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Is Investing In A Multifamily Real Estate Syndication Risky?

Without risk there is no reward. If you are thinking about investing in a real estate syndication you may be asking yourself “is real estate syndication risky?” As you approach a new investment opportunity it is natural to ask such questions; after all, isn’t investing just a balance of risk and reward? In this article we dive into whether real estate syndication investments are risky and what factors may make them risky. Specifically, we will focus on private syndications of individual apartment complexes.

What Is Real Estate Syndication? - Real Estate Syndication 101

Real estate syndication is one of the fastest ways to help you achieve your real estate investing and financial goals. To put it simply real estate syndications are group investments where people with capital and skills come together to purchase, manage, and profit from a real estate investment. There are various roles within a real estate syndication but through out the overall syndication cycle each member plays different roles.


Is Real Estate Syndication Risky?

Before we even answer the question of “is real estate syndication is risky” perhaps, we should look at the base of real estate investing in general. This would lead you to ask, “is real estate investing risky?” Better yet, you should ask, “Is investing in general risky?” The answer is yes. Just like any investment, by the very nature of it being an investment, real estate investing requires that there be some level of risk to earn a reward (i.e., a return) on your money. Because real estate investing is risky, real estate syndication investments bear risk as well.

To define something as risky however also means that relative to another alternative option there is more chance of a negative outcome than if you choose the alternative option. In this case we can compare investing in general to not investing (i.e., saving your money and leaving it in a savings account). Most savings accounts provide a paltry interest rate of a fraction of a percent - far less than the rate of inflation which is typically 2-3% per year. This means that the value of your money is eroding each year. You are, in a sense, losing money and getting a negative return by keeping your money in a savings account. Real estate on the other hand provides inflation adjusted returns as real estate often appreciates at the rate of inflation or faster not to mention the additional cash flow and other