Why Multifamily Syndication Outshines REITs for Investors

I remember when a friend, who was at our house for dinner, was all excited about a new investment opportunity he was looking into: REITs (Real Estate Investment Trusts). Naturally, he wanted to know my opinion on the investment. I have made real estate my career since my first flip back in 2016, either managing my own projects or acting as a private investor for others. However, I’ve always valued having control and transparency in what I invest in, so REITs were never really something I paid much attention to.

To me, REITs seem appealing on the surface—low risk, high reward, and the benefits of real estate, all while being a publicly traded stock. But they remind me of when you dig into the fine print of your brokerage account and discover hidden fees eating into your returns. REITs, after all, are still a type of stock, subject to market volatility and fees that can shrink those impressive returns you see on paper.

Let’s backtrack for a moment. What exactly is a REIT? A REIT is a company that owns or finances income-producing real estate across various property sectors. While they offer a way to invest in commercial real estate through the stock market, for someone like me, who believes in the power of direct ownership and passive income, they lack a key element: control.

While REITs can be a great option for investors who enjoy stocks and want to dip their toes into real estate, multifamily syndications offer a more compelling opportunity for those seeking the full benefits of real estate investing. While both provide access to real estate, multifamily syndications stand out by offering direct ownership, greater control, and significant tax advantages, making them a more attractive option for savvy investors looking to maximize their returns.

Multifamily apartment syndication investing has been a game changer in the way we invest. Let me outline a few ways in which it stands out compared to REITs:

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5 advantages of Multifamily Syndication vs REITs

1. More Control Over Investments

When you invest in a syndication, you’re directly owning a piece of a specific property alongside other investors. This gives you more insight over what you’re investing in—whether it’s a high-growth area or a particular class of property. In contrast, with REITs, you’re buying shares in a company that owns and manages a broad portfolio of properties, but you have little insight over how those assets are chosen or managed.

2. Better Tax Benefits

One of the biggest advantages of syndication is the ability to take advantage of tax deductions, like depreciation. As a direct owner in a multifamily property, you can significantly reduce your taxable income, often offsetting cash flow. In REITs, on the other hand, the tax benefits are spread across many shareholders, and you won’t have access to the same level of depreciation benefits.

3. Higher Potential Returns

Multifamily syndications often deliver higher returns compared to REITs because they focus on properties with value-add opportunities, like renovations or improving management. Investors can benefit from both monthly cash flow and appreciation upon sale. REITs, however, often have lower dividend yields and don’t allow investors to participate directly in the upside of property appreciation.

4. Lower Fees

Syndications typically have lower overall management and operational fees compared to REITs. REITs may charge hidden administrative and performance fees, reducing the overall return on investment for shareholders. In a syndication, the sponsor’s compensation is more transparent and typically comes from performance-based incentives, aligning their success with yours.

5. Passive Income, Without the Stock Market Volatility

REITs are traded on the stock market, meaning they’re subject to the same ups and downs as any publicly traded security. Multifamily syndications, however, are tied directly to the real estate market, which tends to be more stable over time. Plus, you get the benefit of passive income through consistent cash flow, without the day-to-day price fluctuations that come with REITs.

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Why Choose Syndications?

Multifamily syndications allow investors to enjoy all the benefits of real estate—cash flow, tax advantages, and appreciation—while keeping control of their investments. It’s a powerful way to build wealth passively, without the volatility of the stock market.

Smart Key Capital was created to help you though all of this. When you are ready to learn more, hit the message button to connect. Share if you think others will benefit from this information and follow us on social @smartkeycap?

To your success, Elena

P.S. Ready to invest? We’re currently raising capital for our next multifamily project in, and we’d love to help you get in on the opportunity! Don’t miss out—contact us today!

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