Are you considering investing in multifamily real estate?
With the high projected cash flow, appreciation, and security, it’s an attractive option for many accredited investors looking to diversify their portfolios and build equity in a vital asset. However, most importantly, as a busy physician, lawyer, or business executive, this strategy earns passive income, meaning you can let your money work for you—as you build equity without becoming a landlord.
This blog looks at the benefits of multifamily investment syndication plus a leading Capital group where busy physicians will maximize their earning potential.
What Is Multifamily Real Estate Syndication?
Unless you’re Bill Gates or own a bank, real estate investing by buying an entire apartment complex can be financially challenging for your cash flow. Due to this, real estate attorneys devised a way to finance and purchase high-level real estate assets through an ownership structure known as syndication.
Syndication is a temporary relationship that lasts until the end of the specific deal. Essentially, it’s a vehicle for accredited investors to access high-level investment opportunities. For example, a group of investors provides funds to a management team that purchases a multifamily property, which is a property that houses more than one family or occupant.
The investors are known as “limited partners” and passive investors in the deal. The management team is known as the “general partners,” sometimes also called “syndicators,” who locate, organize and manage the property on behalf of the investors.
How Are Deals Structured?
While deals can be structured differently, we’ll examine the key features of a standard agreement.
An easy way to consider a syndication deal is from the top down. The general partners will locate, manage and underwrite a deal. Once the property has been located, asset managers seek out investors to provide capital; commonly, a $50,000 minimum investment amount is required. Investors are limited in the amount that they invest.
Sponsors will invest personal capital into the deal, which can make up anything from 5-20% of the agreement.
Profits are split among investors based on a predetermined percentage. For example, investors receive 70%; the rest will go to the syndicators. It’s a net profit amount as there are costs associated with property management, such as updates, maintenance, and tax. This profit typically pays out monthly to the nominated account of investors.
An investor’s profit amount depends on the investment amount, as investors can increase their initial investment or contribute to syndications on an ongoing basis.
Another common aspect of these deals is that a preferred return is common—a percentage amount commonly between 6-8%, which must be hit before the general partners receive their share. Again, this is to incentivize performance by the general managers.
A typical real estate syndication deal will last anywhere from 5-10 years. After this time, the syndicators locate buyers and sell the property. Due to appreciation, this is usually a higher price than the purchase price. As a result, investors will get their money back plus a profit share from the appreciated funds.
What Are The Top Benefits Of a Real Estate Syndication?
So, what are the top benefits of multifamily investment syndication for physicians? There are plenty!
It’s a More Accessible Option
The cost to access a multifamily building such as an apartment building is massive— we’re talking multimillion-dollar entry points, in most cases.
However, real estate syndication is a way to unlock many of the benefits of a big deal without the same level of risk. As long as you meet the financial threshold, which commonly requires you to be an accredited investor, it’s a much lower cost of entry than property investing on your own.
In addition, banks are more willing to support multifamily deals due to their historically high performance and potential for multiple cash streams.
Bigger Deals and ROI
Access to bigger deals means a more significant return on investment. Remember that you’re earning passive income month-by-month and equity in an appreciating asset.
At Viking Capital, we ran a case study in which a $100k investment would yield a $100k profit over a 5-year investment in one of our typical syndications.
Lower Risk Investment
Multifamily real estate syndications are low risk for several reasons. Some of the factors include:
- The capital is spread across several investors.
- You’re investing in a historically vital asset.
- The asset generates income from many occupants, i.e., you still earn decent profits even with a less than 100% occupancy rate.
- Revenue is generated from both appreciation and rental income.
- Mechanisms such as preferred return provide additional support and a safety net for investors.
It’s An Incredibly Easy Way To Invest
Rather than managing a portfolio of stocks, constantly checking the news, or worrying about market downturns, you front the cash, and the GPs manage the deal.
A leading syndication team like Viking Capital will walk you through every step and maintain ongoing GP-LP relations, so you’re never in the dark.
It’s Truly Passive Income
One of the significant benefits of real estate syndications is that it builds a passive income. We hear the phrase ‘passive income’ thrown around often. However, many who use it don’t use it correctly.
As the general partners handle all management, you’re earning income as you sleep—this is the true definition of passive income.
As a bonus, when you invest in multifamily deals, there are methods to limit your taxation, such as depreciation. This means that you must find a trusted team with a proven record of investment success like Viking Capital.
Investing in Real Estate Syndication Is a Win-Win
If you’re an accredited investor looking to access the unmatched benefits of multifamily real estate investment, look no further than real estate syndication.
With a team like Viking Capital at the helm, you can enjoy truly passive income, growth equity, and a surprisingly pain-free tax time. In addition, you’re diversifying your portfolio in a historically vital asset that performs well in all market conditions.
If you’d like to learn more about the benefits of real estate syndication investing or are keen to get started on your syndication journey, reach out to the team at Viking Capital today.