H Squared Capital, LLC
3 Consideration to Being a Limited Partner in a Real Estate Syndication
Updated: Jun 23, 2022
It is not uncommon for investors to want to take part in apartment syndication deals as general partners, so they can control what happens with the property. But if you are looking for other ways to increase your investment opportunities, there are many reasons why you should also consider taking part in these types of deals as a limited partner. Here are three of the most significant ones:
1) Perhaps one of the biggest reasons to invest in apartment syndication deals as a limited partner is that you have an opportunity to diversify your portfolio. By investing in other people’s properties, you can get away from just sticking with one type of property and mitigate some risk by growing your real estate portfolio. You get to choose markets that you feel are most promising and that align with your investment strategy. Some key matrices about a city to look at are economic growth, unemployment rates, and population trends.
2) You have an opportunity to make money- Even if you are investing as a limited partner, there is still the potential to make money. Limited partners typically earn between 6% and 12% on their investments annually. As long as your investment stays secure with no additional capital needs or problems, this amount will stay consistent throughout the term of the business plan. However, should something change that requires more funding your general partners should have already had a plan in place and reserved capital to address the major issue. When you include the proceeds from sale, it is not uncommon for investors to double their invested capital over a five year hold. If high-yield returns without having control appeal to you, investing as a limited partner might be what makes sense for your situation.
3) There are many ways you can create value through investing as a limited partner. For example, if you are a more sophisticated passive investor you can help guide the general partners on how to improve their business model and increase returns for everyone. You might also have a new idea that could significantly benefit one of your properties, but it needs someone with more experience to implement it successfully. By being a limited partner in this situation, you have access to those ideas without having all of the responsibility or risk involved as well.
When it comes down to it, becoming both general and limited partners in apartment syndication deals has many benefits that you should not overlook. If any of these three reasons interest you about taking part in apartment syndication deals as a limited partner, there are many opportunities for investors who may be interested in pursuing this route or validating their concerns before making such a large investment. However, it is important not only to do thorough research but also to continue learning throughout the process so that when decisions arise they can be made confidently and without having too much on the line financially at stake.
If this article piqued your interest in investing in real estate then congratulations – there’s never been a better time than now to invest in income-producing assets! For more information on how you can get involved in a value-add multifamily syndication deal, please contact me at Hutch@HSquaredCapital.com or Dr. Heath Jones at Heath@HSquaredCapital.com. You can also visit our website at www.HSquaredCapital.com. We’d be happy to answer any of your questions and help get you started on the path to financial success through multifamily investing!
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