Did you know over 80% of multi-family purchases are made through syndications? Syndications allow you (the investor) to leverage the experience and financial strength of the sponsor (Direct Source Wealth) and aggregate capital among other investors to invest in otherwise unobtainable, high-value commercial assets.
By investing with others in syndications and with a firm like DSW that has a proven track record, investment risk is dispersed among all the investors. Syndications allow you to adjust your investment risk to an appropriate level based on your risk tolerance.
Disclaimer: We are not tax strategists or advisors. Please consult your CPA for specific benefits of these investment types. However, investing in real estate generally has the added tax advantage of depreciation.
PAYING DOWN PRINCIPAL
When holding real estate long-term, rental income from the property pays off the debt or loan. Upon sale or refinance of the property, the goal is to have the investor’s principal returned in addition to any potential gains.
MONTHLY OR QUARTERLY DISTRIBUTIONS
Depending on the type of asset and the pro-forma plan, most multi-family properties will produce a positive yield making it possible for monthly or quarterly distributions. In some cases where there is major rehabilitation required or new construction, the pro-forma may require investors to accept little or no distributions in the beginning in exchange for a potentially larger return later.
ECONOMY OF SCALE
Single-family properties or small multi-family properties usually do not have enough revenue to hire full-time staff. Therefore, the owners are typically required to handle all day-to-day operations of the property. In large multi-family syndication (100-500 units), the revenue is sufficient enough to hire a full-time staff to operate the property with oversight and direction from the syndicator and/or asset management company.
Unlike a single family home, a multi-family apartment building is more like a business that is valued primarily by its Net Operating Income (NOI), not by comparable sales nearby. The goal of value-add investing (in most cases) is to improve the asset’s condition while adjusting rents upward and thereby, increasing the property value by increasing the NOI. Most properties we invest in have a value-add component which provides an opportunity to capture potential equity upside in addition to cash flow.
BUILT IN ASSET PROTECTION
In each syndication at DSW, we purchase the multi-family asset through a limited liability company (LLC). An LLC provides its members (investors) with certain personal legal protections against lawsuits and personal financial liability. Please consult with your attorney for specific advice on the benefits of investing through syndications and/or LLC.
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We do not provide tax or legal advice. You should consult with a qualified financial planner, tax advisor, or attorney for assistance regarding your specific needs and circumstances. The purpose of this information is to provide general information about self-directed IRAs.