TOP 10 REASONS TO INVEST

One of the biggest reasons investors diversify their real estate investment portfolio is to mitigate risk exposure. The phrase “don’t put all your eggs in one basket” applies directly to this concept, as spreading your investment across a broad spectrum is how investors balance risk.

There are several types of diversification as by niche and geography.

 

Niche Diversification

Spreading investments amongst apartments, boutique buildings is a great way to achieve this. Understand asset cycles and trends. Some areas like office may not do so well in a down economy where more stable assets like apartments, homes may hold up nicely.

 

Geographic Diversification

Another form of diversification within real estate syndication is geographically. Some of the best deals are out of state in growing markets. It can be very difficult trying to be an active out of state investor due to competition, relationships, market knowledge, etc but if you align yourself with a reputable, successful operator in that local market you can gain access to some great deals you otherwise wouldn’t have had access to.

Some of the best real estate investment opportunities are in significant properties or development projects. Because real estate syndications give you the ability to pool your funds with other investors, you are able to get exposure to this asset class, without a seven or eight figure investment.

Possibly the most beneficial reason to consider syndicating your funds for real estate is that you have the ability to be a passive investor.

When you invest the syndicator will handle all aspects of the deal: due diligence, locating a profitable properties, hiring and managing and so on. Investors will pay the syndicator via the performance of the deal with a split of the cash flow and appreciation.

In exchange for the sponsor fee, you are able to be completely passive as an investor.

When you invest in pooled investments that utilize LLCs, a whole new world of tax-deferred status is open to you. This structure allows you to compound 100% of the fund’s proceeds for years, as long as you do not distribute the gains outside of the fund. Under the new law, investors in pass-through entities like commercial real estate will greatly benefit from an additional 20% deduction.

For instance, let’s say you are investing in a syndication where the sponsor is purchasing a fully occupied apartment building and holding it for cash flow. Because of depreciation, interest payment write offs, expense write offs, and so on, your annual tax exposure for this opportunity will usually be zero or even NEGATIVE, even if you receive thousands of dollars in distributions from the property’s cash flow.

Of course, when the property is sold, the investors will pay taxes on the gains they receive from distributions, but giving your money the chance to compound without paying taxes can completely change your portfolio’s trajectory. Note: Savvy syndicators will utilize 1031 exchanges to roll your investments into the next deal, thus pushing taxes off further.

Boutique Building syndication is a business that is valued primarily by its Net Operating Income (NOI), not by property comps. Through physical and operational improvements, you can increase the value of the property by increasing NOI.
Then you can add the appreciation of the property over time.

By investing with other investors through a syndicator with a proven track record, investment risk is dispersed among all the investors.

We all know that using an entity such as an LLC is advisable when investing in real estate. However, when you invest in a real estate syndication with a sponsor, you add another layer of protection between you and any liability resulting from the fund’s managers or debt obligations.

In real estate syndications, there are typically two sides of the operating agreement: the “A Side,” which lists the managing members who are responsible for the decisions behind the fund, and the “B Side,” which lists the investors who bring only capital to the table. Under no circumstance will “B Side” investors be responsible for making management decisions of the fund, and, therefore, under no circumstance would a judge find the “B Side” investors liable for decisions made during the fund’s performance. This way you are completely removed from any lawsuits that may arise due to fund-related activities.

Futura World will lower costs by vertical integration and economies of scales.

All building costs and renovations, contractors price per unit will be lower the higher the number of units, and providers of renovation materials as well by ordering in bulk.

And Less Volatility Than Stock Market.
The long-term performance of real estate makes it a compelling asset class for investors. It brings consistent performance compare to more volatile investments as stock markets.

Rental income pays down the debt and builds equity in the property. Through the life cycle of the syndication, rental income from the property pays all debt service. Upon sale of the property principal reductions will be returned to investors.

Investing and building wealth through apartment buildings is a great way to hedge against inflation because rents, which is the source of an apartment investor’s gross income in the investment, rise along with inflation.
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Because of the limited amount of land, in certain markets, and rising population growth, demand in the real estate apartment sector is high. This limited supply and high demand means that increased property values offset any deterioration in wealth caused by a rise in inflation.