Here are the 5 top reasons to consider commercial multifamily:
Economy of Scale
Single family properties or small multifamily properties do not have sufficient revenue to hire full time staff. Because of this, owners are typically required to handle all day to day operations of the property. With a multifamily, revenue is sufficient to hire full time staff to operate the property.
Cost of property management, repair materials, service contracts benefit the economy of scale.
Risk Reduction
Thanks to the multiple units in a multifamily property, laws of average for vacancy and maintenance costs apply. An Investor in single family homes will need many units to apply laws of average on his portfolio: a bad tenant can result in burning up all profits made in a year.
Tax benefit
Contrary to a single family rental property, the depreciation on a multifamily asset can be accelerated thanks to a cost segregation analysis.
Appreciation
Unlike a single family value tied to comps, themselves linked to market conditions, the value of a multifamily asset is based on the Net Operating Income (NOI) - income minus expenses - and the Capitalization Rate of the market. There are three ways to force appreciation by increasing the NOI: increase income, decrease expenses, or a combination of both.
Workload
Finding the deal, underwriting, negotiating, closing and managing. Those are the tasks that must be repeated for each acquisition of a real estate asset. While less complex, single family properties must have to be repeated for each door. A single multifamily acquisition allows one to run a more intense process once to acquire 5, 10, 100... 1000 doors!
Here are the top 5 reasons to consider passive investing in syndications:
Passive
Possibly the most beneficial reason to consider investing in real estate syndications is that you have the ability to be a passive investor. The sponsor will find the deal, negotiate, underwrite (create a business plan), find financing, close the transaction. Then the investor is letting the sponsor manage the asset or take care of the operational perspective of the investment.
Experience
A syndication allows you to take advantage of the experience and financial strength of the sponsor. The sponsor brings a track record and a network of 3rd parties to inspect, finance, provide legal support and manage properties.
Access to Large Investment
A syndication allows the aggregate of capital among other investors to invest in otherwise unobtainable, high-value apartments with high returns. Over 90% of multifamily purchases are made through syndication.
Diversify
Investment in a syndication typically start at $50,000 and could be as little as $25,000. The relatively modest investment in a particular syndication allows you to access several markets when investing in multiple deals.
Protection
Each syndication purchases the multifamily asset through a Limited Liability Company. An LLC provides its members with personal legal protections against lawsuits and personal financial liability. Consult with your attorney for specific advice on the benefits of investing through a syndication.
