The Top 5 Benefits of Investing in Multifamily Real Estate Syndications
From the stock market to government bonds, Airbnbs to ATM machines, there are dozens of ways to invest your hard-earned money. With so many options at our fingertips, it’s essential to take the time to research which investment avenues will best help you achieve your goals both financially and for your desired lifestyle. Time, money, the knowledge needed for success, taxation benefits and regulations, and return on investment are all things to consider when looking at potential investment opportunities.
Real estate has always been a real asset that can offer great returns in multiple ways. Yet, within real estate, there are still many ways you can decide to invest. For those who want an option that allows them to sit back and not be the one doing the work, apartment syndications are an appealing option. This article will explain why by sharing the top benefits of investing in apartment syndications and why so many investors choose this option to diversify their portfolios.
No hands-on involvement
One of the biggest perks of multifamily syndications is that, as a passive investor, you don’t have to do any of the heavy lifting. Unlike other forms of real estate investing that require you to be involved in the day-to-day operations, passive investing in apartments allows you to take a hands-off approach while reaping the benefits of a large-scale investment project. Managers of the syndication, often referred to as General Partners or syndicators, handle everything from finding the property, purchasing it, creating and executing the business plan, to paying out the profits to their investors.
No experience required
Unlike flipping houses or buying a rental property, when it comes to multifamily syndications, you won’t be hiring contractors, fixing plumbing issues, or working to convince a lender to underwrite you for a loan. You don’t need a real estate license or experience in the construction field. All you need is to vet and build solid relationships with an experienced, professional team that shares a common goal. Investing with a syndicator who has a strong track record in the market and an in-depth business plan that they transparently share with you can help you to avoid potentially costly mistakes while still adding large-scale apartment holdings to your portfolio.
Higher returns on investment
Individual stocks and cryptocurrencies can often feel like a gamble for investors with a varying degree of return on investment. It doesn’t mean it’s a bad investment, it’s just a different path with many more “unknowns” because you as an investor don’t have access to a business plan or roadmap. Many investors have seen higher returns on multifamily syndication properties than other investment vehicles, especially when combined with the tax advantages they offer. At the time this article was written, an average total return on a well run apartment syndication can be between 80-100% within the 5 year holding period. That’s doubling your money in 5 years, or sometimes less! Remember, just like with any investment, there is still risk involved. Nothing in investing is guaranteed. It’s important that you educate yourself on the risks and how to mitigate them, especially by working with syndicators who you trust with solid track records. Learn more about what to look for in a syndication team.
Greater tax benefits
That said, multifamily real estate syndications offer greater returns in the way of tax benefits than other forms of investing. As it stands, the profits earned at the end of a multifamily syndication project are taxed as long-term capital gains, which typically carry a lower rate than ordinary income taxes for those of you who fall into the high salary bucket.
As a passive investor, you own an actual percentage of the property, which opens the door to other tax benefits, including the ability to offset passive income with passive losses. This can potentially delay your taxation until the end of the project. Even then, there are strategies you can use by investing in multiple syndications at a time and leveraging passive losses from each to reduce your tax burden in the short term. We highly suggest finding a tax professional who has experience working with real estate investors to educate you further and help you craft a strategy for taking advantage of real estate taxation rules.
Remember, we are not tax professionals and share this information based on our experience for educational purposes. Always consult your tax specialist to gain a deeper understanding of the benefits and how they relate to your individual situation.
Fulfills a human need
One of the basic human needs is the need for shelter. As the demand for housing increases with the population, so does the demand for good housing. investors are looking for ways to continue to add value to the communities they invest within. When you invest in an apartment building or mobile home park syndication, you provide a roof over a family’s head that may not otherwise have access. Unlike investing in stocks or other vehicles where your success relies on your ability to sell someone on an idea, housing is already in high demand. You are offering a solution to that need and a better quality of life to families within the community.
These are our top five reasons to invest in real estate syndications, but the list is endless. Wherever and however you decide to invest your money, just keep in mind the importance of making decisions that align with your short-term and long-term goals. Take the time to research what you’re investing in and who you’re investing with. You want to align yourself with a team that shares similar goals as you, communicates effectively, and has experience in their market.
If you’re interested in learning more about how syndications may help you progress your financial goals, schedule a free consultation with the EZ FI U team.
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