Why Multifamily?


“Landlords grow rich in their sleep without working, risking or economizing..”

— John Stuart Mill

Why invest in Multifamily Real Estate?

What is Multifamily real estate?

Multifamily real estate, the largest sector of commercial real estate, is a term used to describe properties with more than five residential units. Most often, this term refers to an apartment building or apartment complex. The multifamily sector is considered one of the most “defensive” areas of real estate as apartment buildings tend to be less prone to economic cycles, since everyone needs a place to live, even when a drooping economy might cause significant vacancies in other types of commercial space.

Multifamily buildings are different by location (urban or suburban) and size of construction. Garden apartments are multi-family apartment buildings with three floors or fewer; mid/high-rise are multi-family buildings with four floors or higher. All real estate properties, Multifamily included, are classified into four asset classes: class A, B, C and D, depending on the overall quality of the property.

Class A apartments are the highest quality multifamily properties. They are usually new developments in the best neighborhoods, with the best finishes, and also present with the highest cost. These features makes Class A investments less risky but these properties also provide correspondingly lower financial returns.

Class B and C assets are the sweet spot for multifamily investors as they provide strong financial returns with still only moderate risks.

The bottom of multifamily apartments are Class D. These buildings are often falling apart, have unreliable tenants and are located in rougher areas of town. Renovating low end apartments in areas undergoing gentrification can provide great returns but at much higher risk.

Why invest in Multifamily?

When affordable housing demand continues to grow, rents continue to grow and interest rates are low.. it’s good to be a landlord. Here are some of the benefits of investing in Multifamily syndication:

Higher & Consistent Returns

Average annualized returns 12-20%.

Low Risk / Hard Assets

Investments are secured by physical property.

Preferred Returns

Investors get paid before Operators.

Cash Flow

Income payments, typically quarterly.

Tax Friendly

Depreciation and expense deductions as well as lower rates.

Hedge Against Inflation

Asset values goes up with inflation.


Sponsors sign on any loans and do all the work, capital partners simply receive returns and an annual K1 report for tax filing.

Why Multifamily is better than Single Family Rentals?

In a word, scale. Multifamily provides economies of scale, higher cash flows, lower per unit costs, greater financial cushion for downturns and forced appreciation. This is not to say that single family rental investments are necessarily bad. Single family rental homes can be a good investment if executed properly. This means managing the tenants, taxes, insurance, financing, maintenance & repairs regularly and efficiently. Doing this for a single property or two by yourself can be done with varying amounts of time and energy but with typically minimal cash flow for the amount of time, money and effort. Additionally, a single month or two of vacancy can be devastating to the annual income on such an investment. Moreover, it only takes one bad tenant to crush a single home investment and ruin any gains (ask us how we know). Ultimately, the amount of time, energy and liability investing in 50 single homes can not compete with a single 50 unit apartment building.

What is Value-Add opportunity?

One of the best aspects of multifamily investing is the opportunity to add value to the property. Decreasing the expenses is always a very important part of running any business, but increasing the net operating income (NOI) through making improvements to the property is extremely powerful. We look for inefficiencies in management as well as opportunities to improve the property creating the most potential value for investors. Performing all of this also makes the greatest impact on the communities. Ultimately, improving the property allows for increased rents while providing the tenants a safe clean home they can be proud of.

When you should NOT invest in Multifamily?

Although there are many advantages to investing in multifamily real estate, there are a few cons any potential investor should consider.

First of all, the cost of acquiring apartment buildings can range from $1 million to over $100 million. This is a considerable barrier to entry for most investors. Partnering with others is a common way to overcome this obstacle (read about syndications below). Management of many apartments can be demanding and also requires an experienced team. Competition in the commercial real estate spaces is very high and can be yet another obstacle for investors. Having experience in the market and established relationships are very important and can take years to develop.

Factors that individuals should consider before investing in Multifamily syndications are:

Not Liquid

If you need liquidity in your investment, multifamily syndications may not be the right fit for you. Typical investments in syndications require several years of committed funds. Note: special circumstances can typically be accommodated.

Larger Investments

Most real estate syndications require minimum investments of $50,000 or $100,000. Which, for anyone, is a LOT of money. It could very well be an entire year’s salary for some people.

No Control

General Partners in a syndication have control over the asset while Limited Partners/Capital Partners do not. If you like more control over the general operations and business plans, multifamily syndications may not be a good fit for you.

Novel Investment

Passive investing can be very different from traditional investments and may take some getting used to. Your relationship with the General partner(s) is very important as they do all the work. It may take some time and research to get comfortable with this type of investing.

Whether a multifamily investment is right for you depends on a variety of factors. Like all investments, these factors include your disposition, your goals, and your experience. It depends on your financial situation and the amount of time and sweat equity you might be willing to put into an investment. It depends on the market you are trying to get into. In short, it depends on the person and where they are in their lives. It is something you have to answer for yourself. Most people team up with experienced investors and test the water with a modest investment

What is a Real Estate Syndication?

A real estate syndication is a partnership between investors. These people combine resources (such as skills and capital) to purchase and manage a property together. A real estate syndication is a great way to generate passive income when you want to put your money into real estate without taking on the daily management responsibilities. It’s a significant endeavor that needs a lot of time and work. Together we can take down bigger projects and enjoy bigger gains.

Who are the players in a Syndication?


There is a person or company that organizes the real estate syndication and are responsible for finding and managing the property. They are interchangeably known as the Sponsor, Operator, or Syndicator and depending on the legal structure of the organization created for the investment, the Sponsor is technically known as the General Partner (GP) or Manager.


The people who provide the capital are often referred to as Passive Investors or Limited Partners (LPs) or Members depending on the legal structure. Limited Partners receive an equity share in the syndication along with cash flow distributions and profits.

Sponsors manage the property, execute the business plan and update investors.
Investors get perks of Real Estate investing, BUT no tenants, no fixing toilets and broken doors…
Limited Partners/Capital Partners sit back and get quarterly preferred return payments (and a K1 to give to your tax preparer/CPA).

What is a preferred return?

A preferred return on an investment means that the Limited Partner gets paid their share of profits BEFORE any other partners. A Sponsor gets paid only AFTER investor/capital partners receive their distributions up to the specified allotment and any remaining profits are shared according to the deal structure. Such an arrangement assures Limited Partners that their interests come first and keeps the interests of all parties aligned.

Different Investments can offer a variety of Investor classes, some of which may be only preferred returns (10-12% annually) while other may offer a smaller annual preferred return (5-8%) but with retained interests in the project for a significant upside at disposition. Some people prefer the annual cash flow, some prefer the larger profits at sale, and others the tax benefits. Most syndications provide some of each of these, although each deal is unique due to the many variables.

Additional profit sharing after the preferred return payouts can vary from [75:25] to [50:50] (Investor:Sponsor) depending on deal criteria and investor class. Such equity investments return structures are project specific and can allow for significantly greater rates of return.

“Don’t wait to buy real estate. Buy real estate and wait.”


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