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For the past 100 years, residential real estate investing has proven to be one of the most reliable ways to build wealth in the US. Driven by consistent growth in real estate values over time, real estate investing can be a dependable source of rental income for investors. [1]
There are two main ways to generate income from a real estate investment: through rental income and through property value growth or appreciation. A real estate property such as an apartment complex is a tangible asset that a real estate investor can rent out to tenants. These tenants will pay rent on a monthly basis, providing a steady flow of income.
On the other hand, property value growth is when a property appreciates in value over time. When this happens, investors grow their equity value in that specific property. There are also many ways to get into real estate investing: flipping properties, owning multifamily real estate, going for real estate investment trusts (REITs), etc. There is always a specific strategy that suits your needs and financial goals.
This makes real estate a good choice for stock market investors looking for ways to diversify their portfolio.
Bear or Bull Market? Buy Real Estate and Break the Cycle with Strong Cash Flow
A bear market refers to the prolonged decline in market prices, which typically describes a situation in which securities fall 20% or more from recent highs. A bear market is also characterized by negative investor sentiment and widespread pessimism over different investment properties. [2]
In a bear market, investors tend to be more cautious and sell their investments, which leads to further price declines. Economic indicators may also point towards a slowdown or recession during a bear market.
Meanwhile, a bull market represents a market condition marked by rising prices and optimism among investors. It is characterized by an upward trend in market indices and sustained buying activity. In a bull market, investors have confidence in the economy and expect future growth, which leads to increased demand for stocks and other investments. Bull markets can last for months or even years, and they often coincide with periods of economic expansion and positive business sentiment.
A bear market and a bull market are terms used to describe the overall direction and sentiment of the financial markets, particularly in relation to stock markets. However, they can also be applied to other financial markets like real estate.
That said, real estate can help you generate consistent income, which can somewhat offset the volatility of the stock market.
One study that analyzed the historical data on rental property investing found that returns were both strong and consistent across rental income and property value growth, which means it is still one of the best long-term investments for US investors. [1]
How Investment Professionals Are Helping Clients Beat the Stock Market with Multifamily Real Estate Investing
Working with an investment professional is great if you want to get into real estate investing and you have no idea where to begin. They can explain various concepts like appreciation, capital gains tax, property management, and everything else you need to understand regarding this asset class. If you are an accredited investor, they can even suggest investment opportunities that are exclusive to you such as REITs and multifamily real estate syndication.
Generally speaking, multifamily real estate investing is one of the most reliable ways to add real estate into your portfolio because of its strong cash flow. However, just because real estate investing has been historically profitable doesn’t mean it always is. Keep in mind that past performance is not indicative of future results, so you still need to approach it cautiously.
Done properly, multifamily real estate investing can be profitable. But success requires a formula. Multifamily real estate investing is certainly not easy as it requires a larger investment and you have to worry about property management.
But those who invest in apartment complexes can enjoy great long-term return on investment (ROI) without having to play the role of landlord by investing in professional property management. With the right strategy, multifamily investing can become a passive investment. [3]
Investment professionals help clients identify properties in desirable locations with strong rental demand, allowing them to generate regular income streams. By focusing on cash flow, investors can benefit from the property’s rental income even if the real estate market experiences short-term fluctuations.
They can help investors increase their income by increasing property values and reducing operating costs. Executed correctly, this creates instant equity.
There are also certain factors that influence the success of multifamily investments such as professional underwriting, process improvement, appreciation, due diligence, leverage, and cash flow. You need to work with a pro that knows all about handling a large multifamily real estate property so you can focus on collecting checks or managing your other priorities. [3]
Investment professionals educate clients about the tax advantages associated with multifamily real estate investments. Real estate investments often qualify for tax deductions such as depreciation, mortgage interest, property taxes, and operating expenses.
These deductions can help reduce taxable income and improve investment returns. Additionally, investment professionals may guide clients on strategies such as 1031 exchanges, which allow investors to defer capital gains taxes when selling one property and reinvesting the proceeds into another.
All of these things can be achieved by any investor, but it requires the support of someone with extensive knowledge and experience in real estate investing. This is why it is highly recommended that you work with a professional if you are unfamiliar with multifamily investing.
Investment professionals often recommend multifamily real estate as an alternative investment strategy to help clients beat the stock market. They usually advocate for diversifying investment portfolios to minimize risk. Including multifamily investment alongside traditional stock market investments provides diversification, as real estate has a low correlation with the stock market.
This means that when the stock market is performing poorly, real estate investments may continue to generate steady returns, reducing overall portfolio volatility.
If you are tired of the unreliable stock market, you need to add multifamily real estate into your investment portfolio. Working with an investment professional can help you make the right decisions, reach your financial goals, increase cash flow, and grow your portfolio.
Why Fee-Based Financial Planners Love BAM Capital for Accredited Real Estate Investors
Investment professionals and financial advisors fall under one of two categories: commission-based and fee-based or fee-only. This is important to know since the method of compensation may influence the kind of advice you get from your financial advisor.
Even though real estate is known as a potentially lucrative investment vehicle, a commission-based financial advisor may not recommend it to their clients because they won’t get any commission from it. Instead they will focus on the products that they need to sell to earn from commissions.
On the other hand, fee-based financial advisors can give proper investment advice because they do not rely on commissions. Since they are only paid from the fees for their services, there is no conflict of interest to worry about.
A fee-based wealth advisor can guide you towards your financial milestones, helping you pay down debt, create budgets, plan your retirement, etc. There are also no hidden costs, commissions, kickbacks, and referral fees to think about. Investors only pay financial advisor fees. Do keep in mind that they may cost more than a commission-based financial advisor, but they can offer more investment strategies. [4]
For most investors, this is the preferable payment structure.
Because they are not limited in what they can offer you, fee-based financial advisors will tend to recommend the most lucrative investment opportunities. If you are an accredited investor, they may even recommend multifamily real estate syndication.
A multifamily real estate syndication involves multiple investors pooling their resources together to purchase a single property. A sponsor will put the deal together, locate the investment property, coordinate the transaction and funding and even handle property management when it’s all complete. The sponsor acts as the general partner for this transaction, while the investors are the limited partners. The limited partners will provide the majority of the funds needed to purchase the property. [5]
Multifamily syndication is the most popular version despite the fact that a syndication deal can be created for just about any type of real estate. This is because multifamily real estate properties have multiple units and can therefore produce strong cash flow through rental income.
Multifamily properties are also unaffected by a few vacancies, whereas vacancies are more impactful for single-family homes because they stop generating income. Apartment complexes can still create a cash flow as you look for replacement tenants for vacant units.
Accredited investors love the strong and steady income generated by multifamily properties. A syndication deal turns it into a passive investment. Because the syndicator handles property management, you do not have to play the role of landlord. You can avoid all the headaches associated with owning a large property.
You don’t have to handle tenants, deal with emergencies, collect rent manually, take care of repairs and maintenance, etc. The syndicator will handle it themselves or hire third party property management companies to take care of it. Either way, investors do not have to worry about it. [5]
Multifamily syndication even has an advantage over REITs, which is a comparable investment. With REITs, you are investing in the company itself, meaning you have no control over the properties that the REIT invests in. With multifamily syndication, you can choose which deal to participate in and select the multifamily property that you believe in.
Once the deal is in place, you no longer have to provide any more input. You become a passive investor.
Every syndication deal is different, but generally speaking, accredited investors gain a share of the rental revenue. Depending on the deal structure, investors may also get a share of the equity upon resale.
The sponsor will be in charge of cash flow distributions from rental income. This usually happens on a monthly or quarterly basis. The exact distribution scheme will follow the predetermined parameters detailed in the syndication agreement. [5]
For syndication deals, a limited liability company (LLC) or limited partnership (LP) is commonly established. The LLC Operating Agreement and the LP Partnership Agreement will play crucial roles as they will detail all the Sponsors’ and Investors’ rights, including rights to payouts and fees for administering the investment. [5]
Participating in a multifamily syndication has plenty of benefits. Whether you are looking for a passive investment to add to your portfolio or you want an easier way to buy a large multifamily property without buying it on your own, multifamily syndication is the way to go.
But professional investors and financial planners will still recommend that you work with a company that you trust. Choosing the right syndicator is the key to success if you want to balance your investment portfolio and mitigate risks.
Multifamily syndication is a hands-off strategy, so you need to be able to trust the company that is handling the property. This is where BAM Capital comes in. Professional investors love working with BAM Capital because of its historic ROI, consistent track record, and reliable staff.
This is an Indianapolis-based syndicator with a strong Midwest focus, prioritizing high quality multifamily real estate that have proven upside potential and in-place cash flow. BAM Capital only goes for properties that are Class A, A-, and B++. [6]
Multifamily syndication lets you enjoy the strong cash flow of multifamily real estate without the burden of running an apartment complex all by yourself. Investors are drawn to BAM Capital because of their award-winning investment strategy that mitigates investor risk while creating forced appreciation. [6]
If you work with BAM Capital, you can focus on running your business, managing other investments, spending time with your family, and attending to your other priorities in life.
In fact, BAM Capital now has over $700 million AUM and 5,000+ units. And because BAM Capital is a vertically integrated syndicator, they can handle every step of the syndication process. They can take your hand and guide you through the entire syndication deal.
Not only will BAM Capital put the deal together and acquire the property, they will also cover property management. Accredited investors can just sit back, relax, and collect their checks.
No investment is without risk. Make sure to consult your investment advisor or speak to a BAM Capital investment team member before making any financial decisions.
For accredited investors who want to enjoy the passive income and all the other benefits of being in a multifamily syndication, schedule a call with BAM Capital and invest today.
Sources:
[1]: https://arrived.com/blog/historic-returns-from-investing-in-rental-homes/#
[2]: https://www.investopedia.com/terms/b/bearmarket.asp
[3]: https://www.betterworldllc.com/five-step-formula-for-multifamily-investment-success/
[4]: https://smartasset.com/financial-advisor/fee-only-financial-planner
[5]: https://www.qccapitalgroup.com/post/ultimate-guide-to-multifamily-real-estate-syndication#
