REAL ESTATE BENEFITS: an IDEAL Investment
The income of a property is mostly made of the rents paid by the tenants, expenses are made of the cost of operating the property, including debt. Typically, a stabilized asset will generate a positive cash flow (income minus expenses) that will be distributed to the investors.
An investment property is an asset that can be depreciated over time, typically resulting in tax savings applicable to investors via a K1 form. Please consult your CPA for specific benefits.
Through the ownership of a property, rental income from the property pays the debt service (loan), including the principal. Upon sale of the property principal reductions will be returned to investors.
Unlike single family homes, a multifamily property is a business that is valued primarily by its Net Operating Income (NOI), not by property comps. Through physical and operational improvements, you can increase the value of the property by increasing NOI. At resale or re-finance of the asset, the Investors will receive their investment back.
Banks offer investors loans on the acquisition of an asset with 20%-30% down payment allowing to control an asset with a value 3 to 5 times larger than the money invested. Returns are increased thanks to this leverage.
MULTIFAMILY REAL ESTATE INVESTMENT BENEFITS
A syndication allows you to take advantage of the experience and financial strength of the sponsor and to aggregate capital among other investors to invest in otherwise unobtainable, high-value apartments with high returns. Over 90% of multifamily purchases are made through a syndication. How does a syndication work? How to learn more?
By investing with other investors through a syndicator with a proven track record, you benefit of their experience running properties.
A syndication allows you to adjust your investment to a more comfortable risk level.
Thanks to the multiple units in a multifamily property, laws of average for vacancy and maintenance costs apply. An Investor in single family homes will need many units to apply laws of average on his portfolio: a bad tenant can result in burning up all profits made in a year.
Economy of Scale
Single family properties or small multifamily properties do not have sufficient revenue to hire full time staff. Because of this, owners are typically required to handle all day to day operations of the property. With a multifamily syndication, revenue is sufficient to hire full time staff to operate the property with oversight and direction from the syndicator.
Cost of property management, repair materials, service contracts benefit of economy of scale.
Each syndication purchases the multifamily asset through a Limited Liability Company (or Limited Partnership). An LLC (or LP) provides its members with personal legal protections against lawsuits and personal financial liability. Consult with your attorney for specific advice on the benefits of investing through a syndication.