Investors can approach multifamily property investments through three primary strategies: private investments, real estate syndications, and real estate investment trusts (REITs). Each has its own advantages and disadvantages:
Private Investments
Private real estate investments involve individuals or entities directly purchasing properties.
Pros:
- Control: Direct influence over property decisions and management.
- Higher Return Potential: Potential for higher returns with active management.
- Flexibility: Greater freedom in decision-making and strategy.
Cons:
- Higher Capital Requirements: Significant upfront investment.
- More Hands-On: Investors are involved in day-to-day property management.
- Higher Risk: Success is tied to the property’s performance and market conditions.
Real Estate Syndications
Syndications are private partnerships where investors pool capital to buy real estate.
Pros:
- Larger Properties: Access to bigger multifamily properties.
- Passive Investment: Investors benefit without managing the property.
- Lower Capital: Minimum investment is typically lower than private investments.
- Experienced Partners: Professional operators handle management.
Cons:
- Limited Control: Investors have little say in property management.
- Illiquidity: Longer investment horizons (typically 5-10 years) make early exits difficult.
- Conflicts of Interest: Possible misalignment between syndicators and investors.
Real Estate Investment Trusts (REITs)
REITs allow investors to buy shares in companies that own and manage real estate.
Pros:
- Institutional Ownership: Access to large, professionally managed portfolios.
- Diversification: Exposure to a variety of properties, spreading risk.
- Hands-Off: No involvement in property management.
- Low Barrier to Entry: Can start with smaller capital by purchasing shares.
Cons:
- High Fees: Management and administrative fees can lower returns.
- Higher Tax Liability: Dividends are taxed as ordinary income and cannot be depreciated.
- No Control: Investors lack control over property decisions.
If you need recommendations on real estate syndications or REITs, please reach out!
Jordan Lester, CCIM, MBA joined SVN Cornerstone as a Commercial Real Estate Broker in 2022. Jordan specializes in advising clients with the acquisition and disposition of multifamily investment properties. With a primary focus in Spokane County and an expert understanding of the latest market trends, Jordan is committed to maximizing his client’s financial goals to achieve their real estate objectives. Jordan began his real estate career as a broker’s assistant for three years with SVN Cornerstone, which gave him valuable knowledge and experience to jumpstart his career as a broker. To get in touch with Jordan, email jordan.lester@svn.com or call 509.496.6922