5 Benefits of Multi-Family Syndication Investing
Are you attempting to further your real estate investing and trying to figure out where to invest your money? In this blog, we will lay out some options to help guide you to make an informed decision for your future real estate investments.
Many entrepreneurs trying to grow their real estate holdings, invest in one to four units as rental properties or even a flip. But is that the highest and best use of your money and time?
What is a Multifamily Syndication?
Multifamily syndication is a real estate investment where multiple investors pool their money to collectively purchase an asset. In many cases, this means a larger apartment building. A sponsor locates the deal, coordinates the transaction and financing, and manages the investment after the sale closes.
Passive investors supply the majority of the required capital in exchange for real estate equity. The idea here is that you can leverage economies of scale to yield a better return on your investment without the hassle of direct management of the property. This type of passive investment is a highly lucrative option for many real estate investors.
The Benefits of Multifamily Syndication vs. Owning One to Four Units
Passive investment. Once you wire your funds into syndication, your work is done. The only thing you have to worry about is collecting your checks every quarter instead of dealing with tenants, contractors, vacancies, property taxes, insurance, etc. The professional property management team handles the ongoing work.
You have access to better deals. The sponsors that lead syndications hunt for deals for a living. They have developed seasoned relationships with brokers, owner’s, property managers, and contractors. They have also been through prior investments and have developed a feeling for good deals and bad ones. When you purchase one to four units, you will be on your own to decide what is or isn’t a good deal. And, you won’t have access to more massive high-quality deals.
Economies of scale can bring better returns on your money. JB2 recently purchased a 72-unit building. With only two vacancies, the building sits at 97% occupancy. On the contrary, two vacancies will put you at a 50% vacancy with a four-unit building. Larger buildings can withstand vacancies, whereas vacancies or delinquencies on one to four units can completely kill your cash flow. With more extensive facilities with more units, it is easier to plan around vacancies and account for potential revenue loss in your ongoing financial planning.
Lower risk. With multifamily syndication, you are pooling your money with other investors. Thus, there will be experienced operators to sign off on this deal as well, significantly reducing the risk. You also do not have financial liability for the loan like you would if you independently purchase one to four units.
Gain insight into how to manage a larger apartment building. As a passive investor, you will receive financial reports that outline the status of the investment. These reports help you learn about the financials of a larger building. The financials are more involved in a larger facility.
JB2 Practices Transparency, Helping Investors Maximize Their Investment
At JB2, we distill all information to make it very easy to understand at a glance. We are open and transparent to any questions or thoughts by our investors.
We started our real estate careers buying duplexes. Now that we invest in multiple multifamily syndications, we see the power and possibilities. We wish we would have known about syndications sooner as it would have been the better route to go.
If your goal is to build a broader real estate portfolio, we hope the insight provided in this article will help you better understand what it takes to manage a more massive asset. Our goal is to allow you to bypass the step of buying smaller multifamily units. When you invest in high-quality multifamily syndication with other reputable operators and investors, everyone wins.
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