If you’ve been following my blog, you know I’m a believer in multifamily real estate investing. But I also know the first step is often the hardest, so read on for my advice in taking the plunge and getting started with multifamily real estate.
Life Bridge Capital is a leading real estate syndication company. We offer our investment partners the opportunity to leverage shares of multifamily rental properties into a passive monthly income. Learn More.
Decide Whether Active or Passive Investing Best Suits You
There are so many real estate investment methods available that narrowing them down to an option or two has to happen for forward progress. From there, you can dedicate your time to finding the best fit within that category.
An excellent place to start is identifying whether you want to be an active or passive investor. Doing so distinguishes whether you want the hands-on role of an active investor or delegate that to someone else through passive investing.
Active investors prefer the control and opportunity to exercise the know-how that comes with being the leader of a real estate project. That may be as a direct owner, the active partner in a partnership, or even as the sponsor of a syndication.
Alternatively, passive investors are keen to use real estate to grow wealth without committing themselves to it as if it were a full-time job or even second. To compartmentalize real estate investing, consider buying real estate investment trusts (REITs). REITs exchange-traded funds (ETFs), lending through crowdfunding, being a limited partner in a syndication, or simply the passive partner in a partnership.
Identify Your Budget and Ideal Risk Level
After identifying your tolerance for responsibility of the project, consider how much your bank account can handle. The beauty of real estate is that there’s a place for anyone, regardless how much or little money they have to spare and what stage of life they are in.
While considering the dollar figure you want to leverage, remember to consider how long you are willing to part with your funds.
REITs and REIT ETFs are usually the most affordable place to get started. Investors purchase REITs for the cost of a single share. REIT ETFs typically have a minimum purchase, depending on the fund. For example, Vanguard’s REIT ETF requires a $10,000 minimum.
REITs and REIT ETFs are also the most liquid options; simply sell shares to get out of the investment, but remember that as with other stocks, a hasty sell could result in a loss.
On the flip side, syndications and crowdfunding usually rely on a smaller pool of investors, meaning each one contributes a significant portion. Accordingly, expect minimum syndication investments to be $50,000 to $100,000.
Syndication and crowdfunding projects place strict limitations on the early return or withdrawal of investor funds and may even make it impossible. Because there are fewer investors, the projects rely on each one’s capital for operation.
As such, these options are long-term investments, often five to eight years. As a result, these should be funds that you can do without, even if an emergency arises.
Finally, direct ownership could be anywhere on the spectrum, depending on the financing method used. Buying a property in cash will likely be the heftiest investment we mention, but few investors do that.
Instead, financing allows investors to purchase multifamily properties with a very small percentage down. As a result, many investors end up being surprised by how little of their own money they have to contribute to buy a modest multifamily property.
Start Looking for Opportunities
Once you know your basic wants and needs from an investment, start hunting.
REITs and REIT ETFs
REITs are available through multiple channels, but looking at publicly traded REITs on national exchanges is a good place to start. Those are the most liquid and easily accessible REITs available.
Similarly, REIT ETFs are also purchased through a broker, and most professional brokerages have their own REIT ETF on the menu.
Other REITs are public but not listed or private. While many of them can be suitable investments, they have different SEC standards than publicly traded REITs. Also, keep in mind that they may be challenging to sell because they are not on a national exchange, so they are considered illiquid.
Partnerships and Syndications
Partnerships and syndications will require more effort upfront, but they also offer more potential returns. These types of investments thrive through professional relationships, so look for networking opportunities in your local market. Alternatively, turn to an online investing community like Bigger Pockets to meet other real estate professionals.
When you find someone with a real estate project, reach out to them to see if there’s an opportunity there for you. With some syndications prohibited from public solicitation–due to SEC filing status–direct contact can be the best way. To stay up-to-date with our projects in need of investors, simply fill out our contact form.
Final Thoughts
If syndications seem like a good fit for you, but you aren’t sure where to start, consider working with us for investment coaching.
Life Bridge Capital is a leading real estate syndication company. We offer our investment partners the opportunity to leverage shares of multifamily rental properties into a passive monthly income. Learn More.
