History has repeatedly demonstrated multifamily properties to be less volatile during economic downturns. Real estate value increases with inflation while the buying power of the dollar decreases. Your investments are managed by a team of professionals so the process is essentially hands-off. Unlike single family properties, which tend to require more time and money from the investor, multifamily properties easily generate enough income to cover overhead and have a steady cash flow returned to investors.
Class A – Newly built or remodeled, high-income tenants, little to no maintenance issues
Class B – Older properties, middle-income tenants, some maintenance required
Class C – Oldest properties, less desirable areas, lower-income tenants
Movement between properties is dictated by the economy. During recessions, residents of Class A properties may seek lower rent in Class B properties. On the other hand, when the economy is strong, residents in Class C will seek housing in Class B properties with better amenities and neighborhoods that are more desirable. We invest in a variety of classes to ensure a diverse portfolio that creates passive income regardless of the economy.
A pool of investor capital with a business plan managed by investing experts.
Because multifamily real estate is syndicated, the process is more hands-off than other avenues of investing. Essentially, you must trust the investing managers to have your best interests in mind. However, you can rest assured that’s exactly the attitude our team has when it comes to our clients’ financial futures. Also, invested money is no longer a liquid asset. However, cash will only decrease in value as inflation rises. Real estate actually benefits from inflation. So, while you have less cash in your pocket in the short term, you’ll end up with a stable financial future in the long term once your investments return a profit.
Generally profits are distributed quarterly. They will also be distributed during a refinance or reposition.
These vary based on property type and location. Tax benefits may include: accelerated depreciation, possible 1031 exchanges, property tax, and repairs and upkeep.
Yes! Our team will be happy to discuss how to make the most of your IRA or 401k during your initial consultation with us.
Familiarize yourself with investing terminology by clicking on the tabs below!
In the U.S., the term is used to refer to investors who are financially sophisticated and have a reduced need for the protection provided by regulatory disclosure filings. Accredited investors include natural high net worth individuals (HNWI), banks, insurance companies, brokers, and trusts.
Sometimes called a bank fee or administrative fee, this is a fee that leasing companies charge to arrange the lease. Acquisition fees may also refer to charges and commissions that one pays for the acquisition or purchase of property, such as closing costs, real estate commission, and development and/or construction fees.
Essentially, an apartment syndication is the pooling of money from many investors for the purpose of buying an apartment building and executing the project’s business plan. This process is similar to investing in a mutual fund.
Appreciation is an increase in the value of an asset over time. The increase can occur for a number of reasons, including increased demand or weakening supply, or as a result of changes in inflation or interest rates.
A management fee is a charge paid to an investment manager to compensate them for their time and expertise for selecting and managing real estate properties.
The amount of uncollected money a former tenant owes after move-out.
The occupancy rate required to cover all of the expenses of an apartment community. This rate is calculated by dividing the sum of the operating expenses and debt service by the gross potential income.
A mortgage loan used until a person or company secures permanent financing, which are short-term – generally three years or less. They tend to have a higher interest rate and are almost exclusively interest-only. Bridge loans may also be referred to as interim financing, gap financing, or swing loan. This type of loan is often used when repositioning an apartment community.
Capital expenditures, typically referred to as CapEx, are the funds used by a company to acquire, upgrade and maintain an apartment community. An expense is considered to be a capital expenditure when it improves the useful life of an apartment and is capitalized – spreading the cost of the expenditure over the useful life of the asset. Capital expenditures include both interior and exterior renovations.
Usually referred to as “cap rate.” The rate of return based on the income the property is predicted to produce. Calculated by dividing the property’s net operating income (NOI) by the current market value or acquisition cost of a property.
The limited partner (LP) is a partner whose liability is limited to the extent of the partner’s share of ownership. Basically, the LP is one of the passive investors who funds part of the equity investment.
Loss to lease (LtL) is the revenue lost based on the market rent versus actual rent. Calculated by dividing the gross potential rent minus the actual rent collected.
Amount a landlord might reasonably expect to receive, and a tenant might reasonably expect to pay for a tenancy. This is calculated by analysing and comparing rent charged at similar apartment communities in the region.
Determined by the United States Office of Management and Budget (OMB). Metropolitan statistical areas usually consist of a core city with a large population and its surrounding region, which may include several adjacent counties. The MSA is marked by significant social and economic interaction.
A vacant apartment unit shown to prospective tenants to showcase how their actual apartment would look.
Net operating income (NOI) is all revenue from the property minus operating expenses. Does not include capital expenditures and debt service.
Reserves fund is separate from the price of the apartment unit. It is meant to cover unexpected decline in occupancy, lump sum insurance or tax payments, or higher than expected capital expenditures.
Costs of running and maintaining a property and its grounds.
A long-term mortgage loan secured from Fannie Mae or Freddie Mac and is longer-term with lower interest rates compared to bridge loans.
The rate of occupied units, calculated by dividing the total number of occupied units by the total number of units.
Some frequently asked questions about Multifamily investing. Don’t see your question here? Please reach out to us.