Multifamily Syndication – Now And Beyond

Like the rest of the globe, the multifamily syndication industry has been hit by market volatility, rising interest rates, and the ongoing knock-on impacts of COVID-19, including migratory patterns, an increase in individuals working from home, unemployment, and more.


Now, it’s possible that the reason you’re here is that you currently have investments in one or more real estate syndications. Or perhaps you’ve been on the stock market roller coaster for too long and are ready to invest in real estate to move your money into something more solid.


In any case, we’ll go into detail about what a multifamily syndication is in this article. We’ll also discuss why getting involved in a real estate syndication can be a great way to increase your wealth, how investors can get ready for the future, and how to deal with COVID-19’s long-term effects on the multifamily syndication market. 


What Is A Multifamily Syndication?

Let’s begin with the fundamentals. The simplest definition of real estate syndication is a pooling of resources. So, in essence, a real estate multifamily syndication is when a group of investors combine their funds to buy an apartment complex together. 


When you participate in a multifamily syndication, you pool your money with dozens, and often hundreds, of other investors to buy an apartment complex together, saving you the time and effort of having to discover and manage rental properties on your own.


How Does A Multifamily Syndication Work? 

There are 2 main groups in real estate syndication – The General Partners (GPs) and the Limited Partner Passive Investors (LPs).


General Partners

The General Partners (GPs) play the main role in syndication  and includes the following


  • Finding and underwriting the deal

  • Securing the financing for the deal

  • Negotiating with the seller

  • Completing the due diligence

  • Finding and educating investors

  • Managing the renovations on the property

  • Working with the property management team

  • Executing on the business plan

  • Communicating with the investors

Real estate is actively syndicated, and general partners play a significant role in all phases of the process. Both the deal’s purchase phase and ongoing asset management depend on them greatly. To make sure that everything is working as planned and that investors are receiving their anticipated returns, they collaborate closely with the property management staff.

Limited Partners

On the other hand, you as the Limited Partner Passive Investors play a far more passive role in a syndication arrangement. It’s General partners responsibility to make sure the plan is executed successfully keeping investors best interest in mind. You may put your money into a stable and growing asset as a Limited Partner Passive Investor in a real estate syndication deal, without having to put much effort.

You don’t have to deal with the property management staff, scrutinize the books, or examine rental application materials. The General Partners handle all of it on your behalf, allowing you to take a seat back, relax and enjoy the benefit of passive income stream generated by cash flows or potential value increase over time.

Multifamily Syndication vs. The Stock Market

The stock market has experienced some of the worst declines in recent months that we have witnessed in many years. For those of you who have money invested in the stock market, this implies that a significant portion of your net worth likely disappeared overnight. 

Stock Market Investing

There are no tangible assets to support your investment when you invest in paper assets like stocks. Additionally, because the stock market is prone to economic ups and downs, investors have very little influence over their assets.

Multifamily Syndication Investing

In contrast, with a real estate syndication deal, even in the worst-case scenario where all tenants vacate the apartment building, you still have the inherent value of the property and its underlying land as a safety net.


Moreover, when you opt for a value-add multifamily syndication deal, you’re essentially investing in a property with substantial growth potential. By undertaking renovations and improvements, you can elevate rental rates to match the current market standards, significantly boosting the property’s overall value, irrespective of economic fluctuations.


This often creates a mutually beneficial outcome for both investors involved in the deal and the local communities, which experience revitalization as a result of these positive developments.


Why Invest In A Multifamily Syndication?

Your money only works for you in one manner when you deposit it into a savings account or invest in the stock market. However, when you invest in a real estate syndication agreement, your money is put to use in a variety of ways.

1 – Cash Flow

A significant advantage of investing in a real estate syndication is the establishment of a completely passive and continuous cash flow. By participating in each syndication deal, you generate a fresh stream of passive income for yourself and your family, taking you closer to achieving financial freedom. 


2 – Leverage

Leverage, which may take many different forms in a multifamily syndication, is another significant advantage of flat syndication. Of course, borrowing money to buy the home provides leverage.  

Additionally, by using the resources of other investors in the group as well as the knowledge and expertise of the General Partners, you are able to participate in investment opportunities that you would not otherwise be able to on your own.

3 – Equity & Appreciation

Equity, which normally rises with time, is a major advantage for investors in real estate syndications. Additionally, by remodeling the building and raising the property’s total revenue, you may benefit from forced appreciation by investing in a value-add multifamily syndication, which will dramatically raise the property’s overall worth.

4 – Tax Advantages

Of course, taxes must also be remembered. Many investors like multifamily investments because of the cost segregation and accelerated depreciation tax benefits. While displaying losses on paper, you get to continue receiving cash flow in real life, lowering your overall tax burden.  

How Has COVID-19 Affected Multifamily Syndication?

The main issue is whether now, with all that’s going on with Covid-19, is the best moment to invest in a flat syndication. You now have a better understanding of how real estate syndications operate and the advantages they might offer on your journey to financial freedom. 

Here are the COVID-19 ripple effects to expect in the coming months and years:

  • Unemployment surges

  • Government stimulus

  • Stimulus money dries up, leading to loan defaults

  • Loan defaults lead to bank REOs

  • Foreclosures and other heavily discounted properties hit the market

Should You Invest In A Multifamily Syndication?

What does all of this imply for you right now, especially in terms of the rest of this year and the future?

It implies that the optimum moment to start learning about real estate syndications and performing your due diligence is right now. You should keep applying tight criteria to your assessments of possible real estate syndication prospects, keeping your investing objectives in mind.

In many cases, the underwriting assumptions that were used  recently few months ago are no longer relevant, so be sure to stress test deals to check for things like: 

  • Low breakeven occupancy (the lower the better; breakeven occupancy refers to how low the occupancy may go while still being able to pay the mortgage and costs) 

  • Make sure each multifamily syndicate you invest in has a strong and knowledgeable General Partnership and property management staff, large reserves, relatively low debt, and several backup plans.

Additionally, exercise patience and avoid hasty decisions. While there are already indications that favorable deals may emerge in the market, refrain from rushing into any investment. For Limited Partner Passive Investors, now is the opportune moment to prepare your funds and enhance your knowledge, positioning yourself to invest when the most promising opportunities surface.

Similarly, if you are a General Partner or contemplating creating your own multifamily syndication, focus on expanding your investor network at this time. By doing so, you will be well-prepared with sufficient capital when those lucrative deals present themselves in the market.

Ready to get started in  Real Estate Syndication

If you’ve made the choice to step away from the ups and downs of the stock market and venture into real estate, the present is the ideal moment to enhance your knowledge.


Begin by becoming a part of the Astre Capital Investor Club, granting you access to exclusive members-only content designed to support you on your path towards financial freedom.

If you’re  ready to invest or need to learn more. Join our exclusive investor club and start seeing our latest offerings today.

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