Why to invest in Multifamily syndications?

[Kay Kay Singh]

Six reasons why you should be investing in Multifamily syndications. Can add a few more please?

1. Cash Flow

2. Forced appreciation

3. Professional Management

4. Inflation protection

5. Tax benefits

6. Economies of scale

[Brian Burke]

@Kay Kay Singh the reasons you listed are not benefits of investing in a multifamily syndication.  They are all benefits of investing in real estate in general, and would apply whether investing directly or via syndicates in any income-producing real estate asset class.  Having said that, they are all great benefits, to be sure.

Here are some benefits of investing in syndications, although this isn't specific to only multifamily syndications (this is a summary of what I expand on for several pages in The Hands-Off Investor):

1. No tenants, toilets, and trash.  Let someone else do that.

2. Time--you get to travel, golf, sail, work, or whatever while someone else is doing the legwork.

3. Lack of local investments--maybe you live in a high-cost area and investing locally doesn't make sense, invest outside of your area easier when done with an operating partner.

4. Diversification--Instead of investing all of your money into one asset, spread it around in smaller chunks and invest in multiple properties, in multiple areas, of multiple asset classes, with multiple sponsors.  Eliminate those single points of failure.

5. Liability--As a passive investor investing as a member of an LLC your liability is generally limited to the amount you invested. Not always the case when owning real estate directly.

6. Cash--Either you don't have enough money to buy a large property on your own, or you have too much cash that you'd have to dedicate your life to locating and managing real estate deals.  Syndicates can solve both.

7. Lack of Desire--Maybe you want real estate in your portfolio but don't want to go out and chase deals.  You'd rather spend your time doing something more enjoyable.

8. Can't find a deal--Read the BP forums and count how many threads you see from people saying they can't find a deal, or how hard it is to get a deal, and so on.  Syndicates eliminate this frustration for the passive investor.

9. Leverage--Not just leverage in the conventional sense (using debt to leverage returns).  Yes that's great and all, but there are more forms of leverage that syndicate investors get to take advantage of.  That is, leverage of the sponsor's knowledge, experience, deal flow, financial strength, team, market research, skill, time, network and capital.  Experienced sponsors add value in each and every one of those facets and that is enormously valuable to the passive investor.

Hope that helps!