25 Nov How To Tell If Multifamily Real Estate Syndication Investments Are Right For You
You’ve been conducting your due diligence on real estate syndicates and have found a great deal of information on how this investment strategy that entails passive investment opportunities in multifamily assets can produce higher returns than you ever thought possible. The power of passively investing in commercial real estate investments has piqued a lot of people’s interest, to be fair. And why not? Whether you are an accredited investor or a sophisticated investor, a multifamily syndication is the best way to generate cash flow and steady passive income in your investment portfolio and can ultimately help you to increase your net worth.
Passively Investing In Real Estate Syndications
Investing in multifamily real estate syndications affords you – the passive investor – the ability to invest as a limited partner into tangible commercial properties – that you can see, touch and feel (unlike stock market and mutual funds investing – paper assets) without having to be a landlord, while also reaping the benefits of receiving the majority returns, and the extraordinary tax advantages. All of these advantages while various other people – the general partner, the deal sponsor, the property management company, the sponsorship team, and a group of other experienced and dedicated team members – do all of the work on your behalf and have most, if not all, of the risk, is an amazingly sweet deal. Don’t you think? Plus, investing in real estate syndication deals allows you to make a positive impact on local communities by providing much-needed, affordable housing options.
Now that said, multifamily investments aren’t for everyone. Each individual investor has a varying level of risk tolerance. Some potential investors like high risk, high reward. In that case, investing in a multifamily deal may not be a good fit for that particular investor. We, at PCRP Group, DON’T want to put our group of investors into a high risk real estate project. When our passive real estate investors invest in an apartment complex alongside us they will be in a limited partnership, which means their risk is negligible. Their personal assets are never at risk as would be outlined in any legal documents such as the Confidential Private Placement Memorandum (PPM) that all of our investors review and approve so that they can make an informed decision BEFORE they invest with us.
Before you invest in any real estate syndication, you will want to make sure that you have a full understanding of what that entails, so we go over the top five criteria you should be comfortable with before investing in a commercial real estate syndication.
The Five Factors You Should Explore Before Investing In A Real Estate Syndication:
#1 You Have More Than $50K That You Feel Comfortable Investing
There are some real estate investment platforms like real estate crowdfunding that allow investors to invest just a small amount, but most real estate syndicators require a minimum investment of $50,000 of your own cash to invest in their multifamily properties. Always make sure that you not only have the minimum investment but that you always have extra funds for emergencies. A good rule of thumb is to always have an extra reserve that equates to 6 months of your annual income. It’s never a good idea to invest all that you have.
In the end, only you can decide how much money you will be comfortable investing, but that should be one of the very first considerations you determine.
#2 You’re Comfortable Having Others Manage The Investment
If you have little time or expertise as it pertains to operating an apartment building that could have as many as 300, 400 or 500 units and you have the capital to invest in a real estate deal that may allow you to receive a preferred return that helps you to grow your wealth, then investing in a commercial real estate syndication may be a good fit for you.
Multifamily real estate syndications are virtually a hands-off investment for the passive investor. For example, you won’t have to be in contact with the real estate agents in acquiring the real estate deal, or have to monitor the property manager or property management company. You don’t have to underwrite hundreds of opportunities to find “that one” great deal. You won’t have to manage construction and rehab crews or asset managers. You won’t have to keep a pulse on local real estate market conditions and job growth and population growth and a variety of other metrics and responsibilities, and the list goes on.
If you’re comfortable reviewing the business plan of the professional team who will be managing the property on your behalf while you reap all of the benefits and collect checks each month or each quarter, then commercial real estate syndications may be a perfect investment for you.
#3 You’re Interested In A Longer-Term Investment
It’s an important factor to understand that passive investing in multifamily real estate syndications is not a get-rich-quick scheme. Investing in real estate syndications is a sound investment strategy designed to help you obtain steady passive income and help you to build wealth over time. The hold period for most real estate syndications is typically five years or more.
There are times when a refinance is implemented to return part or all of the investor’s capital before the end of the hold term, so that the investor can still remain in the deal but is now able to reinvest that capital into another investment if they choose. However, we never make a commitment to refinance the property, so you should be prepared to have your capital invested for at least 5 years.
If you’re an investor who would rather “set it and forget it”, and you like the idea of having your capital work for you instead of you working for your capital, then collecting passive income through multifamily real estate syndications may just be your new obsession.
#4 Sharing In Profits & Returns In Exchange For Truly Hands-Off Investing Appeals To You
Doing fix and flips on single-family homes can allow you to retain 100% of the profits for a variety of reasons e.g smaller deals, sweat equity requirements, and often you are the one finding, funding and managing the entire endeavor, right?
Well, multifamily real estate syndications are a completely different investment because there could be literally hundreds of investors involved (both actively and passively), so therefore there is a need to share in the profits and the returns. The passive investors, however, usually get the larger portion of a typical 70/30 split or a 80/20 split, with the general partners receiving the smaller percentage in the split.
An important thing to remember is that syndications are group investments so it takes a “team” to acquire, manage and exit an investment like that. The general partners have virtually all of the risk and take on all of the work, so, it’s just good business that they are rewarded for their efforts as well. If sharing in the profits and the returns in exchange for having a “hands-off” approach to your investment appeals to you, and you like the idea of a professional team collaborating on your behalf to help you create wealth, then you’re in the right place.
#5 You Won’t Need The Money For At Least Five Years
If you have been planning your finances well and have established savings and have been minding your expenses, then chances are you want to grow your nest egg. You’ve worked hard all of these years to budget and save and now you want to find a safe place to park (and grow) your capital for a few years – not for a long time- but enough time (for at least 5 years) with the objective of earning good steady returns.
If you’re comfortable with not needing your savings immediately and having your capital invested for a specified period of time, then passively investing in a multifamily real estate syndication may be the type of investment opportunity that resonates with you.
If you love the idea of investing your money passively in real estate without the hassles of being a landlord all while being able to invest in different markets across the United States AND having the extraordinary tax advantages that multifamily real estate syndications can afford you, then this particular investment vehicle may be just what you have been looking for.
There are so many different ways available for you to invest in sound real estate projects and positively impact local communities. Commercial real estate syndications are just one option available to you, but if you find that you meet a few of the criteria above, and the concept appeals to you, then you might have found your “investment” niche.
Ready to Learn More?
The best way for you to learn more about commercial real estate syndications is to join the PCRP Passive Investor Club.
Through the PCRP Passive Investor Club, you’ll get a priority review of all the deals we offer. We’ll work with you to determine your investing goals and then present you with the best deals to meet those goals. We’ll then guide you every step of the way as you invest in those deals.
So if you’re ready to start investing passively in institutional-grade, commercial real estate in fast-growing, climate-resilient markets in the U.S., join the PCRP Passive Investor Club – IT’S FREE! – and get started on your path to EARN PASSIVELY and LIVE ABUNDANTLY!
If you would like to know more about what we do and how it may be of value to you, please reach out to us anytime. We’re always happy to help!