Why Single Family Investors Are Diving Into Apartment Complex Investing
Table of Contents
Many investors are attracted to real estate investing because there are many different ways to participate. There are many product types as well as investing strategies to choose from, making real estate one of the most diverse investment vehicles out there. Investors can pick whichever type of real estate property they are interested in, whether it is office, retail, industrial, or residential.
Here we are going to focus on residential real estate, particularly multifamily investment properties and why single family real estate investors are making the switch.
Residential real estate is the umbrella term used to describe several housing types. The term usually refers to properties that are used for housing purposes, such as houses, apartment buildings, condominiums, townhouses, student housing, assisted living communities, and co-ops. It can also be referred to as apartment investing. [1]
Residential real estate properties are typically owned and occupied by individuals and families as their primary residence, although some may also be used as vacation homes or investment properties.
While a lot of investors go for single family rental properties, multifamily investments are quickly becoming the more popular choice, especially among investors who want to build wealth. Let’s take a closer look at why a real estate investor should consider multifamily investing over single family investing.
Why Single Family Investors Are Diving Into Apartment Complex Investing
Smart and wealthy investors are choosing multifamily investment properties over single family rentals, and here we will talk about why.
First, we need to acknowledge all the benefits of single family investing. There are plenty of reasons why investors can go for this option without regretting it. For example, these properties are generally less expensive and therefore easier to acquire than large multifamily properties such as apartment buildings.
Generally speaking, these properties are easier to acquire, easier to manage, and more liquid compared to their multifamily counterparts.
It is easier for investors to find single family properties to invest in because each market has more of these investment opportunities than multifamily. Plus, single family homes are also more affordable, which means investors can enjoy a low barrier to entry. Investors just need a modest capital to participate in this investment. [1]
Because of the nature of single family rentals, investors do not have to stress much about becoming landlords since there are fewer tenants to manage. The property is also smaller, which means it is easier to repair and take care of.
The tenant base for single family properties are also described as “sticky”, meaning they are more likely to stick with a rental property for years, whereas tenants in multifamily properties tend to come and go.
Finally, single family rentals are also easier to sell. When it’s time to sell the property, you can usually expect a lot of potential buyers when it comes time to sell the property. Families may be interested in purchasing the house to use for themselves. It is usually possible to sell the property within 30 to 60 days. [1]
With this in mind, there are plenty of advantages that give multifamily investing the edge over single family real estate investing.
Multifamily real estate refers to residential buildings that contain more than one dwelling unit, such as apartments, condominiums, townhouses, and duplexes. The term “multifamily” can be used to describe any building with two or more separate living spaces, but it typically refers to larger properties with several units.
Multifamily properties can be owned by individuals, partnerships, or corporations, and they can be rented or sold as investment properties. They are typically managed by a property management company, which handles tasks such as tenant screening, rent collection, maintenance, and repairs.
Investing in multifamily real estate can be a lucrative opportunity for those who want to earn passive income through rental properties.
Multifamily properties can often generate higher rental income than single-family homes, and they can be more affordable to purchase on a per-unit basis. Apartment complexes have the potential to generate higher rental income compared to single-family properties. This is due to the fact that multiple units are being rented out, generating multiple streams of income.
Additionally, investors can benefit from economies of scale by owning multiple units in a single property, which can help reduce the overall maintenance and management costs.
Multifamily investments offer benefits like lower cost per unit, multiple income streams, economies of scale, and the ability to scale your investment portfolio. Multifamily investment properties have the tendency to have a lower price per unit. Any additional cost is spread across the different units, which leads to a lower cost per unit. The more units a multifamily property has, the more these costs can be split. [1]
Smart investors also consider economies of scale. Hiring a property manager for a single family home is not a very good idea. However, it makes sense to do so if you own a multifamily property with over 30 units to manage.
It only takes one process of due diligence to purchase a 30-unit apartment complex, whereas it would take 30 separate transactions to get the same scale with single family homes.
But arguably the biggest advantage of investing in multifamily real estate is the strong and consistent cash flow. It is more reliable than a single family property because even if one or two tenants leave, the remaining units can still produce revenue through rental income. If a single family home becomes vacant, then the owner has to pay all the expenses until it is re-leased. It also stops generating monthly income. [1]
Investing in apartment complexes allows for diversification of an investor’s portfolio, reducing risk. With multiple units, the income generated is less dependent on the performance of a single tenant.
Investors who want to scale their portfolio will see that it is easier to invest in multifamily real estate properties. You will be able to achieve scale with a multifamily investment in just a few transactions, whereas it may take years to do the same thing with different single family properties.
Compared to multifamily properties, single-family properties can be limiting in terms of scalability. With apartment complexes, investors have the ability to purchase a larger property that can generate more income, making it easier to grow their portfolio.
While these multifamily properties are naturally larger and more expensive, the benefits are undeniable. Some investors aim for apartment buildings ranging from 20 to 50 units so that they can execute a value-add investment strategy on top of the cash flow that the property generates. [1]
Investors who can recognize the potential of multifamily investing will realize that this is a much better choice in the long run. However, if you are concerned about the fact that these properties are expensive and hard to acquire, there is a solution for that. It is called multifamily syndication.
Try Multifamily Real Estate Syndication
Multifamily syndication deals are exclusive to accredited investors, but they solve most of the problems associated with traditional multifamily investing.
Purchasing a multifamily property on your own can be difficult because apartment buildings are expensive. The higher the number of units, the pricier these properties are, generally speaking. Large multifamily real estate properties are also more difficult to manage since there are more units and tenants to handle. These are two of the biggest concerns for real estate investors looking into multifamily investing.
But a syndication deal is structured so that real estate investors can pool their resources together and purchase a single real estate property. Multifamily syndication is when a deal like this is arranged for an apartment complex, condominium, or any other multifamily property. [2]
Thanks to all of the benefits listed above, multifamily syndication deals are the most popular among wealthy investors who are not interested in becoming landlords. You get to enjoy the strong cash flow and the diversification without having to deal with tenants.
This is because in a multifamily syndication deal, the syndicator puts the deal together and also handles property management. They look for investors who will provide most of the capital needed to purchase the property in exchange for a percentage of the monthly cash flow and capital appreciation, depending on the deal structure. [2]
Multifamily syndication is a passive investment that is usually structured as a limited liability company (LLC) or a limited partnership (LP). The syndicator is in charge of rent collection, managing tenants, and dealing with emergencies.
The investors typically share in the profits and losses of the investment which makes it much safer than trying to purchase apartment buildings on your own.
With multifamily syndication, you can just enjoy the strong and reliable cash flow without any of the usual headaches associated with residential real estate.
The Best Multifamily Syndicator for Accredited Investors: Work with BAM Capital
Buying and running an apartment complex is tough. If you are an accredited investor, you should work with BAM Capital and let us grow your investment portfolio through multifamily syndication.
Working with a reliable syndicator will allow you to enjoy all the benefits of multifamily investing without the headaches of becoming a landlord.
BAM Capital is an Indianapolis-based real estate syndicator with a strong Midwest focus. They prioritize properties with in-place cash flow and proven upside potential, particularly Class A, A-, and B++ multifamily properties. [3]
With its award-winning investment strategy that creates forced appreciation, BAM Capital helps their investors grow their wealth while mitigating risk. It is also vertically-integrated, which means they can handle every step of the syndication process and guide you through it. They will negotiate the purchasing of high quality multifamily real estate. They will even handle renovations, repairs, and property management. [3]
But BAM Capital is best known for its consistent track record. In fact, they now have over $700 million AUM and 5,000+ units. This is one of the best syndicators in the business. [3]
No investment is without risk. Make sure to consult your investment advisor or speak to a BAM Capital investment team member before making any financial decisions.
For accredited investors who want to enjoy the passive income and all the other benefits of being in a multifamily syndication, look no further than BAM Capital. Schedule a call with BAM Capital and invest today.
BAM Multifamily Growth & Income
Fund IV
The BAM Multifamily Growth & Income Fund IV, a private real estate fund, seeks to balance cash flow stability, capital preservation, and long-term capital appreciation while providing superior risk-adjusted returns to investors.
Benefits of Multifamily Investing:
- INFLATION HEDGE: ability to raise rents on short-term leases to mitigate rising costs
- TANGIBLE ASSETS WITH CASH FLOW STABILITY: a consistent income stream that is not impacted by the ups and downs of the stock market
- ACCELERATED TAX BENEFITS: performing a cost segregation analysis and accelerating the allowable depreciation can lead to major tax savings
- SUPPLY & DEMAND IMBALANCE: there is not enough housing supply in most US markets to keep up with the demand
- CAPITAL PRESERVATION & APPRECIATION: typically low-risk investments that should produce optimal risk-adjusted returns
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The decision to sit in cash or invest in real estate during a market downturn depends on your individual financial goals, risk tolerance, and investment strategy.
