If you have any experience investing in real estate, whether it is a single-family home, a portfolio of homes, or small multifamily, you know these investments take time and energy. But who wants to deal with ‘tenants, termites, and toilets’…or even has the time for that?
What if you know nothing about real estate outside of the house you own, in the city you know well? Or maybe you do not have the time to find the properties, complete the due diligence, or form the team to fix and run your property. These are just a few of the challenges that investing in real estate can present.
When you speak about investing in multifamily real estate, many people do not even know that there are options available to invest in these investment vehicles.
The good news is that there are opportunities for you to passively invest in multifamily commercial real estate and enjoy all the benefits of this investment while spending time doing what you love.
If you read the article Understanding Active Versus Passive Investing, then you understand that passive investing is an approach for investors who are looking to establish long-term financial returns while minimizing their time investing. By investing with a professional team or syndicator, you can enjoy the six benefits listed below, and more, of this investment class.
- Time – Let’s face it, your time is one of your most valuable resources, and you should spend it on doing things you love. By investing passively, the sponsor is spending the time to find the right property and execute a sound business plan so that you focus on doing other things. (we like to call this making money in your sleep, a.k.a. mailbox money!)
- Tax Benefits – Like any investment, you should anticipate some sort of return, but along with the opportunity to earn income, investing in multifamily properties offer several tax benefits to investors. Taking advantage of these tax benefits allows you to increase cash flow in the short term while maximizing tax savings. If you want to learn more, check out our article on The Tax Advantages of Multifamily Investments.
- Diversification – The most commonly cited reason for investing in multifamily real estate is portfolio diversification. Meaning you are looking to add real estate to your investment portfolio and seek to do it in one of the several ways listed in the section above. You can also diversify your real estate investments across several properties in different areas with different property types and other sponsors. Doing so keeps you from over-allocating assets to any one group and will help you learn what you do and do not like from a multifamily sponsor.
- Liability – With syndications, one of the greatest benefits to investing passively is that you have not liability beyond your investment.
- Philanthropy – With most investments, only you or your family are receiving the benefits of the investment. However, when you invest in a multifamily syndication, you have the opportunity to not only receive monetary returns but positively impact the lives of many families. Each multifamily syndication we execute aims to create a clean, safe, and pleasant place for people to live. Doing so also has a positive influence on the community and environment. This is a benefit you typically do not see from investing in stocks or bonds.
- Leverage – When you invest in multifamily syndications, it all comes down to leverage. In this instance, we define leverage as using something to its maximum advantage. Leverage allows you to use various instruments of the sponsor to increase the potential return of your investment. Passive investing enables you to leverage things like experience, knowledge, research, time, network, teams, and ability to syndicate with other like-minded investors to take down large multifamily deals.
Summary
Passively investing in multifamily real estate is a great way to diversify your portfolio and mitigate risk. It allows you to use your most finite resource, time, on the things you love instead of fixing toilets, screening tenants, or handling the day-to-day operations of a property. You benefit from several tax advantages, have minimal liability, and positively impact many families and communities. That said, we hope that this article helps you build a stronger foundation in making an informed investment decision.