A vertically integrated company takes direct ownership of various stages of its production to streamline its operations. Instead of outsourcing and relying on external contractors or suppliers, these companies acquire suppliers, distributors, manufacturers, and other relevant partners to manage their operations.
Initiating vertical integration can be risky for a company due to the significant capital investment required. As the private equity arm of The BAM Companies, BAM Capital benefits from vertical integration. So, for companies like BAM Capital, which has already successfully achieved vertical integration, their clients can enjoy all the benefits this provides.
This article explains how vertical integration works and its implications for a multifamily real estate company. We will also discuss why The BAM Companies’ vertically integrated real estate model generates returns.
REAL ESTATE INVESTING: WHAT DOES IT MEAN TO BE VERTICALLY INTEGRATED?
Typically, a company handles only a single point in the production process. However, if the organization wishes to be more self-reliant, it can start taking on other aspects of this process. This is what vertical integration is. [1]
For example, a company may start directly sourcing its raw materials to practice vertical integration. They may also begin to distribute their products and sell them directly to consumers or investors, rather than hiring a third-party organization to do so. For real estate, a vertically integrated company might handle everything, including acquisition, construction, property management, and financing.
A company can utilize vertical integration to expand its presence across various sectors, including construction, property management, supply chain management, or manufacturing.
Netflix, Inc. is an example of vertical integration. While it began as an online streaming platform for films and TV shows, it now produces original content to increase its profits and strengthen the Netflix brand.
By performing vertical integration, Netflix no longer entirely relies on the content of other production companies and major studios, although it is still a significant part of their streaming service. [1]
As for vertical integration in real estate investing, BAM Capital is a notable example of an award-winning company. BAM Capital handles all steps of the investment life cycle, from purchasing to remodeling to management, yielding a potentially higher return for investors by streamlining its operations.
A company needs to have direct ownership or control of suppliers, contractors, distributors, and retailers to integrate vertically. The company can potentially enjoy reduced costs and increased efficiency with greater control over its supply chain. [1]
Doing this is no easy feat. The company must find a way to successfully purchase or recreate the part of production, distribution, or retail they’d usually have via third parties. This makes them self-sufficient as they no longer have to outsource that step, reducing manufacturing costs. [1]
Vertical integration is a costly process that requires a substantial investment. Not all companies like BAM Capital can do it successfully. Investors benefit indirectly from vertical integration through streamlined operations and better cost control, which can potentially improve the asset’s performance. All the passive investor has to do is work with the sponsor, who deals with the rest.
Vertical integration tends to increase the size of the company’s operations, making it more complex.
TYPES OF VERTICAL INTEGRATION
There are three types of vertical integration: forward integration, backward integration, and balanced integration. The first two are the most common.
These types refer to how a company acquires the other steps of the manufacturing process. If a company acquires a supplier further along the supply chain, this is called forward integration. If a company acquires a vendor that is positioned earlier in the supply chain, this is referred to as backward integration. [1]
Balanced integration occurs when a company attempts to achieve both simultaneously by merging with companies that precede and follow it in the supply chain. To achieve this, the company has to be “the middleman” in the first place. A balanced integration is more costly, but it gives the company the potential for upside, as it can take over the entire supply chain.
BENEFITS OF VERTICAL INTEGRATION FOR A MULTIFAMILY REAL ESTATE COMPANY
A real estate investment company can benefit from vertical integration in several ways. For starters, a company like BAM Capital, which specializes in multifamily private placement (syndication) and can handle the complexity of vertically integrated real estate, can be considered an authority in its field.
A vertically integrated real estate company has an unmatched level of domain expertise. This means BAM Capital also has an incredible understanding of the real estate market and best practices. BAM Capital clients can, therefore, enjoy the benefit of working with an experienced firm that can offer premier real estate investments for accredited investors.
A real estate company that is vertically integrated likely has far more industry knowledge and experience compared to one that only handles one part of the supply chain, such as acquiring commercial multifamily properties. [2]
BAM Capital handles everything in the investment life cycle, from purchasing to property management. This level of involvement has given BAM Capital the expertise to identify and acquire potentially lucrative multifamily properties for its investors. Since The BAM Companies also handles tasks such as remodeling and construction, it saves its investors more money. Vertical integration can maximize the returns for investors by reducing the reliance on third parties and enhancing operational control.
A vertically integrated real estate company can also make more deals viable. With its in-house construction unit, a vertically integrated company can pursue projects that other companies cannot, and it can do so with the confidence that its construction unit is operating with its interests in mind. [2]
Real estate companies that only outsource jobs do not have the same reassurance; therefore, certain projects are less viable for them. They will have to look for a third-party company to rebuild investment properties to bring them up to rent-worthy condition. Making the project work for them may require more preparation, planning, and financial resources. [2]
Overall, vertical integration can help generate greater returns for the company’s investors.
Finally, a vertically integrated company also benefits from economies of scale. When a company increases its output level, it can give it proportionate cost advantages.
Vertical integration can give a company greater control over its supply chain, leading to lower reliance on external parties and reduced costs.
While it’s true that the company will have to take on more responsibilities as it takes control of the supply chain, it may also lead to faster turnaround times. If the entire process is handled in-house by a single company, then this also means simpler logistics. Despite having more things to manage, the company can maintain proper order because all steps in the process are aligned. [2]
Keep in mind that vertical integration is a long and challenging process. It cannot be achieved overnight. The company will have to buy into the entire production process. This means they have to spend on new systems, new equipment, staff training, etc. [2]
Any company that implements vertical integration while narrowing its focus on its area of expertise will likely develop effective processes that propel it toward its long-term goals.
BAM CONSTRUCTION
The BAM Companies is one example of a vertically integrated company in real estate. It specializes in acquiring and managing multifamily properties, particularly apartment communities. [3]
It is headquartered in Indianapolis, Indiana, and consists of BAM Capital, BAM Management, and BAM Construction.
The BAM Companies has successfully implemented vertical integration. Now, it can utilize its market expertise and the knowledge and strengths of its employees to achieve maximum benefit for community residents and investors alike. [3]
BAM Construction was added in 2015, upgrading features and amenities and officially completing the vertical integration process for The BAM Companies. This means The BAM Companies can now cover every part of the real estate investing process from start to finish. All clients must do is participate.
BAM MANAGEMENT
Meanwhile, BAM Management specializes in managing multifamily apartment communities.
BAM Management hires local talent with market expertise, which benefits investors and residents alike. BAM Management began in 2010 but quickly grew into an award-winning real estate property management company. It transitioned from managing a few small properties to overseeing more than 9,000 historic units.
A property management team can benefit a company offering multifamily private placement or syndication deals. This is because syndication deals are designed to be passive investments wherein investors do not have to play the role of landlord. The apartment community’s responsibility usually falls on the owner/operator, who either hires a third-party property management company or handles it themselves.
With BAM Management, The BAM Companies aims to ensure that investment properties are appropriately managed and consistently maintained in top condition. BAM Management keeps an attentive and experienced staff from the front desk to the maintenance teams. They will care for the residents and make sure they have a pleasant experience.
BAM Management also makes it as easy as possible for residents to submit repair requests, ask questions, and pay rent with the help of on-site staff or through the use of the latest technology.
As a whole, The BAM Companies only manages communities of which it is proud. This is why even staff choose to live at these locations simply because of the convenience, the Class A amenities, and the value for their money.
BAM CAPITAL
BAM Capital is the private equity arm of The BAM Companies, an institutional real estate owner/operator.
BAM Capital works with accredited investors, providing them access to premier investment opportunities through private placement deals in multifamily real estate. BAM Capital offers transparent stewardship of capital and a means to achieve portfolio diversification.
By investing with BAM Capital, accredited investors can enjoy tax advantages, plus the ability to build long-term wealth.
WHY OUR MODEL WORKS SO WELL
There are several reasons why The BAM Companies model works so well, and vertical integration is a massive part of it. The BAM Companies invested in launching all three companies and ensuring each was successful enough to stand on its own. This is why BAM Capital, BAM Management, and BAM Construction work so well together as a unified real estate operation.
The BAM Companies can provide everything from upgrading amenities to finding premier multifamily assets, managing properties, and delivering a one-of-a-kind experience to residents. But its success is not merely because it is a vertically integrated company.
BAM Capital prioritizes Class A multifamily assets with in-place cash flow and proven upside potential, aiming to identify opportunities that have the potential for investor profit. However, profit is not guaranteed, and investments involve risk. It also allows the fund to target a consistent monthly cash flow.
As mentioned, vertical integration comes with the added benefit of establishing local expertise, which The BAM Companies has also achieved thanks to its strong Midwest focus. BAM Capital leverages local knowledge and long-standing relationships with real estate developers, brokers, sellers, and builders to provide them with expert knowledge on the assets being purchased.
BAM Capital has unmatched expertise thanks to its vertical integration and transparency.
WHY WORK WITH BAM CAPITAL?
As a whole, real estate can be a strategic investment. There are also many ways to participate. You can go for a commercial real estate investment, a residential property, or even vacant land. However, for accredited investors, another viable option is multifamily real estate private placement (syndication).
BAM Capital partners with accredited investors who want to enjoy passive income and all the other benefits of multifamily private placement. As the private equity arm of The BAM Companies, BAM Capital has been focusing on buying assets targeted as having strong profitability potential and staying disciplined in its investment thesis. BAM Capital’s investment strategy aims to create forced appreciation while seeking to mitigate investor risk. To date, the brand has successfully managed over $1.7 billion in assets across ~9,000 apartment units.
For additional multifamily real estate insights, visit Pathways to Passive Wealth, BAM Capital’s new platform designed to make real estate investing more accessible, transparent, and achievable for aspiring and experienced investors.
Remember that no investment is risk-free. 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.
© 2025 BAM Capital. All rights reserved.
SOURCES:
[1]: Investopedia. (2024). “What Is Vertical Integration?” https://www.investopedia.com/terms/v/verticalintegration.asp
[2]: Worcester Investments. (n.d.). “How Vertical Integration Adds Value in Multifamily Real Estate Investing.” https://www.worcesterinvestments.com/the-value-of-vertical-integration/
[3]: The BAM Companies. (n.d.). “The BAM Companies have executed over 1.73B in transactions.” https://thebamcompanies.com/
[4]: BAM Capital. (n.d.). “Current Portfolio.” https://bamcapital.com/
