For some individuals who can’t or won’t be willing to deal with the stock market’s volatility, real estate may be a viable option. Whether you are willing to take an active or passive role in managing your investment portfolio, real estate provides you with options that will be suitable for your decision. Among its types, multifamily real estate is a promising real estate investment an investor can secure in its portfolio because it carries the idea of high-return real estate investing.
What is Multifamily Real Estate?
Multifamily real estate pertains to the type of housing that includes numerous units in a single structure. Also referred to as multi-dwelling units, it is generally used to describe apartment complexes, as each structure has numerous rentable areas. Further, this also describes townhouses, duplexes, triplexes, quadplexes, and other structures that are built to house multiple families in distinct units.
To give it a full-circle disclosure, it honestly takes a lot of effort to actively manage a multifamily investment. The most significant hurdle for multifamily investors who want to go it alone is the time commitment required to manage their property. Finding tenants, negotiating their contracts, and settling any concerns are all common events for landlords together with the regular tasks of scheduling property repairs and maintenance.
Overview on How to Invest in Multifamily Real Estate
Multifamily real estate can be classified as a mixed type between residential real estate and commercial real estate. The defining line would then be the investor’s purpose for the property. However, in most cases, this type of investment is often used commercially to gain rental income.
Nonetheless, there are various ways for an investor to acquire this asset. An individual can invest in multifamily real estate either through:
- Direct Multifamily Real Estate investment
- Real Estate Syndication
Direct Multifamily Real Estate Investment
Apart from rental income, appreciation and profits earned from any commercial activity that relies on the real estate property are all sources of revenue for direct real estate investors. If you want to have more control in managing your property, you may opt to directly acquire it. In addition to this, another benefit of directly investing in multifamily real estate is the potential to generate significantly high substantial cash flow.
As the population grows, the same goes for the rent demands. This subsequently provides an advantage for property investors with more sources of income. Not to mention that with multifamily property, you lease out more than one unit and thus the income will be significantly more as compared with single-family houses.
On the other hand, a disadvantage of this is that if you want to be successful, you will need to put in a lot of time and effort. On top of this, there are possible tenant difficulties, maintenance emergencies, and liability on your end, if there are any incidents on the property that you are bound to address.
Real Estate Syndication Investment
Property syndication, also known as real estate syndication, is defined as the act of a collaboration involving numerous investors. They pool their skills, resources, and finances to buy and operate a property they couldn’t or wouldn’t want to acquire on their own. Additionally, there’s a certain subgroup that will take care of the financing task, while another subgroup will focus on assessing the perfect real estate to invest in.
In a sense, it is similar to crowdfunding. Both syndication and crowdfunding, in their most basic form, require pooling capital with other individuals for a similar purpose or objective. The purchase of real property, or a tangible building that you can see and touch, is a typical goal in real estate.
Access to transaction flow is the most important reason why investors favor investment syndication. Not every investor has the time to sift through hundreds of homes in search of a hidden treasure. However, there are thousands of real estate companies doing this for a living all over the United States, one of which is Holdfolio.
While real estate syndications promote a lot of advantages, remember that no investment comes without any risk at all. When it comes to syndications, the most critical decision an investor will have to make is with whom to invest. So before making an investment, be sure you’re working with a reputable and knowledgeable real estate syndicator.
Real Estate Syndication Returns
Fortunately, research-based calculations with regard to real estate syndication returns can be found and accessible for public use. For an average syndication real estate investment is expected to have a 5-year hold which means that its liquidity is low within this period.
Next, the projected cash-on-cash returns for property syndication is 7 to 8 percent. Cash on cash returns pertains to the cash flow that is expected to be the result of the capital.
Lastly, once the property is decided by its owner/s to be sold in the market, the projected profit upon sale is 40 to 60 percent. This is under the assumption that the sale will be done only when the hold matures.
Applying this into a sample calculation on the returns – if you put $200,000 into a real estate syndication contract with these predicted returns, you can expect to receive amounts ranging from $340,000 to $400,000 after five years of being locked in. And just like any other investment, the higher you invest, the higher the chance for you to receive more returns.
The Overall Key to the ‘How’: Get a Real Estate Portfolio Manager
Regardless of whether as an investor you are leaning towards directly investing in real estate or undergoing a real estate syndication, one thing is arguably certain – you need extensive knowledge before releasing your money out there.
This is where the service of real estate portfolio managers comes in. Service-offering companies that specialize in this type of market, like Holdfolio, help investors to maximize the capital they are willing to invest by opening the doors to potential investments.
As Holdfolio takes pride in, their investors benefit from strong collaboration partnerships and trust, which allow them to get the highest degree of aligned interests and build financial wealth and a safe source of income. It vows that regardless of market conditions or the real estate cycle, the company will always aim to earn a significant return on the investment they are working on without gambling.
Having a portfolio manager to guide you on this type of investment surely saves you time on getting all the information that you need before deciding on how to grow your money. At the end of the day, it is still important that you have done your research on which company to ask help for prior to investing in multifamily real estate to make sure that any risks involved are well understood and considered.
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