The Powerful Benefits of Multifamily Commercial Real Estate Syndications
Fundamental Real Estate Syndication Terms You Need to Know
August 14, 2022
5 Reasons to Invest in Multifamily Commercial Real Estate
September 12, 2022
Key Takeaways
- Commercial real estate syndications often produce higher returns at lower risk than traditional market investments.
- Owning multifamily properties through a syndication can produce steady income during the hold period.
Real estate can be a safe investment, but you can also lose money if you buy the wrong property at the wrong time. Markets tend to be regional, and success requires understanding regional economic and market trends.
A syndication allows you to pool funds with other investors to purchase higher-valued properties than you could on your own. Commercial real estate syndications are one of the most efficient ways to build your real estate portfolio because it relies on industry experts to locate, secure, and manage each asset. The active manager does all the legwork, and investors contribute cash for the down payment.
A few of the powerful benefits of multifamily syndications include the following:
Passive Investment: It is one of the few investments that requires no time and energy after the initial investment. The sponsor forms a company that includes the syndicator as the active partner and investors as limited partners. Investors do not have an active management role. You contribute to the deal and receive distributions based on your contribution level. The managing partner or sponsor does all the work.
Faster Portfolio Growth: Real estate uses leverage to buy properties, which makes your investment dollars go further. You can purchase more assets with less money in real estate than you can in traditional investments.
Less Volatility: Real estate, as an investment category, has less volatility than traditional market investments. Property values can rise and fall but do so at slower intervals and are typically spurred by market conditions. Traditional stocks and bonds can fluctuate because of emotional reactions to company news or even unrelated world events. Multifamily real estate tends to be even less volatile because housing is an essential need.
Ongoing Distributions: Real estate syndications can act like a dividend-paying stocks if the agreement includes monthly or quarterly distributions. The contract could repay a portion of the principal investment or payout profits based on revenues in regular intervals.
Tax Benefits include deductions for expenses, including interest and depreciation. You may also be able to deduct bonus depreciation in the year of the purchase, lowering taxable income. When you do pay taxes, it’s at the lower capital gains rate. You can often defer taxes on the gains at the end of the hold period through a 1031 exchange.
At Sunage Equity Capital, we specialize in multifamily housing in growing regional markets. Our properties have value-add projects that can accelerate appreciation, increasing returns for investors.