Apartment Syndication: Is It a Worthwhile Real Estate Investment?
Updated: Apr 15, 2019
If you’re considering a commercial real estate investment, today’s market bodes well for rental housing. Given the surging force of short-term rental platforms like Airbnb and the uptick in development of apartment syndication developments in major cities, commercial real estate investors should look to capitalize on these current market trends.
In fact, short term rentals have become a lucrative business for millions of investors. People are buying up apartments, condos, apartments, and houses with the sole intention of listing them on rental platforms to generate income. At least 6% of Airbnb hosts have between 3 and 272 listed units, and that number is expected to climb. In other words, more people will start looking to acquire properties they can turn into rental income.
As a real estate investor looking for low risks and high returns, apartment development syndication looks to be a viable opportunity that satisfies both.
The Benefits of Real Estate Syndication
A Real estate syndication is a form of investment that allows multiple real estate investors to pool funds and acquire a property they would not be able to acquire on their own. For example, you may not be able to purchase an entire apartment complex, but you could go in with other investors to purchase the property and receive a share of ownership.
Syndication is usually made of two parts: General Partners and Limited Partners.General Partners invest more and bear more of the risk of the investment, while Limited Partners invest more passively and have limited risk.Ideally, real estate syndication allows investors to spread their risk across multiple investments. Think of it as not putting all your eggs in one basket: since the stake in each investment is lower, potential losses are also lower.
Why Apartment Syndication Is a Viable Commercial Investment?
The current state of the short-term rental market is only the beginning. Investing in apartment development syndication offers attractive benefits to investors that makes the deal all the more lucrative.
Cost of Entry
If you’re considering investing in commercial real estate, apartments tend to have a lower cost of entry vs other property types. This helps you to keep investment costs low to see an ROI sooner.
The apartments aren’t the only valuable component of the investment. You also get the land on which the apartments are built, which can be highly valuable on its own.
Affordability for Buyers
The cost of an apartment building tends to be cheaper than a group of single-family homes with the same amount of doors, giving buyers an incentive to purchase an apartment over another property type. This attraction is strengthened by the prospect of limited external upkeep to the apartment owner, no and access to community amenities.
The demand for smaller properties like apartments is strong, especially when considering the short-term rental market. Platforms like Airbnb have lowered the barrier to entry for real estate investors who want to generate passive income through rental properties. In addition, as housing costs continue to rise, the need for more affordable housing will be more recognizable.
Bottom Line: Is Apartment Syndication a Good Investment?
Given the current state of the global short-term rental market, apartment development syndication looks on all fronts to be a viable opportunity for commercial real estate investors. Major cities in the United States and Latin America are experiencing growth in apartment development, signaling a real need and interest in the industry.
To help you make a smart investment decision, reach out today to learn more about how Acorb LLC can help connect you to the best investment opportunities.