Generational Wealth Cont Part 2

Single Family vs. Multifamily Investing

Investing in single-family vs. multifamily properties is a great debate in the world of real estate investing. While each offers several compelling advantages, each side represents a very different exit strategy for investors, including management style and income earned. Investors, insurers, and lenders view these properties differently. Comprehending the ins and outs of multifamily and single-family properties is critical for your success.

For those considering taking the plunge and investing in multifamily properties or single-family properties, it’s important to understand which investment vehicles do what. Deciding among single-family or multifamily properties is largely about personal preference and goals. The following will explain the major differences between the two investments, including each strategy’s various advantages and disadvantages. If you are looking for an answer for the single-family vs multifamily debate, I encourage you to keep reading.

Multifamily Investing Benefits

A multifamily property, or multi-dwelling unit (MDU), is a residential building with two or more units under one roof. They can also be several buildings within one complex. The most common examples are duplexes, townhouses, and some types of condos. Each unit tends to have its own living space, a separate kitchen, and a bathroom. A multifamily property will generally consist of owning the property and the land on one recorded deed. In some cases, it can be owned by one or more parties.

While they are the least common type of residential buildings, investing in multifamily properties is an immensely favorable strategy among investors thanks to their additional source of monthly income, along with slow but steady appreciation. As an investor, the advantages of owning a multifamily property include:

Bigger Cash Flow: A single-family property generates a single monthly income, and a multifamily property produces multiple forms of monthly income. The allure of investing in multifamily properties is easy to see. These investments represent an innovative opportunity to generate additional income from one investment. Also, investors may decide to live in one unit and rent out the others for income. When it comes to passive income retirement investing, a multifamily property can be used in multiple ways.
More Control Over Value: The more income a property receives, the higher the value is. Multifamily properties are comprised of more units, which means earning multiple streams of income. Therefore, these investments are generally valued higher than single-family homes, dependent on comparable sales as rentals.
Larger Pool Of Tenants: One of the underlying benefits of investing in multifamily properties is less risk. How, you ask? Because, unlike single-family units, where income is lost when the home is vacant, multifamily properties have numerous units and alleviate the total economic loss for investors.
Scalability: Multifamily investments epitomize scalability. Rather than purchasing one property at a time, these investments allow for acquiring multiple properties within one building. They are perfect for those looking to grow their real estate investment portfolio and take their business to the next level with the option for investors to venture into the arena of mixed-use and apartment investing down the road.
Ideal For Property Management: Single-family properties typically do not generate enough income to justify hiring a property management company. However, a multifamily property typically generates enough income to allow investors to hire a property manager to handle day-to-day operations and handle required repairs. This can be a great benefit for investors looking to have less involvement in their rental properties.
Tax Benefits: Multifamily property offers great tax benefits for investors. Investors can depreciate their multifamily property to offset a great deal of the rental income that they collect from the property each year.
Blanket Insurance Policies: While multifamily properties have more areas to insure overall, investors may find these policies easier to negotiate and secure. Insurance companies are well-versed in multifamily properties and the associated liabilities and will be experienced enough to walk you through different options. As your portfolio grows over time, you will typically be able to group everything under one policy.

New investors should conceptualize multifamily real estate as a hybrid between a single-family home and a condo. Both the structure and the land are owned and on file in one recorded deed. These investments allow for the ability to generate more income than a single-family property. They are ideal for those looking to grow their business and offset risks when generating monthly income.

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part I

Getting Started

What is Real Estate Syndication?

A real estate syndication is a group of investors combining their skills, resources, and capital to purchase real estate investments that would otherwise be difficult or impossible to acquire alone. For example, an apartment complex or storage facility.?

A “Syndicated” investment is synonymous with “Crowdfunded” investment.

What are the Main Benefits of Investing in a Real Estate Syndication?

Passive Income. A multifamily syndication generates cash flow for investors from the income generated by the asset. Implementing a value-add strategy allows us to force appreciation and reward our investors for years to come.

Above Average Returns. Between 2000 and 2019, the average annualized return of the S&P 500 Index was about 8.87%. On the other hand, multifamily syndications can return average annual returns of 10% and higher. That’s after fees, inflation, and taxes.

Below Average Risk. When the great recession hit in 2008, the delinquency rates on single-family home loans hit 4% in 2010. Despite the recession, delinquency on multifamily loans only hit 0.4%. Only a tenth of what single-family assets experienced! If you’re looking for an asset to invest in that can potentially beat the odds, there’s no better way to invest your money than in a multifamily syndication.

Hedge Against Inflation. Generally, the value of multifamily assets increases as inflation increases. This creates a potential inflation hedge for our investors.

Massive Tax Benefits. Your passive investment income is taxed at a far lower rate than other investments because of something called “bonus depreciation”. Bonus depreciation can actually help you show a taxable loss. That taxable loss can then be leveraged to offset other passive gains. This is why a multifamily syndication is the best passive investment vehicle out there.

What are the Risks of Investing in a Real Estate Syndication?

High Minimum Investment. Sometimes starting at $25k—but, usually, it’s $50k–100k—real estate syndications have a relatively high entry point for investors.

Illiquid Investment Type. Even though investors can receive quarterly distributions, investments can be typically tied up for up to 5–7 years before they are returned along with any additional profit.

Lack of Industry Regulation. Unlike public markets, real estate investments operate at a much lower level of scrutiny from the SEC. When engaging in a real estate syndication, make sure you only engage with companies you know and trust.

Who are All of the Parties Involved in a Real Estate Syndication?

There are many roles to fill in a real estate syndication—General Partners (GP), Lenders, Brokers, Attorneys and Limited Partners (LP). Each plays a key role in making sure the deal sourcing, fundraising, acquisition, reposition, sale and distribution of capital go as smoothly as possible.

A General Partner is the party who organizes the syndication. General Partners find the investment opportunity, secure the financing, and manage the property. “General Partners” is synonymous with “Sponsors”, “Operators”, or “Syndicator”.

The group of people who provide capital (Cash, 401(k) or IRA (Traditional or Roth)) for the investment are called Limited Partners, LPs, or “Passive Investors”.

The Limited Partners receive a share of the equity in the real estate investment along with distributions (cash flow) and profits, in return for their contribution with limited liability up to their investment amount.

Lenders, when used, provide debt leverage to increase buying power and can help achieve a higher ROI than otherwise possible.

Who Can Invest in a Real Estate Syndication?

Real estate syndications are typically available to verified “accredited investors”. The Securities and Exchange Commission (SEC) defines an accredited investor as someone who has an annual income of $200,000 (or $300,000 joint income) or a net worth of at least $1.00MM, not including a primary residence.

Some syndications—like 506(b) offerings—are available to non-accredited investors as well as accredited investors. Many real estate syndications are designated as 506(b). This means they are open to non-accredited investors or “sophisticated” investors.

A sophisticated investor should have enough know-how and/or experience in investing in alternative investments such as real estate, ATMs, oil, gold; any investments outside of the stock market. A sophisticated investor should be able to make educated decisions about syndication offerings.

Aside from being “sophisticated”, the investor needs to have a pre-existing “substantive relationship” with the General Partner(s). The SEC doesn’t exactly define what a “substantive relationship” entails. This document from the SEC alludes to what a “substantive relationship” may consist of.

When you decide to become an investor with Love Apartments and Investments you are guided through an onboarding process that allows us to gather important information (your experience, goals, etc.) and begin to develop a relationship with you.

800-257-2595

[email protected]

www.loveapartments.com

https://calendly.com/rayna-1/discovery-call-for-investors

?

?Single Family vs. Multifamily Investing

Investing in single-family vs. multifamily properties is a great debate in the world of real estate investing. While each offers several compelling advantages, each side represents a very different exit strategy for investors, including management style and income earned. Investors, insurers, and lenders view these properties differently. Comprehending the ins and outs of multifamily and single-family properties is critical for your success.

For those considering taking the plunge and investing in multifamily properties or single-family properties, it’s important to understand which investment vehicles do what. Deciding among single-family or multifamily properties is largely about personal preference and goals. The following will explain the major differences between the two investments, including each strategy’s various advantages and disadvantages. If you are looking for an answer for the single-family vs multifamily debate, I encourage you to keep reading.

Multifamily Investing Benefits

A multifamily property, or multi-dwelling unit (MDU), is a residential building with two or more units under one roof. They can also be several buildings within one complex. The most common examples are duplexes, townhouses, and some types of condos. Each unit tends to have its own living space, a separate kitchen, and a bathroom. A multifamily property will generally consist of owning the property and the land on one recorded deed. In some cases, it can be owned by one or more parties.

While they are the least common type of residential buildings, investing in multifamily properties is an immensely favorable strategy among investors thanks to their additional source of monthly income, along with slow but steady appreciation. As an investor, the advantages of owning a multifamily property include:

Bigger Cash Flow: A single-family property generates a single monthly income, and a multifamily property produces multiple forms of monthly income. The allure of investing in multifamily properties is easy to see. These investments represent an innovative opportunity to generate additional income from one investment. Also, investors may decide to live in one unit and rent out the others for income. When it comes to passive income retirement investing, a multifamily property can be used in multiple ways.
More Control Over Value: The more income a property receives, the higher the value is. Multifamily properties are comprised of more units, which means earning multiple streams of income. Therefore, these investments are generally valued higher than single-family homes, dependent on comparable sales as rentals.
Larger Pool Of Tenants: One of the underlying benefits of investing in multifamily properties is less risk. How, you ask? Because, unlike single-family units, where income is lost when the home is vacant, multifamily properties have numerous units and alleviate the total economic loss for investors.
Scalability: Multifamily investments epitomize scalability. Rather than purchasing one property at a time, these investments allow for acquiring multiple properties within one building. They are perfect for those looking to grow their real estate investment portfolio and take their business to the next level with the option for investors to venture into the arena of mixed-use and apartment investing down the road.
Ideal For Property Management: Single-family properties typically do not generate enough income to justify hiring a property management company. However, a multifamily property typically generates enough income to allow investors to hire a property manager to handle day-to-day operations and handle required repairs. This can be a great benefit for investors looking to have less involvement in their rental properties.
Tax Benefits: Multifamily property offers great tax benefits for investors. Investors can depreciate their multifamily property to offset a great deal of the rental income that they collect from the property each year.
Blanket Insurance Policies: While multifamily properties have more areas to insure overall, investors may find these policies easier to negotiate and secure. Insurance companies are well-versed in multifamily properties and the associated liabilities and will be experienced enough to walk you through different options. As your portfolio grows over time, you will typically be able to group everything under one policy.