Happy Cinco de Mayo! As we celebrate this holiday, we also want to take the time to honor the importance of making informed decisions as passive investors. Grab your preferred Mexican beer or Margarita and enjoy while you read the 5 things that passive investors should know when selecting a property to invest in via multifamily syndications:
The first thing that passive investors should know when selecting a property to invest in via multifamily syndications is the type of syndication being offered. There are two main types of syndications: 506(b) and 506(c). The key difference between these two types is who is allowed to invest. 506(b) syndications allow for up to 35 non-accredited investors, while 506(c) syndications are only available to accredited investors. To qualify as an accredited investor, an individual must have a net worth of at least $1 million (excluding their primary residence) or an annual income of at least $200,000 (or $300,000 for married couples) for the past two years. The advantage of 506(c) syndications is that they can generally raise more capital since they can only accept investments from accredited investors. However, 506(b) syndications may be a better fit for investors who don't meet the accredited investor requirements or prefer a more diversified investor base.
The location of the property is another important factor to consider when selecting a property to invest in via multifamily syndications. Different locations can have different economic and demographic factors that affect the property's potential for growth and profitability. Some key factors to consider include population growth, job growth, rental demand, and supply of multifamily properties in the area. Investors should research and analyze the local market to determine whether the property is located in a desirable location for long-term growth and profitability.
Investors should assess their risk tolerance before investing. Multifamily syndications are generally considered lower risk compared to other types of real estate investments, but there are still risks involved. Investors should carefully review the risks associated with the investment before deciding to invest.
The deal structure can vary from one syndication to another. It's important for investors to review the terms of the deal and understand how the syndication is structured. This includes understanding the return on investment, preferred returns if any, the length of the investment, and any fees associated with the investment.
The experience of the syndication team is another crucial factor to consider. Investors should evaluate the experience and track record of the syndication team, including their experience with multifamily properties, their success rate in previous investments, and their overall reputation in the industry. Investors should also consider the team's communication style and how they handle investor relations.
As you can see, there are many factors to consider when selecting a property to invest in via multifamily syndications. If you're interested in learning more about these factors or if you have any questions, please don't hesitate to schedule a quick call with us CLICK HERE. Additionally, we have a free e-book that provides more information on this topic, which you can download at this link https://content.bluepathholdings.com/free-ebook.