Things to Look for Before Investing in Multifamily Syndication

Things to Look for Before Investing in Multifamily Syndication

Despite an economic slowdown caused by the coronavirus pandemic, the multifamily sector remains stable. Apartment complexes and other types of rental housing are great asset classes for first-time investors to consider.

According to an article from the International Business, multifamily investment properties “should continue to be a reliable source of income and appreciation for the owners of these properties.”

And considering that interest rates are at historic lows, the multifamily investment will definitely lead the charge when the economy starts to recover.

For now, those eager to invest in multifamily assets should start looking for opportunities. There’s also a great deal of preparation involved, so if you are planning to structure a multifamily portfolio, here are a few things you should watch out for.

1. Capital
Do you have enough resources to structure syndication? If you don’t, you may want to diversify your capital sources so you can afford the needed down payment for the acquisition. I make it a point to tap into Other People’s Money for the capital I needed to invest in an apartment complex. So, try to look for family members, friends, or even business partners who will gladly invest their money for greater returns. You can also pre-qualify for HUD and FHA loans that can give you enough cash for acquiring your first deals.

2. Taxes
Property taxes in any location are an important factor to consider before shopping for a multifamily investment property. You will have to look at local tax trends and check if there will be an impending rate increase. At any rate, investors can choose to defer taxes using a 1031 exchange, provided that you are able to manage the asset properly.

3. Housing inventory
Basic economics tells us that the price of a commodity is determined by the demand-supply dynamic. When there’s a slowdown in housing construction in a given city, the median prices of residential assets increase. This is great for investors seeking greater returns, but such an environment also entails greater risk.

4. Job growth and rent
Using inventory alone is not enough to help you develop a clear investing strategy. Even when property prices are soaring due to an uptick in construction demand, you may also check historical trends in job growth. If a location performs well in that area, then you know more and more people can afford to rent out. But other than job growth, it’s also important how rental rates are performing over the years. This is crucial as the rent and the ability of tenants to afford it can affect your cash flow.

5. Value-add
Regardless of the type of property you want to invest in, you will need to look for an asset that can open up a new income stream and, more importantly, provide added convenience to your tenants. As you search the market for a property to add to your portfolio, you might want to look for apartment complexes and townhouses you can improve with laundry services, coworking spaces, fitness centers, and other lifestyle amenities your tenants will surely love.

To wrap all this up, multifamily syndication is a discipline you will have to take seriously. You want to get the best benefits possible, so it’s always important to come prepared.

One way to do that is to have a multifamily syndication coach by your side. That way, you can learn the ins and outs of acquiring properties that will sure to make you and your investors happy!

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