Why Invest in Multifamily?

As an investor, you have many options when it comes to investing your money. One of the most attractive options is investing as a limited partner in multifamily syndications. A multifamily syndication is a group of investors who pool their money together to purchase and manage a multifamily property, such as an apartment complex. In this article, we'll explore the top 10 reasons why investing in multifamily syndications as a limited partner can be a smart investment choice.

 

1. Passive Income Generation: One of the main reasons to invest in multifamily syndications as a limited partner is the opportunity to generate passive income. As limited partner, you'll be a passive investor, which means that you won't be responsible for the day-to-day management of the property. Instead, you'll simply make an initial investment to receive regular income distributions and a large distribution once the property has been sold, based on your share of the investment.                  

2. Diversification: Investing in multifamily syndications as a limited partner can help you diversify your investment portfolio. Multifamily syndications provide exposure to a unique, highly sought after type of real estate, which is an asset class that can provide true diversification benefits compared to other investments, such as stocks and bonds.                                                            

3. Professional Management: By investing in multifamily syndications, you'll be able to benefit from the expertise of professional property managers who will oversee the property's day-to-day operations. This can help ensure that the property is well-maintained and that the investment is generating the expected returns. Quick tip: When investing with syndicators, look for those who have property management inhouse (vertically integrated) as they will likely perform better.                                                      

4. Tax Benefits: One of my favorite benefits of real estate! Multifamily syndications offer amazing tax benefits, such as lucrative bonus depreciation and regular depreciation deductions and pass-through tax treatment. These benefits help reduce your tax liability and improve your after-tax returns. At the end of the year, you’ll receive a tax document called a K1 so you can file your investment information with the IRS. Make sure to review this to see just how beneficial the tax benefits are with multifamily syndications.                                                                                                                                                                                                                      

5. Reduced Risk: Your investments in multifamily syndications as a limited partner help reduce your risk compared to investing in a single property on your own. You’re not only investing in a hard asset that appreciates over time, but you’re also investing in a team of experts that know how to identify, acquire, manage, and sell these assets. Additionally, when you invest in a syndication, you'll be sharing the risk with other investors, which can help mitigate the impact of any unexpected events, such as a downturn in the local real estate market.                                                                                                                                                     

6. Higher Returns: Multifamily syndications can offer higher returns compared to other types of general investments and other real estate investments, such as single-family rentals. This is because multifamily properties can generate more income than single-family rentals and appreciate more in total dollar amount, which help increase the overall return on investment. As long as the syndicators are running the property in line with or exceeding their original projections, multifamily investing is one of the best ways to invest in realestate. To give you an idea of what these returns look like, NestedEquity looks for an equity multiple of at least 1.8x over a 5 year period. This means if all goes according to plan, you’ll earn at least an 80% return in 5 years. This in addition to all of the tax benefits and not having to do any of the work as a limited partner.                                                   

7. Economies of Scale: By pooling investor capital together, investors in multifamily syndications can benefit from economies of scale. This can help reduce the overall costs of managing the property, which can help increase the return on investment. This also gives limited partners access to real estate assets they typically can’t obtain on their own.                                                                        

8. Stability: Investing in multifamily syndications is typically less volatile than other types of investments. With stocks, you can see wild swings in the market and valuations at any given time. If you own 10 single family rentals and 3 are vacant for a month, you’ll experience a 30% drop in revenue for that month. However, if you have a 50 unit apartment complex and 3 units are vacant for a month, that’s only a decrease in revenue of 6%.                                                                                                                                    

9. Access to Deals: Investing in multifamily syndications can give you access to deals that you might not be able to find on your own. Syndicators often have access to off-market deals and can use their network to find opportunities that are not publicly listed.                                                                                                                                                                                                                                   

10. Social Impact: Last but certainly not lease, multifamily syndications can have a positive social impact by providing quality, affordable housing for renters. By investing in multifamily syndications, you can contribute to the development of communities and help provide a valuable service to tenants. Helping to solve the housing shortage in the U.S. is an incredibly important effort, especially because current economic factors suggest it won’t be solved anytime soon.

 

In my opinion, investing in multifamily syndications as a limited partner is a smart investment choice. These top 10 benefits are only some of the many advantages multifamily syndications offer. If you would like to learn more or are interested in these types of investments, please reach out to me at alan@nestedequity.com or register on our website here: https://www.nestedequity.com/invest-with-us