What are Real Estate Funds?

Table of Contents

Navigation: What Do Real Estate Funds Do?, What Do Real Estate Funds Invest In?, Why Work with BAM Capital on Multifamily Syndication Real Estate

There are many ways for investors to own real estate. However, investing in a rental property involves becoming a landlord—something that not a lot of investors are comfortable with or interested in.  Being the landlord comes with plenty of responsibilities including maintaining the property, handling emergencies, and dealing with tenants.

These responsibilities cannot be avoided unless you find and hire a property manager to work on your behalf. Real estate is generally a hands-on investment.

The good news for investors is that there are other ways to invest in real estate—some of which don’t require a lot of direct involvement.  Real estate investment funds offer a good solution for those who want to invest in real estate but do not want the usual responsibilities associated with it. Here we will be taking a closer look at real estate funds and what they are.

What Do Real Estate Funds Do?

Unless you are interested in flipping houses or becoming a landlord, real estate funds may be the best alternative for you. They make attractive additions to any portfolio and you can even avoid becoming a landlord, which means you are able to focus on other ventures.

An investment fund is an entity that is formed to pool resources of various investors in order to purchase securities like stocks, bonds, and real estate. A real estate investment fund is therefore an investment wherein a combined capital is used to purchase an asset. [1]

In some ways, real estate investment funds are similar to real estate investment trusts or REITS. Both of these are pooled sources of capital that then go into a real estate property. The difference is that REITs are corporations, meaning they need to distribute 90% of their taxable income to shareholders so that they can maintain their tax-advantaged status.

On the other hand, real estate funds don’t have to follow those rules. Investors get returns from capital appreciation rather than dividend payments. [1]

Investing in a real estate fund comes with a number of benefits including diversification. It is also a passive investment, because tenants pay rent and this generates cash flow. Real estate funds are a lot more hands-off compared to other investments because others are in charge of managing the property.

There is also a lower initial investment threshold when it comes to real estate funds. This means there is a much lower entry point compared to purchasing a property on your own.

There are three main types of real estate funds that are available to investors: real estate mutual funds, real estate exchange-traded funds (ETFs), and real estate private equity funds. [1]

What Do Real Estate Funds Invest In?

Real estate funds may focus on different types of properties, but since it involves pooling resources of multiple investors together, they naturally gravitate towards assets that are more expensive such as multifamily properties.

Multifamily properties are residential buildings that have multiple units, which can be occupied by more than one family. Common examples are duplexes, triplexes, apartment complexes, and condominiums. The number of units does not matter, as long as it is not a single family home.

Syndication is one way for investors to purchase a multifamily asset without having to provide all the capital on their own. Multifamily syndication is when investors pool their money to purchase a single real estate asset. A sponsor or syndicator such as BAM Capital locates the property, puts the deal together, and then finds investors to participate in the syndication. [3]

Through syndication, investors can enjoy a passive real estate investment and a continuous cash flow without having to become a landlord. They can also earn money from the equity once the deal is finished.

Although any type of real estate property can be used for a syndication deal, multifamily properties are currently the most popular. Multifamily syndication is considered a safe passive investment.

This sponsor is the general partner and also handles property management. Passive investors often supply most of the capital required in exchange for equity in the real estate. [3]

Why Work with BAM Capital on Multifamily Syndication Real Estate​

People who want to invest money into real estate funds should look carefully into the sponsor’s experience, trustworthiness, and knowledge. Look at their track record to see if their previous investments have paid off. See if they have spent enough time in the industry to gain valuable experience.

BAM Capital is a great option if you are looking for a sponsor for multifamily syndication. It has a strong Midwest focus, prioritizing real estate properties in that area that are Class A, A-, and B++. Investors also love BAM Capital’s vertical integration model that mitigates investor risk. BAM Capital values low risk investments for its passive investors. [4]

BAM Capital will arrange the syndication deal so there is no need to purchase an asset on your own. BAM Capital will also handle property management.

BAM Capital works with accredited investors and negotiates the purchasing and financing of high quality multifamily real estate properties on their behalf. This Indianapolis-based company currently has over $700M AUM and 5,000+ units. Schedule a call with BAM Capital and invest today.

Sources:

[1]:  https://www.millionacres.com/real-estate-investing/reits/what-is-a-real-estate-investment-fund/

[2]:https://www.millionacres.com/real-estate-basics/real-estate-terms/investing-multifamily-syndication/#:~:text=A%20multifamily%20syndication%20is%20a,sponsor%20is%20the%20general%20partner

[3]: https://www.sharestates.com/glossary/multi-family-property/

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