Multifamily Syndication Returns

Even in downmarkets, most investors have their eyes on real estate investment opportunities. Infact, many savvy investors only buy during economic downtimes. There are also multiple ways to get into real estate investing.

However, not all investments are as stable and consistent as multifamily real estate investing. Simply put, everyone needs a place to live. This asset class typically performs very well even during times of economic uncertainty, such as the pandemic.

If you are an accredited investor, you have more investment opportunities available to you, and that extends into real estate as well. A lot of investors have discovered that real estate syndication deals can allow them to put their money to work.

Real estate syndication is ideal for those who wish to participate in a passive investment. Passive investors can earn a share of cash distributions throughout the deal’s lifespan. These deals typically last for years, although the exact details may vary from one syndication to another. Usually syndications last for 3 to 7 years, sometimes even more.

Also depending on the deal structure, investors may earn a share of the equity upon resale of the multifamily property. Here we are going to discuss the expected returns for these investments. This should help you make an informed decision on your real estate investment.

What is Multifamily Syndication?

First, let us talk about multifamily syndication and how it works. A real estate syndication deal involves multiple passive investors pooling their resources together to purchase a single real estate property. These real estate deals can be done with most types of real estate, but multifamily investment opportunities are the most popular for a number of reasons.

Multifamily real estate such as apartment complexes, duplexes, triplexes, and condominiums have more than one unit, meaning they have a reduced risk of becoming fully vacant at any given moment. Multifamily properties are also known for their strong cash flow. [1]

Because these are larger properties, they also tend to be more expensive and therefore more difficult to buy for a lone investor, even accredited investors with large annual income and net worth. With multifamily syndication, it is now easier for investors to invest in larger real estate properties.

A syndication deal is put together by a syndicator who acts as the General Partner (GP) or primary sponsor. They are in charge of locating the best real estate property for syndication, coordinating the funding, and finding accredited investors who will participate in the deal and provide most of the capital needed.[1]

As an investor in a syndication deal, you do not have to secure a huge down payment because there are multiple investors funding the property. A limited liability company (LLC) or limited partnership (LP) is typically formed for real estate syndications. Passive investors act as Limited Partners in the deal.

Whether or not this is a good investment for you depends on your financial situation, personal goals, and risk tolerance.

A real estate syndication deal provides passive income along with a tangible asset that appreciates over the long term. If you want to try multifamily investing but do not want to purchase an entire apartment building all on your own, try multifamily syndication.

What Kind of ROI Can Accredited Investors Expect from This Real Estate Investment

Because people always need somewhere to live, multifamily apartment buildings are considered some of the best offerings when it comes to real estate syndication. With multifamily investment opportunities, you can expect a generally stable cash flow, and even an opportunity for appreciation. [2]

While the exact return on investment will vary based on multiple factors, the equity splits as well as the cash flow distributions are pre-determined, calculated, and outlined in the Private Placement Memorandum (PPM) and Operating Agreement. This means you will be informed about everything before you even send your investment capital.[2]

This gives investors the opportunity to review returns projections and perform their due diligence before investing.

Investors may do their own calculation using Cash-on-Cash Return. This is a measure of your return on investment (ROI), calculated on an annual basis by taking the cash flow you receive and dividing it by your initial investment. [3]

If an investor puts in $100,000 into a syndication deal and receives $8,000 in distributions for the first year, this means their Cash-on-Cash Return is 8%. Cash-on-Cash Return usually ranges from 5% to 10% and increases over the life of the investment as the syndicator optimizes the property. [3]

Do keep in mind that this calculation does not include the big prize at the end of a syndication deal when the property is refinanced or sold, and that is the equity. When taken into consideration, this may further push your annual return up to 22%.

Again, each syndication deal will vary based on a number of factors so exact ROI is very difficult to determine.

The Benefits of Multifamily Real Estate Investing for Accredited Investors

Some investors do not want to get into multifamily real estate investing because they know these real estate assets can be difficult to manage. Playing the role of landlord—especially if you do not have experience—can be tricky. You have to deal with emergencies, collect rental income, manage property taxes, keep up with repairs and maintenance needs, and communicate with tenants.

However, you do not have to be intimidated by the idea of becoming a landlord. One of the greatest advantages of a multifamily syndication deal is that the syndicator handles property management. This means multifamily syndication is a truly passive investment wherein you can just sit back, relax, and focus on your other investments.

You can collect passive income and let your money work for you. Meanwhile, the syndicator will either hire a property management team or take care of the real estate property themselves. The syndicator has plenty of responsibilities. They pay attention to real estate market cycles, look for high quality real estate for syndication, put the deal together, and even handle property management.

Because multifamily real estate properties tend to generate a strong and steady cash flow, it usually justifies hiring a professional property management company to take care of the day to day necessities of the apartment. They will keep it running on your behalf. But sometimes syndicators take a more active role by managing the property themselves and optimizing it to create forced appreciation. Either way, it is out of your hands.

A multifamily syndication deal addresses two of the biggest concerns for real estate investors: the high barrier to entry and property management.

Beyond this, there are other reasons why you should consider investing in a multifamily syndication, especially if you are an accredited investor.

Multifamily syndication offers tax benefits. Investors get certain tax benefits through their K-1 tax filings by owning a piece of the real estate property. [4]

The government incentivizes investors for providing housing for residents of any given city. For this, they reward investors with tax breaks and tax incentives. [5]

The value of the property gradually increases over time, which means your multifamily syndication will also benefit from appreciation. This will increase your potential ROI.

Participating in multifamily syndication is also a good way to diversify your investment portfolio. Not only will you be able to try real estate investing, you will even have the opportunity to spread your capital across multiple syndication deals. Real estate syndication will help you boost your investment portfolio quickly. [4]

The only challenge you will face with multifamily syndication is that your capital will be locked up for a long time. Since these syndication deals last for years, you will not be able to access these funds for a significant period. You have to be aware that these investment opportunities come with a bit of illiquidity, which you must be comfortable with. This is why real estate syndication deals are exclusive to accredited investors. They have the financial capability to participate in these deals and still have a big enough safety net to deal with the risks involved.

Real estate investments always come with a bit of risk. Accredited investors have the financial sophistication to make informed investment decisions. Overall, multifamily syndication is a hassle-free investment strategy suitable for accredited investors looking for a great source of passive income.

Why Accredited Investors Trust BAM Capital for Multifamily Real Estate Syndication

Now that you understand how multifamily syndication deals work, you can decide on which syndicator to work with for your first real estate syndication deal.

BAM Capital will help you invest in multifamily real estate syndication without the headache of becoming a landlord or managing tenants.

This Indianapolis-based syndicator has a strong Midwest focus, offering high quality multifamily real estate properties that are Class A, A-, and B++. With its award-winning multifamily investment strategy, BAM Capital helps accredited investors grow their wealth through syndication.[6]

BAM Capital uses a vertical integration strategy that mitigates investor risk and creates forced appreciation to boost their ROI. This syndicator is also known for its consistent track record. In fact, BAM Capital currently has over $700 million AUM and 5,000+ units. [6]

BAM Capital provides a safe and passive investment for accredited investors looking to get into real estate investing. They will negotiate the purchasing and financing of high quality multifamily properties on your behalf.

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.

Accredited investors can schedule a call with BAM Capital and invest today.