13 Reasons Why You should Invest in Multifamily Syndicated Investments (Part-1)
Financial Freedom is the new American dream!
You need multiple streams of passive income to make this dream come true.
When it comes to creating long-term wealth, Real Estate investment is one of the best-proven investment strategies for ages, even kings and queens tried to expand by acquiring lands.
If we talk about performance, tax benefit, and risk levels, real estate is an inflation-hedged asset class that can provide a way to build and manage your wealth over the stock market.
It’s easier said than done when it comes to Real Estate investments though. While there is so much hassle, risk, and competition to follow different paths like fix and flip, foreclosure, tax-liens, BRRR, and much more, a busy professional like you could get completely discouraged and drop the idea of investing in real estate altogether.
What if I tell you that there is a better way?
Syndicated Real Estate investments, especially multifamily/apartment investments can bring you a completely passive, risk-managed, and hassle-free way of investing in Real Estate by leveraging the experience of seasoned syndicators combined with the power of leverage and pulling capital together as a group.
In this blog, we will discuss why, as a passive investor, you should invest in Multifamily Syndicated Investments and balance your portfolio outside the stock market roller-coaster.
But before that, let’s understand what real estate syndication is.
Real estate syndication is a partnership between several investors who combine their resources; intellectual, capital, and skills for purchasing and managing a property that otherwise would have been difficult to manage and afford. The experience and expertise of each member combined are beneficial to all the syndicate members, including passive investors like you.
Here are the TOP 13 reasons Why You Should Invest in Multifamily Syndicated Investments as Passive Investors:
1. Shelter is a Need, Not a Want
Shelter is one of the basic human needs. Everyone needs shelter to stay. During COVID times we stayed inside our home more than 90% of the time.
The US workforce is reaching 164.6 million as of Feb 2020. The workforce tends to stay in apartment complexes for the majority of their life, not being able to achieve the American dream, purchasing a home.
Also, statistics indicate millennials and baby boomers moving into apartments are causing a big shift in making America a renter’s nation. The demand is going up and supply is having a hard time keeping it up, creating a scarcity of apartment housing, keeping the absorption of these properties at a higher rate as well.
2. Above-Average Returns
History has a lot to share. For almost the last two decades, the stock market has generated a much lower return than real estate. According to statistics released by Fundrise, real estate investments have generated investors an average 10.71% annual return, while S&P returns have averaged at about 5.9% and Dow Jones at 7.03%
You can yield above-average returns by investing in multifamily syndication because real estate is inevitably known to perform better than any other kind of investment, but wait there are more benefits.
3. Completely Passive Cash Flow (Mailbox Money)
The first benefit that you can yield as a passive investor is that the syndicator is responsible for all the legwork and heavy lifting. He/she will be performing all the major tasks and taking care of identifying the property, performing due diligence, acquiring loans, leasing, and maintenance, implementing the business plan including renovations, and sale of the property. All you have to do is fund your investment at the beginning of the investment procedure and garner the benefits of the shared profits, during the investment as well as at the sale.
You don’t need to babysit your investment or monitor the ups and downs to execute your entry and exit.
Being a partial owner in the deal, your checks will automatically show up in the mailbox or money can automatically be deposited in the bank accounts with cash flow and equity, without you lifting a finger(well you would have to click and check your balance).
Enjoy your automatic cash flow in bank accounts while you can relax and enjoy life.
4. True Diversification
You have heard the phrase “All Eggs in the same Basket”
As an investor, you would love to have a Truly Diversified portfolio, right?
But what are the options? Investors look for a better alternative to the stock market to save themselves from the risk-bearing and volatility of the stock market, but a typical financial Advisor offers diversification tied to the stock market itself. The alternate investing proposed such as real estate via REITs is still tied somewhat to the stock market volatility.
Real Estate investing in multifamily syndication allows you three-way diversification:
- Diversification completely outside of the stock market, directly in Real Estate
- Diversification across the US, in the emerging cities, not just in the city around you
- Diversification in different asset classes, such as Class A, B, or C defined by the age and condition of the property
5. Relatively Recession Resistant Asset
The stock market can fluctuate with the economic market shifts, real estate, especially multifamily, has a lesser impact than stocks. With an average of 96.2% occupancy and lower mortgage delinquency rates, multifamily investments have proven to be steadier historically.
Moreover, it rebounds faster than the stock market during a crisis. During the 2008 recession, multifamily investments not only held up steadier than the stock market as well as Single Family homes but also bounced back at a much faster rate as well.
6. Tax Benefits
Multifamily Syndication is a tax-sheltered investment. Investing in this structure will allow you to save on taxes via :
· Threefold depreciation (Structure + Specific Assets via Cost Segregation +Bonus Depreciation)
· Write off on Interest payments
· Write-off on multiple other expenses
These write-offs result in a significant paper loss for the property for tax purposes, while a positive cash flow is being generated, making your investment extremely tax efficient. Keep more of what you make!
7. Risk Managed Returns
Stock market investments fluctuate based on market shifts and can lose value overnight. These investments are collateralized unlike stocks, which can potentially lose most or all their value and vanish into cyberspace quickly.
Multifamily investments, however, backed by a real tangible asset, cannot lose their value overnight. Even in case of calamities like fire, flood, natural disasters, the insurance can cover rebuilding the property, loss of rents, etc. and increase the value and income of the property
Besides, like a single-family home, the value of an apartment complex is not determined by the up and down of other apartments in the area. Being a commercial property it is mostly driven by the Income and Expense ratio (along with the market cap rate).
Stay tuned for the next blog where we will be discussing the other six reasons.