Buy Your Own Apartment Complex

Whenever you drive through a big city and see all the large buildings, have you ever dreamed of owning them? As I kid, I had this dream, and still do today. Until recently I thought these expensive buildings were out of reach for someone with a net worth under millions of dollars. I’m happy to tell you that you too can have ownership in apartment communities.

A real estate Syndication is an investment strategy where passive investors (limited partners) purchase shares (equity) in a company used to buy property that will be managed by the general partners/sponsor. This is similar to how shares in the stock market are purchased, but it comes with the backing of a hard asset (property) and has many tax advantages not offered in any other investment vehicle.

Syndication allows investors to have ownership interest in large properties who may not be able to purchase them alone. Typically for a limited partner (passive investor) the risk is limited to the amount of money invested, though you should consult your attorney to verify. Syndications are often used on large value-add projects where the general partners can significantly increase the value of the property to return investor capital as quick as possible. In a successful deal, investors can enjoy cash flow, appreciation, debt paydown and tax advantages on a larger scale. Many syndicated deals return investors initial capital in full within 2-5 yrs and often have a 100%+ total return on investment over a 3-7 yr period.

Syndications are a great way to invest if you want a passive investment vehicle. General partners will typically send out quarterly and annual performance summaries along with updated projections for future periods. Assuming you choose a sponsor and deal wisely, you should have a very limited amount of time invested, allowing for more freedom than if you had chosen to buy single family houses or flip homes.

Vetting your deal sponsor/general partners is crucial to success in this strategy, even before vetting the deal. First and foremost, your sponsor should be someone that you trust and can be held to the utmost ethical standards. You’ll also want them to have relevant experience, or an advisor that does and make sure their goals align with yours. If you’re looking for immediate cash flow, then investing in a distressed apartment complex that takes 12 months to turn around and see positive cash flow may not be the right deal for you.

*This article is not intended to solicit the purchase of securities, it is intended as a knowledge share only.