What You Need To Know About Investing in Multifamily Real Estate Funds

Table of Contents

1. Understanding Multifamily Real Estate Investment Opportunities

2. Why High Net Worth People Choose Multifamily vs. Single-Family Investments

3. What is a Multifamily Fund?

4. How Do You Finance a Multifamily Property?

5. What is Multifamily Real Estate Syndication?

6. Is a Multifamily Property a Good Investment?

7. How Do You Know if a Multifamily Project is a Good Deal?

   1. Sources:

8. About BAM Multifamily Growth & Income Fund II

When people think about investing in multifamily real estate, they think about buying a property and then renting it out in order to generate income. And while that sounds like a good way of generating passive income, most investors don’t like the idea of becoming a landlord and actually managing the property.

This is where multifamily real estate syndication investments come in. This is a great option that allows investors to generate income in real estate investing without having to be a landlord full time.

Understanding Multifamily Real Estate Investment Opportunities

Real estate is generally the preferred investment strategy for investors who want to avoid the volatility of the stock market. With real estate investing, you can take a more active role in growing your capital. [1]

Rental property investing is also a great source of additional monthly income, which is why it’s a good idea to look for these investment opportunities. You can even enjoy a slow but steady appreciation in the value of your portfolio.

There are two main types of properties you can invest in when it comes to residential real estate: single-family and multifamily.

Single-family properties only have one unit that’s available to rent, while multifamily properties have multiple units of rentable space. Multifamily properties are usually apartment complexes and duplexes. [1]

Why High Net Worth People Choose Multifamily vs. Single-Family Investments

When it comes to residential buildings, multifamily properties are typically easier to finance compared to single family properties despite being more expensive. Banks are more likely to approve a loan for a multifamily property than the average home. That’s because these larger properties can generate a consistent cash flow every month. Multifamily properties have many advantages that are appealing to the experienced investor. In the eyes of lending institutions, this is the safer investment. [1]

This is also the reason why high net worth (HNW) people prefer to invest in multifamily properties. Multifamily rentals can be more stable. They tend to avoid major value swings and also produce better cash flow. They even offer that diversification element to your rental income. [2]

If you purchase a triplex and one unit is vacant, you can still collect rental income from the two remaining units. But if you are renting a single-family home and it sits vacant, you won’t get anything. This gives you the opportunity to build a portfolio without a huge risk of negative cash flow. [2]

High net worth individuals also see multifamily properties as an easy way of building a large portfolio of rental units. Think of it this way: acquiring a 20-unit apartment would be a lot easier than acquiring 20 different single-family homes in different addresses and from different sellers. Many investors also don’t want to open 20 separate loans for each individual property. That’s too much of a headache compared to just going for the single 20-unit apartment complex. [2]

What is a Multifamily Fund?

A multifamily investment fund is made up of equity investment positions in several large multifamily properties. It pools many properties together into one fund and then divides the equity among multiple investors. [3]

These properties may be in one area or in multiple states. It depends on the sponsor’s investment strategy. Multifamily real estate funds are recommended for real estate investors seeking passive income.

How Do You Finance a Multifamily Property?

For those who are not interested in buying a multifamily property all by themselves, and do notFirst you want to seek out a property in a good location. Location is very important when choosing a multifamily property to invest in. Choose apartment buildings in locations that renters will want to live in. Places close to a school, to the city, or close to multiple attractions make good investments. These are the places that attract high quality tenants who will want to pay to live in the property. [4]

Partner up with a local real estate agent so they can offer quality advice when it comes to multifamily real estate. They can even help you determine if a property is overpriced. We have the experience to help you navigate the waters of multifamily property investing. At BAM Capital, we work with investors across the country despite our midwest focus with our assets.  We focus on the midwest due to our investment strategy to target tertiary markets with upward trending white-collar jobs, population growth and quality school systems.

Next, choose a loan. Pick a loan program and provider that’s right for you. Keep in mind that some online lenders will only finance a 2-unit property but not anything larger. [4]

However, conventional mortgages are the most popular when it comes to real estate investing. Once you’ve arranged the financing, you are ready to make an offer on the property.

You may need your agent’s help when it comes to making an offer on the multifamily home you are interested in. They will meet the selling agent on your behalf and negotiate based on your budget, financing limits, and the highest offer you are willing to make. Counteroffers are common during this stage. [4]

Once the seller accepts the offer, you will move toward the closing process. Now you only have to think about insurance, inspections, and handling the closing costs.

 want the burden of being a landlord, the best way to finance your multifamily property is through multifamily syndication.

What is Multifamily Real Estate Syndication?

A multifamily syndication is a type of real estate investment wherein multiple investors pool their money to purchase a single asset. A sponsor is in charge of locating the deal so you don’t have to bother looking for one yourself. It’s all about choosing what syndication deal you want to invest in. [5]

The sponsor, also known as the syndicator, is also in charge of managing the investment once the deal has closed. They will put it all together and serve as the general partner who coordinates the transaction all throughout the process.

Technically, any type of real estate property can be used for a syndication deal. But we’re discussing multifamily real estate syndication because it is one of the safer investments you can make—and it is also a source of consistent income. On top of all that, you don’t even have to be a landlord since another party will serve as the property manager. [5]

How it works is that the passive investors provide most of the capital required, and in exchange, they receive equity in the multifamily property. It is basically crowdfunding for real estate.

Sponsors can be individuals or companies. Either way, they will take charge of the deal. They will look for a deal, acquire the property, and manage the real estate. These syndicators have a ton of real estate experience. This means they also have a deep understanding of due diligence for potential deals.

Investors, particularly high net worth individuals, usually take interest in multifamily syndication because it offers plenty of benefits. It is a particularly smart move if you want a passive investment, wherein you don’t need to be involved with the property, its tenants, or its management.

The investment is protected by the real estate asset. By investing in multifamily syndication, you can get profit from the cash flow, from equity build, and appreciation.

The fact that multiple people are investing their money means that some of them could participate in larger deals that they otherwise wouldn’t be able to.

Real estate is also one of the best investment vehicles because of its tax benefits. If you want to enjoy the benefits of real estate without the hassle of managing a property, this could be the type of investment for you.

Multifamily syndications may differ in terms of the fees, the deal, the investment strategy, and the way equity and cash flow are split.

To form a syndication deal, investors and syndicators will form an LLC or a limited liability company. The syndicator will serve as the managing member, and the investors are all limited partners. [5]

A certain percentage of the property is owned by each party in the investment. While sometimes ownership is split equally, other times the syndicator takes a larger percentage of equity. Cash flow is also shared amongst the partners based on the percentage they own.

Some deal structures include a preferred return to the investor. Before the syndicator can make any money out of it, the deal needs to hit a minimum return. This motivates syndicators to fulfill their role. The individual investor also bears less risk in this arrangement.  [5]

The specific details of the investment are outlined in a private placement memorandum. This also details all fees associated and all the risks involved. After this, the required SEC registrations and notices are filed.

The syndicator secures a loan for the investment and signs on the loan. This means the investors are not liable for the repayment of the loan.

Once financing is secured, the sponsor looks for potential investors who would pool their money for the deal’s capital requirements. Once enough money is raised to cover the down payment and the closing costs, the deal is closed.

Some syndicators choose to hire a third party property management company to manage the property instead of doing it themselves. [5] At BAM Capital, we are a vertically integrated company with our own construction and management teams.

The cash flow is then distributed to the investors based on the structure they agreed upon. As for the exit strategy, it usually involves selling the property at some point—typically between 5 to 10 years in the future. The investors then receive their share of the equity from the sale. BAM Capital aims for a 5-7 year hold period.

Is a Multifamily Property a Good Investment?

Multifamily rental properties tend to be more in demand, which is a huge benefit for investors. Even if there are vacant units every now and then, the cash flow doesn’t necessarily stop. Learn the differences beween an REIT and Multifamily syndication.

Bigger real estate deals often means there are more investors involved. You get the added benefit of having an experienced multifamily asset manager. The cherry on top is you get to add rental real estate into your investment portfolio.

Multifamily syndication is a generally low-risk approach to real estate investment.

Investors can profit from the equity and appreciation from paying the principal balance on the loan. The goal is to earn more money than the original investment.

How Do You Know if a Multifamily Project is a Good Deal?

When picking a multifamily project to invest in, there are a few factors you need to consider. Regardless of your strategy for finding these deals, you will surely have a lot of options. It’s all about picking the right one for you.

BAM Capital works with accredited investors looking for high value syndication opportunities that will generate more income.

If you are looking for lower risk investments that can give you the maximum benefit, consider working with BAM Capital. This Indianapolis-based company has been focusing on buying the right assets and staying disciplined in its investment thesis. Currently, BAM Capital has $593M AUM and 5,000 units. [6]

BAM Capital specializes in the acquisition and management of income-producing multifamily apartment communities. BAM Capital also focuses on , B++, A-, and A multifamily assets to provide low-risk opportunities with lucrative assets. Accredited investors reap the benefits of their cash flow-positive assets. Schedule a call with BAM Capital and invest today.

The contents on this site are for informational and entertainment purposes only and do not constitute financial, investment, or legal advice. BAM Capital cannot guarantee that the information shared on this post or page is appropriate for you and your financial situation.  By using this site, you agree to hold BAM Capital and any and all entities related to the writing & publishing including BAM Capital’s parent company harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information found on this site. Always consult your investment advisor, CPA, and other professionals before making an investment. BAM Capital is excited to help you grow your investment assets. Please contact us to see how we can help you.”

Sources:

[1]: https://www.investopedia.com/articles/personal-finance/041216/3-reasons-invest-multifamily-real-estate.asp

[2]: https://www.millionacres.com/real-estate-investing/articles/single-family-vs-multifamily-which-is-a-better-investment-strategy/

[3]: https://trionproperties.com/real-estate-investment-education/articles/multifamily-investment-fund/

[4]: https://www.rocketmortgage.com/learn/multifamily-homes

[5]: https://www.millionacres.com/real-estate-basics/real-estate-terms/investing-multifamily-syndication/

[6]: https://capital.thebamcompanies.com/

About BAM Multifamily Growth & Income Fund II

BAM Capital created this fund in order to yield consistent and reliable cash flow, long-term appreciation, and accelerated tax benefits. The fund aligns with BAM Capital’s demonstrated track record of successful multifamily investing by continuing to implement our signature investment thesis, now in fund format. The fund aims for greater overall returns and lower risk through a multi-asset diversification strategy.

• Consistent passive income
  Lower-risk assets with in-place cash flows with the ability to distribute preferred return after acquisition.

• Significant tax benefits
  A cost segregation analysis allows for accelerated deprecation to years of ownership. This large passive loss gets passed onto investors through a K1.

• Vertically integrated company
  In-house property management and construction allow for predictable cost reduction and value add.

Investing In Multifamily Syndication In Cincinnati

Cincinnati is a city in Ohio, on the Ohio River. The Over-the-Rhine district is known for its 19th-century architecture, including Findlay Market, which has food and craft vendors. To the north is the Cincinnati Zoo & Botanical Garden. The Cincinnati Museum Center encompasses history, science and children’s museums in the art deco Union Terminal. Works spanning 6,000 years are on display at the Cincinnati Art Museum.

History

Cincinnati was founded in 1788 by Mathias Denman, Colonel Robert Patterson and Israel Ludlow. The three bought 800 acres of land along Ohio River at the mouth of River Licking. They further divided their roles for the new project. Denman was to fund, Patterson to find settlers while Ludlow to survey the land to enable sales and establish a town. At first the city was named “Losantiville”. This name is made of four words from different languages. It means “The city opposite the mouth of Licking River”. “Ville” is French for city, “anti” is Greek for opposite, “os” is Latin for mouth and “L” is all that was involved with the Licking River.

Population

Cincinnati is a city located in Brown County, Clermont County, and Hamilton County Ohio. It is also the county seat of Hamilton County. With a 2020 population of 307,266, it is the 3rd largest city in Ohio (after Columbus and Cleveland) and the 64th largest city in the United States . Cincinnati is currently growing at a rate of 0.54% annually and its population has increased by 3.48% since the most recent census, which recorded a population of 296,943 in 2010. Cincinnati reached it’s highest population of 503,998 in 1950. Spanning over 80 miles, Cincinnati has a population density of 3,948 people per square mile.

The average household income in Cincinnati is $65,213 with a poverty rate of 26.28%. The median rental costs in recent years comes to $738 per month, and the median house value is $138,000. The median age in Cincinnati is 32.2 years, 31.2 years for males, and 33.2 years for females.

Income

The Census ACS 1-year survey reports that the median household income for the Cincinnati-Middletown Ohio metro area was $66,825 in 2019, the latest figures available. Cincinnati median household income is $8,183 higher than the median Ohio household income and $1,113 greater than the US median household income. 2020 metro income data (including Cincinnati median household income) will be released in September of 2021. Median family and per capita income for Cincinnati-Middletown are shown below.

Climate

In Cincinnati, the summers are warm and humid, the winters are very cold and snowy, and it is partly cloudy year round. Over the course of the year, the temperature typically varies from 24°F to 86°F and is rarely below 8°F or above 93°F.

Based on the tourism score, the best time of year to visit Cincinnati for warm-weather activities is from mid June to late September.

Economy

Cincinnati has an unemployment rate of 4.9%. The US average is 6.0%.

Cincinnati has seen the job market increase by 0.8% over the last year. Future job growth over the next ten years is predicted to be 29.8%, which is lower than the US average of 33.5%.

Tax Rates for Cincinnati

• The Sales Tax Rate for Cincinnati is 7.0%. The US average is 7.3%.

• The Income Tax Rate for Cincinnati is 5.6%. The US average is 4.6%.

• Tax Rates can have a big impact when Comparing Cost of Living.

Income and Salaries for Cincinnati

• The average income of a Cincinnati resident is $25,256 a year. The US average is $28,555 a year.

• The Median household income of a Cincinnati resident is $34,002 a year. The US average is $53,482 a year.

Notable People or Businesses

Al. Neyer

Division: Small Sector: Real estate – commercial development Founded: 1894 Ownership: Private Local HQ: Downtown Local employees: 93 What the company does: Developer and design-builder that specializes in office headquarters, industrial sites, mixed use developments Why one employee loves working there: “Work doesn’t feel like ‘work.’ We are driving toward common goals and accomplishing great things as a team.”

American Modern Insurance Group

Division: Large Sector: Insurance – consultants and brokers Founded: 1965 Ownership: Private Local HQ: Amelia Local employees: 1,188 What the company does: Specialty insurer of manufactured homes and specialty dwellings and recreational vehicles such as boats, ATVs, snowmobiles, motorcycles and classic cars Why one employee loves working there: “There is room to move up or learn new things at your pace. Nothing is forced on you.”

Ancra Cargo

Division: Small Sector: Manufacturing Founded: 1969 Ownership: Private Local HQ: Erlanger Local employees: 113 What the company does: Makes and sells cargo handling and cargo restraints systems. Why one employee loves working there: “I get to work with great people that get along and we are always doing something new and interesting.”

Apollo Home

Division: Small Sector: HVAC and plumbing Founded: 1910 Ownership: Private Local HQ: Oakley Local employees: 109 What the company does: Repairs and replaces cooling, heating plumbing and electrical systems. Why one employee loves working there: “It’s the best place I’ve worked for the teamwork, helping each other out and not being disrespectful when someone makes a mistake.

Archbishop Moeller High School

Division: Small Sector: Education – parochial Founded: 1960 Ownership: Nonprofit Local HQ: Sycamore Township Local employees: 109 What the company does: Runs a Catholic high school for young men Operates Why one employee loves working there: “I am very impressed with the respect and good manners I am shown on a daily basis from the student body, and I love the freedom from standardized testing that I did not have at my previous teaching job.”

AtriCure Inc.

Division: Midsize Sector: Manufacturing Founded: 2000 Ownership: Publicly traded Local HQ: Mason Local employees: 392 What the company does: Medical device company providing tools and education for the treatment of atrial fibrillation Why one employee loves working there: “I am able to work outside the typical envelope to get things done in an innovative way.”

Atrium Medical Center team members celebrating an award from the American Nurses Credentialing Center.

Atrium Medical Center

Division: Large Sector: Health care – hospitals Founded: 2007 Ownership: Nonprofit Local HQ: Franklin Township Local employees: 1,424 What the company does: Operates a hospital, which includes Warren County’s only Level III trauma center and primary stroke center Why one employee loves working there: “My coworkers encourage and support me throughout my day. I enjoy the diversity of my job responsibilities.”

Barnes Dennig

Division: Small Sector: Accounting services Founded: 1965 Ownership: Partnership Local HQ: Downtown Local employees: 109 What the company does: CPA firm with offices in Cincinnati, Crestview Hills and Indianapolis Why one employee loves working there: “I feel like everyone has the expectation of getting your work done, but also understands and prioritizes life outside of work. Barnes is also really good at showing employee appreciation.”

Beech Acres Parenting Center

Division: Midsize Sector: Human and social services Founded: 1849 Ownership: Nonprofit Local HQ: Anderson Township Local employees: 153 What the company does: Provides parent education, foster care services and individualized parent, child and family counseling services Why one employee loves working there: “The amount of support that I have received since the first day I started working here is unlike anything I have experienced at any other job.”

BGR Inc.

Division: Midsize Sector: Distribution Founded: 1972 Ownership: Private Local HQ: West Chester Local employees: 205 What the company does: Packaging supply chain experts Why one employee loves working there: “Job challenges me to think outside box and come up with viable solutions for the customer.”

Blair Technology Group

Division: Midsize Sector: IT – computer refurbisher Founded: 2005 Ownership: Private Local HQ: Covington Local employees: 176 What the company does: Buys, clears, repairs and resell computers Why one employee loves working there: “The company is filled with passionate people. Every day is inspiring because of it.”

Bray Construction Services Inc.

Division: Small Sector: Construction Founded: 1948 Ownership: Private Local HQ: Alexandria Local employees: 54 What the company does: Speciality excavation and utility work Why one employee loves working there: “There aren’t constant interruptions causing loss of focus or unnecessary drama. Co-workers are a pleasure to be around … and it’s a well-run company that offers stability.”

BRG Apartments

Division: Midsize Sector: Real estate – property management Founded: 2005 Ownership: Private Local HQ: Sycamore Township Local employees: 161 What the company does: Operators of apartment communities in Southwest Ohio and Northern Kentucky; Dayton, Ohio; Columbus; and Louisville. Why one employee loves working there: “Everyone from the CEO to the part-timers are treated the same, with respect. You don’t feel invisible.”

BSI Engineering

Division: Midsize Sector: Consulting and design engineering Founded: 2007 Ownership: Private Local HQ: Sycamore Township Local employees: 167 What the company does: Serves manufacturing clients in the chemical, pharmaceutical, food and beverage, and consumer product sectors. Why one employee loves working there: “I get to work on meaningful projects with intelligent peers. The atmosphere in the office radiates positivity.”

Butler County Educational Service Center

Division: Large Sector: Education – public Founded: 1914 Ownership: Government Local HQ: Hamilton Local employees: 614 What the company does: Provides educational programs, professional development, multi-faceted family services from prenatal through high school Why one employee loves working there: “Not only are we educating the children but we are educating and motivating families to strive for greatness in all aspects of life.”

Community education and outreach plays a key role in Caracole’s fight against HIV/AIDS. The agency embraces and offers practical strategies to help prevent disease and promote health and well-being.

Caracole

Division: Small Sector: Human and social services Founded: 1987 Ownership: Nonprofit Local HQ: Northside Local employees: 62 What the company does: Provides safe and affordable housing, medical case management and pharmacy services to those living with HIV Why one employee loves working there: “We think about clients first and how to be great and effective at our jobs. We are well connected and respected in the community.”

Carespring Healthcare Management

Division: Large Sector: Health care – skilled nursing facilities Founded: 1986 Ownership: Private Local HQ: Miami Township Local employees: 2,345 What the company does: Provides skilled nursing, rehabilitation, independent and assisted living services to seniors at 10 locations Southwest Ohio and Northern Kentucky Why one employee loves working there: “I like to help people. The residents are like family to me.”

Cassady Schiller CPAs & Advisors

Division: Small Sector: Accounting services Founded: 1990 Ownership: Partnership Local HQ: Blue Ash Local employees: 72 What the company does: Certified public accountants and consultants Why one employee loves working there: “The service we provide and the ways in which we differentiate our services provided from others within the industry and driving the relationship building.”

CBT

Division: Midsize Sector: Distribution – industrial automation products Founded: 1921 Ownership: Private Local HQ: Columbia Township Local employees: 233 What the company does: Sells electrical supplies, mechanical power transmission, belting and conveyor components Why one employee loves working there: “The people at CBT are some of the most knowledgeable in the industry and freely share their knowledge to advance each other’s knowledge.”

Cincinnati Center City Development Corp. (3CDC)

Division: Small Sector: Real estate – nonprofit developer and manager Founded: 2003 Ownership: Nonprofit Local HQ: Over-the-Rhine Local employees: 100 What the company does: Private, nonprofit real estate development and finance organization focused on revitalizing Downtown Cincinnati and Over-the-Rhine Why one employee loves working there: “I’ve never worked for a company that made me feel like what I do matters until I walked through the doors here at 3CDC.”

About BAM Multifamily Growth & Income Fund IV

BAM Capital created this fund in order to yield consistent and reliable cash flow, long-term appreciation, and accelerated tax benefits. The fund aligns with BAM Capital’s demonstrated track record of successful multifamily investing by continuing to implement our signature investment thesis, now in fund format. The fund aims for greater overall returns and lower risk through a multi-asset diversification strategy.

• Consistent passive income
  Lower-risk assets with in-place cash flows with the ability to distribute preferred return after acquisition.

• Significant tax benefits
  A cost segregation analysis allows for accelerated deprecation to years of ownership. This large passive loss gets passed onto investors through a K1.

• Vertically integrated company
  In-house property management and construction allow for predictable cost reduction and value add.