What are Multifamily Real Estate Syndications?
Multifamily investment syndications are group investments in real estate assets.
The assets are referred to as multifamily as several families can occupy the real estate—the most common example being an apartment building. This makes it a far more diversified investment, as rental payments come from several occupants.
Syndication refers to the transfer of power in a deal. In this case, although you are investing in a real estate deal—it will be managed by an external group of real estate professionals (meaning physicians or high-level professionals need no real estate experience to partake in syndication).
How Does It Work?
For a multifamily real estate deal to work, you need two groups of investors. Here’s a brief breakdown of the investors involved.
1. General Partners (GPs)
These are the syndicators or ‘managers’ of the deal. They are often composed of professional real estate specialists, lawyers, or asset managers.
They assume responsibility for the deal undertaking tasks including but not limited to:
- Underwriting the property
- Securing financing and investors
- Legal regulations and due diligence
- Communication with investors
- Any value-add strategies, such as upgrading apartments
- Working with property managers
Once the GPs have researched, underwritten, and settled on an investment opportunity, they will source investors known as Limited Partners (LPs) to finance the deal. In addition, general partners invest some of their own capital into the deal.
2. Limited Partners (LPs)
Limited Partners are the investors who provide the majority of the capital for the deal. This is a passive role and requires very little input once the money has been provided.
The GPs will then manage the property, ensuring investors receive the projected returns—monthly payments.
Who Can Participate?
Due to the high financial threshold, many multifamily real estate syndications are only open to accredited investors. An accredited investor is an individual who meets specific economic limits allowing them to invest in higher-level deals. For example, someone with one million dollars in the bank or earning at least $200,000 a year consistently (amongst other thresholds) would be considered an accredited investor.
What Are The Advantages Of Multifamily Real Estate Syndications?
While the buy-in can be high, it’s worth it!
Passive Cash Flow
As a busy professional in the medical or professional fields, you likely don’t have time to manage and administer investment properties. As a result, real estate syndication is passive, as the GPs handle all day-to-day and long-term operational duties.
You sit back and enjoy the monthly payments and increasing equity.
You need 100% occupancy to earn rental income if you invest in a single-family home. However, in multifamily deals, the higher number of tenants means payment is covered if one or (several occupants) leave the building.
Equity And Appreciation
When you invest in real estate syndication, you’re building equity in a historically vital asset. Then, upon the sale of the property, you receive a payout that can equal a significant figure, thanks to the appreciation of the investment.
Opportunities to Offset Tax
There are tax-saving benefits to investing in multifamily real estate—depreciation and accelerated depreciation are the two main ones. However, skilled syndicators such as Viking Capital will structure deals for increased tax offsetting. As a result, you minimize your tax payments while earning passive income. It’s a win-win!
One key benefit of real estate syndication is its resistance to inflation.
During high inflation, there is a higher demand for rental property as more people are on the hunt for rentals and delaying purchasing property. In addition, the cost of raw materials increases, meaning fewer new properties, which also increases property demand.
Case Study: Viking Capital LLC
Viking Capital is a team of real estate syndicators determined to locate the best deals for hardworking medical professionals.
As a leading multifamily real estate investment firm, we’re focused on securing high-value-add low-risk property that puts people first. Our strategy creates massive upside potential for investors while minimizing any risk involved in the investment.
As part of our mission, we empower investors with financial independence and education to create a financially free future for them and their families.
Real Estate Syndications are the Key To Future Wealth
While it’s easy to become discouraged at the state of the stock market and impending inflation prices, it’s important to remember that there are other options! One of the ways intelligent investors can prepare for an economic downturn and earn passive income no matter the market conditions is with multifamily investment syndication.
If you’re ready to build a more diversified and inflation-proof portfolio with multifamily real estate, reach out to the team at Viking Capital today.