Is Now a Good Time to Invest in Real Estate?

Is Now a Good Time to Invest in Real Estate?

Heightened Inflation, rising interest rates, and trillions of stimulus dollars injected into the economy is affecting everyone as prices and labor costs rise in varying industries. So how does this impact someone who wants to invest in real estate?

Let’s start by quickly defining inflation as “a general increase in prices and fall in the purchasing value of money.” Everything from gas, food, to industrial products become more expensive and consumers can’t buy as much of it. A person who could once afford a house might be forced to rent instead.

Real estate is also directly correlated to low interest rates, which allow people to buy more, thus also causing a rise in house prices. So, with high inflation, everyday consumers are affected in what they can buy.

People who keep cash in a savings account are essentially losing money because of the effects of inflation. Typically, a savings account might generate 0.5% – 2% at best, but when you subtract the percentage of inflation, you end up with overall negative returns. So, an investor investing in a 7% deal is getting a better deal than the investor not investing at all.

As mentioned, the Fed stimulated the economy to encourage consumer purchases and is raising interest rates to combat inflation.

Here is an example of what that means to consumers: Let’s say Bob is shopping for a home, and the interest rate was 3.5%, which was going to make his payment $2155. Then interest rates rise to 4.5% and now his payment is $2432. Bob may no longer be able to afford the house payment with that $300 per month increase. So now Bob must look for a smaller house, or even rent.

Investors could also be impacted by increasing interest rates, depending on their business plans. For example, let’s say Mary has a lease contract with a tenant at a locked in rate for a 10-year lease. She also has a mortgage of $2000 per month at 4.5%, but it has a 5-year balloon on the mortgage that comes due at the end of 2022. This means she must renew her mortgage at a higher rate now. Thus, her monthly payment increases to $2500 per month. Now her expenses have increased, but she cannot raise rent on her tenant, which puts her investment underwater.

Real Estate Syndicators must make business plans with all of this in mind. Any project with short-term debt or non-fixed debt will be forced to use higher rates later if not locked in.

So, is now a good time to invest in real estate?

Absolutely! Let me explain why:

  • Investing in hard assets of value (real estate) protects against inflation

  • Investing in appreciating assets with returns counters inflationary negative returns

  • Rates are still incredibly low

  • Rental growth is increasing yearly and expected to continue

  • Home ownership is on the decline, meaning demand for rentals is rising

The currency has been devaluing steadily for the past 50 years. However, a broad retrospective look at real estate over the past 50 years shows that almost all asset classes have experienced dramatic resilience against inflation.

Three things get wiped out in inflation:

  1. Purchasing power for those on fixed income

  2. Savings get wiped out

  3. Debt gets wiped out

Since real estate investors tend to use a high proportion of debt in their investments, they almost always end up being the beneficiary of inflation because those long-term loans get devalued disproportionately compared with all the other elements associated with real estate. Rents go up in price. Operating expenses go up in price. New Construction goes up in price. It’s the last item that causes existing real estate to rise in price. Since the loan on a property doesn’t go up due to inflation, the increase in price is always to the benefit of the equity holder. Therein lies the inflation hedge.

In summary, if you want to protect your capital and increase returns, investing in cash-flowing real estate syndications in growing markets with long-term fixed debt is the best plan during inflationary periods.

Investors Benefit from Inflation

Investors Benefit from Inflation

Investors Benefit From Inflation

Investors Win

Today, most interest rates are lower than the rate of inflation. 

Sure. That’s really good for real estate investors.

But it’s kinda backward. Why would banks keep making loans if their real yield is negative?

For example, banks are looking at 3% loan interest minus 5% inflation. This equals a -2% bank yield.

Yes, it’s more nuanced than that.

But you don’t have to get as wonky as a bespectacled professor to understand this stuff. 

The simple fact is that savers and lenders are losers. Debtors and borrowers are winners.

Cooling Inflation

The two primary tools that the Fed uses to cool high inflation are: 

  • First, they slow dollar printing (called ” tapering”)
  • Second, they raise interest rates (called “lift off”)

The Catch-22 is that with everyone bursting at the seams with debt – including the US government itself – this economy cannot cope with higher rates.

Does this mean that inflation will run amok? 

Investors Win

If so, the cost of everything explodes for consumers – vases, firewood, haircuts, coffee, furniture, soap, Philadelphia Phillies hats, carrots, blue cheese, and Star Wars action figures.

It’s the investor class that benefits – holders of gold, cryptocurrency, many stocks, and especially real estate investors.

Consumers lose. Investors win.

Be an investor. Build wealth. Own assets.

Think Multifamily Is Out Of Reach? Think Again!

Think Multifamily Is Out Of Reach? Think Again!

Think Multifamily Is Out Of Reach? Think Again!

If we look at a typical multifamily investment project acquired through syndication, where a sponsor puts together a deal and raises funds for the deal from investors, there’s going to be an opportunity for those investors to own a piece of the project and participate in the cash flow, capital gains, and all the reasons we invest in real estate. There are a few steps to investing passively in these deals. Investing passively in syndications can be a true turn key deal, where you’re not doing any of the work. You’re not making design decisions or finding the property or handling the asset management, etc. It’s truly turn key. It’s mailbox money and you are getting all the benefits of being a partner in the deal. You will get a depreciation break on your tax return and this can result in something almost kind of magical for people who haven’t heard of it before. So while the project is generating cash flow, you’re getting distributions every quarter. Then at the end of the year, you are also getting a paper loss, meaning that it didn’t happen in real life, but it is a negative dollar amount on what is called a K1, passed through to you. That is a fantastic benefit of the tax code that we can take advantage of as real estate investors, to get cash flow and get a paper loss. If you are a high-income earner, it’s a very attractive option. In fact, many investors are looking to these investments primarily for depreciation and the K1 loss at the end of the year, so it is a huge benefit.

So what are the steps to investing passively in a project? First of all, this whole business is relationship based. You will need to find a sponsor who has experience and who you know, like, and trust. I would not advocate doing business with someone you don’t like. Obviously if you don’t trust them, you’re not going to do business with them. You want to get networked, and you want to get some kind of deal flow. You need to have deals put in front of you that you can evaluate. You need to have some fundamental knowledge of how to evaluate deals.

Some things to look for and understand is in a passive deal are whether a preferred return is provided, what is the expense ratio on the deal? What is the business plan and how will the sponsors execute that business plan? How much capital improvement is budgeted? What is the expected rent growth? These are all questions to review with the sponsor. Understanding these questions and your own risk tolerance will allow you to evaluate whether or not a deal is within your comfort zone. So you will need to find some sponsors and get in some deal flow that you can start evaluating. That is the first step.

The second step: obviously you need capital. Typical minimum investment on a multifamily project is $50,000. More experienced sponsors that have a large database or group of investors may be as high as $100k, $200k, or $300k to get into a project. But typically, in the multifamily syndication space, you’re seeing investment minimums of $50 – $100k. If you don’t have that capital to invest, then passive investing in multifamily may not be for you at this time. But there are pools of capital that people don’t realize is available to them. Somebody who is working a 9-5 at a corporate job, between their family obligations and monthly expenses, might be spending all their money and putting a little aside for savings. But they may also have a $500,000 IRA or 401k. This is capital that you can use in a multifamily investment. There are ways to take that capital in the IRA or 401k and self-direct it into multifamily investments. They can’t be your own deals. It needs to be an arms-length transaction. It needs to be someone else’s deal. But that is a huge pool of capital that many people don’t realize can be tapped for multifamily investing . It is a lot of money in the American retirement system, and you as a passive investor, that might be a capital source that you can go use.

Other capital sources that we have seen, and that I started out early in my investing career to get some investable capital, selling cars that cost too much; capital in single family residences. It is very common to take equity that you’ve built over the years in some single-family residences. We have countless investors that do that. They say, hey, I have these houses over here but I’m ready to move up to the multifamily space and these houses have some equity. Maybe I’m going to refinance out that equity and put it into a passive investment deal or sell the house. But there are pockets of equity. We certainly wouldn’t advocate going into debt to finance an investment. If you’re going to invest passively in a multifamily project, you need that to be cash. So is it cash in the bank, 401K, IRA, or liquidate some other assets, like real estate. But it needs to be cash. Don’t put debt into a project. That is like stacking two ladders on top of each other. Never a good idea!

Once you understand how to look at deals and if it is something you want to invest in and you found some sponsors whom you know, like, and trust, and you are evaluating deal flow, then you are going to go through the process of investing. It is fairly simple. You will see a deal come out; there are some documents to sign, a private placement memorandum, a subscription agreement, investor questionnaire, and then you’re going to wire funds into the project typically 2-3 weeks before the closing, and then the project closes. You will get monthly updates after that, and quarterly cash flow checks start coming in.

While the education is important (and that is a requisite at the front end; you do need to get educated) once you got some deal flow, the actual process of investing is simply sign the documents, wire the funds, check your email every month. If you want to be more hands on and tour the property or ask the sponsor questions, certainly that is on the table, but beyond the requirements as a passive investor. If you have a W2 job you like or maybe you’re already retired and don’t want to mess with evicting tenants, passive multifamily investing is a great way to still be a partner on a project and benefit from the sponsors work. Perhaps you are an active real estate investor but are worried about how to take your investment activity to another level, passive investing is a great way to scale.

The return projections on a typical multifamily investment project, from a very high-level perspective, sponsors will typically target a 6-8% return cash on cash every year. So if you invest $100k in a project, that sponsor is going to want to deliver 6-8k per year back to you. That beats lots of investment instruments, like CDs money markets, and other fixed income instruments like that. It may even beat the stock market when you consider the S&P 500 has an average annual return of 6-7% over long periods of time. So, you’re getting 6-8%, sometimes even 10% cashflow on your money every year. Then the sponsor is looking to get an equity multiple for you. This is generally of close to 2 times over a 5-7 year holding period. So, the sponsor is looking to double your money in 5-7 years. This is a typical underwriting approach and what sponsors are looking for. Now, if a sponsor can get in and out of a deal in two years, and they didn’t double your money, but they give you a 30%-40% cash on cash return, you would take that, right? So, that can be the case sometimes where a sponsor underwrites a five-year hold, but gets it done in two years. As long as that annualized return is really great, then investors are going to be happy. And, as we talked about before, at the end of the year, you’re likely getting a K1 with a paper loss because of the accelerated depreciation!

So, that’s the overview of passive investing. You need to

·      get educated

·      find sponsors you know, like, and trust

·      start looking at deal flow

When the time comes:

·      sign documents

·      wire funds

Most sponsors run a first come first serve operation because, let’s say you’re raising $5 million, and you have 35 investors on a project, and you have 200 potential investors. It is too difficult for a sponsor to go out there and manage expectations individually. It’s much more efficient for a sponsor to come out with a project, announce it to their investors and have it open for funding until it’s not. So, the key for the passive investor is to get educated so that you’re able to strike quickly when the time comes. Because, once it’s full, that’s it; you’re done! People that have been passive investors in the past know to ask questions of the sponsors up front and get to know the sponsor up front, get educated so that they can very quickly evaluate a deal, and strike quickly when the window opens because it is typically not open for very long with an experienced sponsor.

So that is an overview of passive investing and one of the best ways to participate in multifamily investments without having to do any of the work. Download the free white paper to learn more about passive investments in multifamily at

Multi-Family Property Classifications and Your Investment Strategy

Multi-Family Property Classifications and Your Investment Strategy

Multi-Family Property Classifications and Your Investment Strategy
What is meant by the multi-family property classifications A, B, C, and D? In investment terms which of these property types are classified as core assets and which can be considered core-plus assets? If you are looking to pursue a conservative investment strategy or if you prefer a more aggressive one that has the potential to deliver a higher yield in which class of multi-family property should you be looking to invest? All these questions and more will be clearly answered in this article.

Classification – Class A

Class A multy Family home
Class A multi-family properties are buildings that are less than 10 years old. If they are more than 10 years old, they will have been extensively renovated. The fixtures and fittings will be of the very best quality. The amenities will be comprehensive and of a luxury standard. While Class A properties tend to generate a lower yield percentage, they can grow exponentially and they tend to hold their value even in major economic downturns. In terms of their investment profile, they are considered to be core assets. An article on multi-family investing at explains why Class A apartment buildings, with a ‘core asset’ risk profile, offer a lower yield percentage:- “Owners purchase these properties using lower leverage, therefore with lower risk.  REITs and institutional investors purchase these assets for income stream.  The lower risk profile results in lower returns in the 8-10% IRR range.” A property in the Class A category would not likely have a “core plus” risk profile unless it were slightly downgraded in some way perhaps by a less favorable location, housing type or a number of other factors.  

Classification – Class B

class be property multy family home
Class B properties are older than class A properties. Usually, class B properties have been built within the last 20 years. The quality of the construction will still be high but there could be some evidence of deferred maintenance. The fixtures and finishings will not be as high quality and the amenities will be limited.  

Classification– Class C

Class C properties are built within the last 30 years. They will definitely show some signs of deferred maintenance. The property will be in a less favorable location and it will likely not have been managed in an optimum way. Fixtures and finishings will be old fashioned and of low quality. Amenities will be very limited. Both Class B and Class C properties can be candidates for a ‘value add’ investment strategy. By bringing deferred maintenance issues up to date or by upgrading the property by means of an interior and/or exterior renovation there is an opportunity to increase the tenant occupancy and receive a higher return on your investment. In his article, ‘what are the 4 investment strategies?’ Ian Ippolito explains why pursuing a value add investment strategy is a higher risk:- “Much of the risk in value-added strategies comes from the fact that they require moderate to high leverage to execute (40 to 70%). Leverage does increase the return, but also increases the risk, and makes the investment more susceptible to loss during a real estate cycle downturn.”  

Classification – Class D

Class D properties are generally more than 30 years old. The property will be showing signs of disrepair and will be run down. The construction quality will be inferior and the location will be less desirable. The property may be suffering due to prolonged and intense use and high-level occupancy.
                      Both Class C and Class D properties can be candidates for an ‘opportunistic’ investment strategy. Because these properties require major renovations they are the highest risk investments but they can also yield the highest returns.


In overall terms, the US multi-family real estate market continues to give excellent returns for well-informed investors. This article has clearly explained how different types of multi-family properties are classified. The article has also given an overview of how each class of property fits the different types of investment profiles. We trust that this information will assist you in assessing your multi-family real estate investment goals. For further assistance please connect with our team.
Why Multifamily Investment Makes Sense

Why Multifamily Investment Makes Sense

Why Multifamily Investment Makes Sense

Multifamily Market Overview

The demand for rental accommodation continues to significantly outpace supply. The current status quo is that rental housing supply is falling short by hundreds of thousands of units each year across the United States. This situation, according to The National Multifamily Housing Council and The National Apartment Association, looks set to continue for many years to come. Current demographic preferences reveal a trend at both ends of the age spectrum for renting as opposed to owning. The younger demographic are finding it more challenging to get the financing for property ownership and the baby boomer generation favor downsizing and the increased freedom that allows. The result is that the demand for rental property is increasing. The combination of these two market factors gives a strong positive indication for sustained revenue growth in the multifamily sector.  The conditions look set to remain positive for multifamily investment in most locations for the foreseeable future. Let’s take a look now at four more reasons why investing in multifamily makes good financial sense.

#1 Economy of Scale

The basic meaning of the economic term, ‘economy of scale’ is that there is a fundamental cost-saving benefit to being bigger.

To quote Investopedia, an ‘economy of scale’ is an advantage “that arises with increased output of a product. Economies of scale arise because of the inverse relationship between the quantity produced and per-unit fixed costs.”

How does this concept apply to the argument that multifamily investing is more advantageous than investing in single-family property?

To give a simple example, if you have been collecting 10 rents for 12 months from your multifamily property and then the roof needs fixing, that’s a much better scenario than collecting 1 rent for 12 months on your single-family property and then the roof on it needs fixing.

The rationale applies even more if you add more single-family properties to the equation. The cost of managing 10 individual properties, which could be spread across multiple states, and the cost of hiring different contractors to care for each one would be punitive. The cost would be much greater and the management less efficient and less cost-effective than caring for one multifamily property of 10 units in one geographic location.

#2 Greater Control of Property Value

With a single-family property, you are almost completely at the mercy of market forces.

If you need to sell in a down market your hands will be relatively tied. The value of your property will be determined by what other properties have sold for in the local area at that time.

A multifamily property is perceived somewhat differently because of its commercial nature. It is managed and run as a business and therefore a significant part of its value is determined in the same way as a business. This means that the value is much more in your own hands.

Businesses are valued largely on their profitability and, in a similar way; a multifamily property’s value is determined by its net operating income.

Something as straightforward as adding a laundry facility or some paid parking are two examples that can very positively affect the profitability of your multifamily property and in turn, its value.

With a multifamily property, there are many more ways that you can bring your management and entrepreneurial skills to bear to increase the value of the property independently of the surrounding property market.

In a nutshell, you have the ability to raise the value of your multifamily property by decreasing expenses and increasing income.

#3 Positive Cashflow

In addition to the ideas mentioned previously, namely,
adding laundry facilities and paid parking, there are lots of amenities that could be added to your multifamily property to keep a positive cash flow.

In addition, the old adage of not having all your eggs in one basket applies here also. A tenant vacancy in a single-family rental property will bring your cash flow to a grinding halt. In contrast, if one of your units in your multifamily property is vacant, the impact on your cash flow will be minor because you will still be collecting rent from all the other units.

#4 Tax Benefits

One of the great things about supplying housing for the populace is that in doing so you are helping the government fulfill one of their important responsibilities. Not surprisingly, in return, the government offers you certain tax advantages.

One of the most significant tax advantages for multifamily property owners is something called ‘depreciation deduction,’ in effect it can allow you to deduct a large amount of the income your property generates. For details on how it works, take a look at the following Investopedia article, How Rental Property Depreciation Works.

Another way multifamily property tax laws benefit you is that you are permitted to use some of the cash flow from the property itself to pay down the mortgage.

It is permissible to collect revenue but show a much smaller amount of income on your taxes. This allows you to take a portion of that rental income and use it to pay down your debt on the property, which will steadily increase the equity.

With the help of a good tax advisor, you may find that there are many other legitimate ways to capitalize on the tax deductions and incentives and even grants that the government makes available to multifamily property owners.


In the present fluctuating economic climate multifamily properties are tangible assets that represent a sound focal point for your investment and wealth creation strategy. 

Due to shorter lease terms that give room for regular increases in rent, multifamily assets represent less of a risk than other commercial real estate investments.

The prevailing demographics are also favorable. The steady increase in the number of professionals in the workplace, families, and empty nesters looking to downsize and simplify their lifestyle means that focusing on the multi-family market makes sense.

Multifamily is and will continue to be a solid strategy for investors looking to achieve financial freedom by means of strong investment returns that are attractively low risk.