You’ve probably been watching the news and have seen depressing story after depressing story; the stock market is down, inflation is at 40+ year highs, interest rates are rising faster than anyone expected, and don’t forget the continued looming threat of a recession.
All these negative economic indicators, not to mention food shortages, wars, unknowns about what will happen with the pandemic and much more create quite the gloomy outlook for the economy.
You are probably thinking to yourself, “is now a good time to invest in multifamily real estate syndications?”
I’ll get straight to the point and not waste any of your time.
Is now the right time to invest in a multifamily apartment real estate syndication? The simple answer is yes. It is always a good time to make a good investment.
Is Now A Good Time For You To Invest In A Multifamily Apartment Syndication?
A better question maybe is now the right time specifically for you to invest in a multifamily apartment real estate syndication? There are several reasons why it may not be a good time for you to invest based on your personal life and financial circumstances. This may include lack of finances, personal goals or personality traits that may not make you a good fit for this type of investment. Said differently, are you not only able to invest but are you also willing to invest in a real estate syndication?
Maybe you have the funds available to invest but you are a non-accredited investor and have difficulty finding investment opportunities. You could also be on the other end of the spectrum where you know of opportunities, but you do not have the funds. Or your situation could be something somewhere in the middle.
Assuming that there is nothing specific to your situation that would prevent you from investing and you are willing to invest we are left with the analysis of whether real estate syndications make a good investment in the current market or not.
How Do I Invest In A Multifamily Syndication In The Current Market?
An even better question than whether you should invest now or not is “how do you invest in a real estate multifamily apartment syndication now in this current market?”
As mentioned, before it is always a good time to make a good investment. Real estate moves in cycles and that is great news. It means that real estate can be predicted, and that knowledge can be used to guide how someone should invest during each phase of the real estate market. Seasoned investors know this fact and look forward to times just like this to invest in real estate.
As scary as rising interest rates and inflation seem the reality is all financial markets and investments will be impacted by these two variables. The good news is that real estate is well equipped to outperform other investment options during times like these.
To be successful in investing in this current market the first thing you should do is lower your expectations of what is a good return. If you have been investing in recent years you may have become accustomed to outsized, even eye popping returns. While you may still get these juicy returns in the future don’t consider that to be the norm but rather an exception – icing on the cake.
Next you should invest in deals that prioritize capital preservation. Investments with good operating teams, long term debt financing with fixed interest rates in good markets will make the best choice of investments during this part of the market cycle.
Are Real Estate Syndications Risky?
Given the fact that real estate investments are so closely connected to changes in interest rates (due to the use of mortgage debt to purchase investment properties) many wonder if real estate syndications are a risky investment in the current market. Investing in general bears risk whether in real estate or in other asset classes. There are many ways you can mitigate risks in multifamily real estate syndication. If investing wisely, with great operators, in great markets then you should have nothing to worry about.
How Much Should I Invest In A Syndication?
As mentioned before a clear understanding of your personal situation should drive how, when and what you invest in. Typical minimum investments for syndication deals are around $25,000 however you can invest much more if you desire. If you have ability to invest more it would be wise to invest in multiple assets instead of investing your entire savings into only one deal.
Another way you can help diversify your investment is to invest in different share classes (if the syndication opportunity offers that). Many syndications will offer multiple positions in the capital stack which provide different returns that fit your investment appetite. A couple examples of this are share classes with fixed stable annual return with lower risk or a share class with lower annual returns but a huge upside on the sale of the apartment.