The Passive Investor’s Guide to Evaluating Multifamily Syndications

Choosing to invest in the right deal matters and to do that, you need an understanding of key factors and know the right questions to ask.?

I’m not saying that you need to be an expert in deal analysis – far from it – I just want you to know what to look for in deals.?

So in this article, I’ll give you a quick guide to evaluating multifamily syndications by looking at these 3 things:

1. The asset class?
2. The operator?
3. The deal itself?

The asset class.

What I mean by this is asking yourself how fundamentally strong the asset class is.

We’re talking about multifamily, so in this case the fundamentals are there.?

You can tell by looking at the net absorption rate (aka demand), which was 440,000 units through 2024, up 171,080 units one year prior.?

Also, they’re temporarily undervalued (less risk), but still producing the returns we saw 18 months ago. People are just hesitant to invest right now.

Those are both things we like to see in an asset class.?

So here are some questions you can ask yourself about the asset to determine its fundamentals:

• How has the asset performed historically (does it have a long history)?
• How is the asset performing now?
• How is the asset projected to perform (will there still be demand)?

The operator.?

The operator is responsible for evaluating everything about the deal from its location to management after close to distributions to investors.?

A good operator will take care of things so that you don’t have to.?

Look for these two things when you’re vetting your operators:

1. What is the track record of the partners? How many deals have the partners actually done together? If it’s their first time doing a deal together, that’s something you should consider when deciding to invest.?

1. Are they true operators? True operators actually have in-house property management and construction teams. They’re equipped to successfully operate a deal to protect your money.

So really make sure to look at the operators and their collective track record.

The deal itself.

This step mostly involves just asking the right questions to your operators. Here’s a short list of the questions you should be asking:

• What’s the business plan?

Are they doing a full renovation of the units? How long are they expecting it to take to raise rents? Does their plan make sense??

• What’s behind their projections??

For example, how conservative are their assumptions? If they’re doing a value-add deal, why would they be projecting a 10% vacancy rate in year one when they’re constantly turning over units and ripping everything out? Shouldn’t vacancies be up??

• Are there plenty of reserves?

Reserves for expenses or construction. Are the reserves being taken out of the cash flow, sort of like an emergency fund? If so, then your returns will be higher at the sale.

You’re not actively managing the deal, but it is your money going into it. Make sure you’re setting yourself up for success by getting into the right deal by evaluating it yourself.?

And at the end of the day, what good are projected returns if they don’t align with the operators and story behind the deal?

If you’re ready to explore multifamily syndication opportunities or learn more, check out our deals at Nighthawk Equity.

To your success,

Michael Blank?

#RealEstateInvesting #PassiveIncome #Multifamily #FinancialFreedom #Passiveinvesting