Midwest Multifamily Investment Opportunities

by | Nov 10, 2023 | Accredited Investor, BAM Blog, Blog, Real Estate Investing | 0 comments

Investing in multifamily properties, particularly in the Midwest, is a smart and popular way to enter the world of real estate investments. This region offers a stable rental market that is generally more affordable compared to some coastal areas. That said, real estate investors who want to earn even more passive income should go for even bigger properties such as apartment communities. Investors should consider multifamily investing.

Unlike single-family homes, multifamily properties consist of multiple residential units. These properties can vary in size, from a duplex with two units to large apartment communities with hundreds of units. The primary goal of multifamily investing is to generate rental income from the property while building wealth through appreciation and equity.

This investment strategy offers several advantages, making it an attractive option for both seasoned investors and newcomers to the real estate market.

Before making any investment, thoroughly research the Midwest markets you’re interested in. Some cities with strong multifamily investment opportunities include Chicago, Minneapolis, Kansas City, Indianapolis, and Columbus. Look for areas with job growth, low vacancy rates, a stable rental market, and a diverse economy.

Experienced investors can take advantage of the growing job market to invest in rental properties while the demand for housing is strong. Multifamily investors typically choose an apartment community or any multi-unit property that can keep up with such demand and generate strong cash flow in the process.

When in doubt, you can always look for a local expert—a company that specializes in multifamily properties in the Midwest. Here we will talk about multifamily investing, as well as a good alternative investment opportunity for those who are considered accredited investors.

Advantages and Challenges of Investing in Multifamily Properties

There are many reasons to consider multifamily investing. For starters, homes are becoming less affordable, which means more families are leaning toward renting instead of buying. This increases the demand for multifamily units, which investors can capitalize on. [1]

Multifamily investing has the potential for a strong and consistent cash flow. With multiple rental units, income is diversified and less reliant on the vacancy of a single tenant. Even if one unit is vacant, the income from other units can help cover expenses and provide a steady stream of rental income.

An apartment building also spreads risk across multiple tenants, offering diversification, which is a key strategy in multifamily investing. If one tenant moves out or faces financial difficulties, the income from other units can help absorb the loss.

Multifamily properties also benefit from economies of scale. Maintenance and management costs per unit can be significantly lower than those for multiple single-family properties. Additionally, investors can negotiate better deals with contractors, property management companies, and suppliers when you have multiple units under one roof.

There’s also the benefit of forced appreciation, which means you can increase the property’s value through strategic improvements and management. Enhancing common areas, improving unit interiors, and boosting curb appeal can all contribute to a higher property value and increased rental income.

This means investing in multifamily properties can be an excellent way to create passive income streams. If you hire a property management company to handle the day-to-day operations, you can focus on expanding your investment portfolio or enjoying more free time.

Multifamily investment properties can even provide tax benefits. For example, real estate investors can take advantage of deductions related to property taxes, mortgage interest, depreciation, etc. [1]

Overall, the multifamily sector serves as a pillar of stability within the real estate market thanks to strong demand and the potential for long-term capital growth. [1]

With that in mind, no investment is without risk. While multifamily investing has its advantages, it also comes with its share of challenges such as being time-consuming, complex, and requiring a higher initial investment. The real estate market is also subject to fluctuations, and multifamily properties are no exception. Economic downturns or local market shifts can impact rental demand and property values.

How to Get Started with Multifamily Real Estate Investing

For investors who are interested in multifamily investing, it is ideal that you get started by learning about real estate investment strategies, including multifamily investing.

Attend seminars, read books, and consider taking online courses. Build relationships with real estate professionals, investors, and property management companies to gain valuable insights and connections. This may help you learn more about existing investment opportunities.

Define your investment goals so that it is easier to find and choose an investment vehicle that aligns with these objectives. [1]

Financial preparation is necessary. A solid financial foundation is needed to secure financing and cover initial costs. Generally speaking, multifamily properties are more expensive than single family properties due to their size and number of units. This is a large barrier to entry for a lot of real estate investors. Multifamily properties can easily cost millions just to acquire. It will take even more to run the property and renovate it for the purposes of forced appreciation.

Explore financing options, including traditional mortgages, commercial loans, and partnerships with other investors.

Before investing your capital, research potential markets and locations for multifamily properties. Look for areas with strong rental demand and potential for appreciation, especially if you are interested in the Midwest market. Performing your due diligence is very important.

Once you have narrowed down your options, analyze each potential investment property for factors like cash flow, cap rates, and potential for forced appreciation.

Remember that with multifamily investments, you will not be as liquid as with other investment vehicles. This is why it is necessary to assess the amount that you are comfortable letting sit while you are waiting for it to generate returns. [1]

Multifamily investing can be a rewarding venture, providing financial security, passive income, and the potential for long-term wealth. However, like any investment, it carries risks, so thorough research, due diligence, and careful planning are essential to success in this field. If done right, multifamily investing can be a valuable addition to your investment portfolio.

Looking for an Investment in the Multifamily Market? Try Multifamily Syndication

As you can see, it takes a lot of work to participate in multifamily real estate investing. But for those who are accredited investors, there is another option that is much easier and solves some of the biggest obstacles of multifamily investing.

This popular investment strategy in real estate involves multiple investors pooling their resources together in order to purchase a single real estate property. This can be done with any type of real estate, but due to the strong cash flow produced by apartment communities, multifamily syndication is the most popular version. [2]

Syndication refers to this collaboration between multiple real estate investors. In this investment, there is one or more experienced sponsors leading the initiative and serving as syndicators.

Multifamily syndication benefits from the fact that apartment buildings have several units that can generate income. This setup is more convenient for real estate investors because they no longer have to spend as much capital trying to purchase an entire building on their own. Syndication in real estate allows investors to participate in investments that they normally wouldn’t be able to. It gives access to multifamily real estate investments that are too expensive for the lone investor.

The syndicator puts the deal together, locates the investment property, secures the loan, and looks for passive investors who will provide most of the capital needed to purchase the property. In the syndication deal, the syndicator will act as the general partner (GP) while the investors will be the limited partners (LPs). [2]

Syndication deals are often structured as limited partnerships or as a limited liability company (LLC). The syndicator sets everything up and makes the deal happen.

This is a truly passive investment. It’s a great source of passive income because participating investors do not have to worry about property management. Without the usual responsibilities associated with owning a real estate property, accredited investors can avoid the headaches of being a landlord.

The syndicator will handle rent collection as well as the day-to-day operations of the property. In exchange for providing the capital needed for the deal, investors receive a share of the monthly cash flow. The profit split should be detailed ahead of time in the private placement memorandum (PPM) before investors agree to join the deal. Cash distributions are typically done on a monthly or quarterly basis, but each deal is different.

Limited partners, as the name implies, have limited responsibility and liability in terms of the syndication deal. They do have to pay an assortment of fees like management fees and acquisition fees, however. [2]

Once the capital is raised, the syndicate acquires the multifamily property. The syndicator then oversees its day-to-day management, while investors can focus on their other priorities. There’s no need for them to make any decisions for the investment.

The syndication deal is a great way to invest in real estate properties that are too expensive to be practical or viable for a lone investor. With this, accredited investors can diversify their investment portfolio without having to spend too much on a single property. [3]

Keep in mind that most multifamily real estate syndication deals are exclusive to accredited investors. An accredited investor is someone who has a large enough annual income and net worth to participate in unregistered securities. They are expected to have enough investing knowledge and experience to properly assess these deals. They also have a financial safety net in case investments do not work out.

The US Securities and Exchange Commission (SEC) allows them to invest in these exclusive investment opportunities due to their financial sophistication and ability to make smart financial decisions.

Why Invest in Multifamily Syndication?

Accredited investors get to enjoy all the benefits that come with being in a syndication deal. For example, they benefit from shared risk due to the fact that the costs are distributed among the investors. Instead of buying a large multifamily real estate property all by yourself, you can split the cost with other real estate investors. This also means you are not taking on all the risks alone. In terms of risk, you are only liable for the portion of the capital that you initially invested. [4]

Multifamily syndication deals also offer diversification and professional management, which mitigate some of the risks that normally come with real estate investing. Experienced syndicators have different strategies to help address market fluctuations and minimize risks.

Multifamily syndications generate passive income. Here you can earn a steady cash flow without having to get involved in the property’s day-to-day operations. There’s no need to handle tenant concerns or worry about emergencies and repairs. The syndicator has it all covered.

Overall, this is an accessible entry point to multifamily investing, especially for accredited investors who want to participate in larger deals. [4]

Work With BAM Capital for Multifamily Syndication Deals in the Midwest Area

Instead of putting in all the effort needed to purchase your own multifamily real estate in the Midwest, work with a syndicator with a strong Midwest focus. Work with BAM Capital.

BAM Capital is an Indianapolis-based syndicator that is widely considered to be an industry leader thanks to its vertical integration and proven track record for excellence.

BAM Capital is a vertically-integrated company meaning they can handle every step of the syndication process from locating and acquiring high quality real estate properties to managing and renovating the property for the purpose of forced appreciation. [5]

This syndicator focuses on Class A, A-, and B++ in the Midwest, particularly properties that have proven upside potential and in-place cash flow. [5]

Accredited investors love working with BAM Capital because of their award-winning investment strategy that mitigates investor risk while creating forced appreciation. In fact, BAM Capital now has over $700 million AUM and 5,000+ units.

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.


[1]: https://www.forbes.com/sites/forbesbusinesscouncil/2023/09/29/the-benefits-and-risks-of-investing-in-multifamily-properties/?sh=73f759953c9c

[2]: https://www.forbes.com/sites/forbesbusinesscouncil/2022/12/26/is-real-estate-syndication-the-right-investment-strategy-for-you/?sh=5cd6573f1eaf

[3]: https://www.forbes.com/sites/forbesbusinesscouncil/2023/08/14/a-guide-to-real-estate-syndication-the-benefits-and-what-to-look-for-in-a-syndicator/?sh=4abfbe341fb8

[4]: https://www.multifamily.loans/apartment-finance-blog/advantages-and-disadvantages-of-multifamily-syndication/

[5]: https://capital.thebamcompanies.com/