Residential and commercial multifamily properties include apartment communities, duplexes, townhomes, self-storage facilities, student housing, condominiums, and more. Residential multifamily properties have two to four units, while commercial multifamily properties have more than four dwelling units.

Investors may be interested in multifamily real estate because of its cash flow, scalability, and the opportunity to diversify their portfolio.

However, an investor must carefully evaluate the property to be successful. Several factors must be considered when evaluating a prospective multifamily real estate investment.

To explore multifamily investing and private placement (syndication), you must know what to look for in a property or deal. You can boost your income, grow your capital, or both, with the right deal while maintaining a passive investment approach.

 

WHY INVEST IN A MULTIFAMILY PROPERTY?

Also known as a multi-dwelling unit (MDU), each unit in a multifamily property has its own living space, including a separate kitchen and a bathroom. This can be a useful wealth-building tool and a solid option for investors who want to diversify their portfolios. 

Compared to single-family properties, multifamily properties can be more expensive, but they come with various benefits for investors. For example, apartment buildings and condominiums tend to bring a more significant and consistent cash flow because they have multiple residents and fewer vacancies at any given time.

Thanks to fewer vacancies, there is potentially less risk involved in this type of investment. There is a larger pool of residents to provide consistent cash flow, whereas a single-family unit that becomes vacant will produce zero cash flow until someone moves in. Since multifamily properties comprise more units, multiple income streams exist. 

It is not always necessary to purchase the multifamily property by yourself. Multifamily private placement (syndication) is a real estate investment wherein multiple investors pool their money to buy an asset or portfolio. Almost any real estate property can be used for a syndication deal. Still, multifamily syndication is among the most popular because it is considered by many to be a lower-risk investment compared to other asset types.

Passive investors provide a portion of the capital required in exchange for equity in the multifamily property. A sponsor or syndicator does the work associated with sourcing the multifamily property, including due diligence, underwriting, securing financing, and setting up the deal. They then partner with investors interested in participating in the syndication.

 

HOW TO CHOOSE A MULTIFAMILY PROPERTY TO INVEST IN

If you are not participating in a syndication deal, multifamily real estate investing can be expensive since they are larger than single-family properties. Multifamily properties require more capital and are often held to strict regulatory standards by local jurisdictions. This only means you must be very smart about where you put your money.

As an investor, you need to put in your due diligence. You want to see the documents, maintenance records, bank statements, utility bills, etc. This will ensure that the investment will pencil for you. Consider amenities, local crime rate, and proximity to schools, hospitals, shopping centers, parks, etc.

Due diligence involves locating a property below market value and assessing its financial feasibility. After finding a potential property for your investment, you should compare purchase prices, rental estimates, short-term costs, and long-term costs. The numbers will be your primary concern because these figures will help you understand the actual value of the investment property.

Location is one of the most critical factors when selecting an investment property. Real estate investing is all about location, location, location. You must consider whether the property will appeal to renters, as that will be your primary source of income. Investors typically look for properties in well-maintained neighborhoods.

The number of units will also affect your potential income. With fewer units, there will be a smaller cash flow, but the property will likely be more affordable than a large apartment complex. Beginner investors looking to purchase a property individually should consider starting small. 

Another thing to remember when investing in a multifamily property is that you must manage it. It’s not easy being a landlord, as you will have to deal with emergencies and take care of the property itself. Some real estate investors hire a third-party property manager to solve this problem. Some multifamily syndicators like The BAM Companies are vertically integrated with an in-house management team. 

If you decide to take on the role of landlord, make sure you choose a property you want to take care of. You will have to be involved with the property you are investing in.

This is another reason some investors go for a multifamily private placement (syndication) deal. The syndicator will be in charge of managing the property. Sometimes, they will hire a property manager to take on the job. Either way, you won’t have to spend time managing residents or the property itself. This is truly a passive real estate investment.

 

WORK WITH BAM CAPITAL

For investors who want to explore multifamily real estate investing, there’s no need to go through all that hassle. You can work with BAM Capital and invest in high-quality real estate opportunities.

BAM Capital prioritizes accredited investors who want to enjoy passive income and all the other benefits of multifamily private placement. It negotiates the purchasing and financing of institutional-quality multifamily real estate properties on investors’ behalf. BAM Capital has a Midwest focus and only covers Class A multifamily assets. 

As the private equity arm of The BAM Companies, BAM Capital’s investment strategy creates forced appreciation while mitigating investor risk. To date, the brand has successfully managed over $1.7 billion in assets across ~9,000 apartment units. 

Remember that no investment is without risk. Before making financial decisions, consult your investment advisor and schedule a call with a BAM Capital investment team member.

 

Disclaimer: All investments carry risk, including potential loss of capital. This content is for informational purposes only and is not financial, legal, or investment advice, nor an offer or solicitation to buy or sell any security. Consult an independent advisor for personalized guidance and contact BAM Capital for details on current offerings. BAM Capital and its representatives are not fiduciaries or investment advisors. The information provided is general and may not reflect individual financial goals. Any financial terms, projections, or forward-looking statements contained herein are hypothetical in nature and should not be interpreted as guarantees of future performance or safety. Such statements reflect Bam Capital’s opinion and are subject to market fluctuations, economic conditions, and investment risks. Past performance does not predict future results. BAM Capital and its affiliates do not guarantee the accuracy or completeness of this information. Bam Capital offers investment opportunities under Rule 506(c) of Regulation D exclusively for accredited investors as defined by the SEC. Verification of accredited investor status is required prior to participating in any investment. 

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