Investing as LP in Multifamily Syndications

Multi-Family and Apartment Investing
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Investing as LP in Multifamily Syndications

Jay Amin
Member since 2020 · 8 posts · 4 votes

I would be curious to hear thoughts on those LP investors that have focused on investing in commercial real estate primarily as "Pref Equity" investors rather than "Traditional Equity"  investors.  I began my real estate investing journey in the Fall of 2019 and have focused only on "Traditional Equity", but I am wondering if I need to have a balance of both.  I have reasonable risk capacity and risk tolerance for investing in RE over the next decade, but I hear from many experienced real estate investors about generating regular cash flow, and obviously in some traditional equity investments in multifamily that's not always the case.  Thanks and happy real estate investing!!

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Kim Meredith HamptonBusiness Member
Real Estate Broker · St Petersburg · Member since 2014 · 2k+ posts · 2k+ votes
4y

@Jay Amin I do both, as well as my 401K etc... I also invest in different asset classes as well; office, multi family. My focus is larger multi family this year and will do both as a passive and traditional depending on the deal

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  • Kim Meredith HamptonBusiness Member
    Real Estate Broker · St Petersburg · Member since 2014 · 2k+ posts · 2k+ votes
    4y

    @Jay Amin I do both, as well as my 401K etc... I also invest in different asset classes as well; office, multi family. My focus is larger multi family this year and will do both as a passive and traditional depending on the deal

    [email protected]407-448-6679Podcast Guest on Show The Key to Scoring Discounted Deals in One of America’s Hottest Markets
    Compass | St. Pete514 Reviews
    WebsiteView Page
    1Reply
  • Al Lev
    Rental Property Investor · Brooklyn, NY · Member since 2008 · 22 posts · 11 votes
    4y

    Hi Jay,

    It all depends on your risk profile. The pure "Pref investors" have higher payoff priority when property is sold and it matters if the property is not fetching full acquisition price on the sale (happens due to recessions). You can mix them to attain your desired risk tolerance as investing in both allows you to dial up/down the downside. You should consider the deal leverage as high leverage will likely negate any difference between pref and equity shares. (Both will get wiped out if the deal goes south)

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  • Percy N.
    Developer · Philadelphia, PA · Member since 2015 · 2k+ posts · 904 votes
    4y

    Outside of the reasons mentioned above, I sometimes hear from people who invest via SDIRA as "pref" equity or debt to avoid UBIT/UDFI. You should check with your tax professional to confirm, if this applies to you.

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  • Adam Mitchell
    Rental Property Investor · Richardson, TX · Member since 2019 · 120 posts · 82 votes
    4y

    @Kim Meredith Hampton we have MF deal flow in the TX and OK markets. Let me know if your interested in connecting sometime.

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  • Drew Zaruba
    Real Estate Agent · Kearney, NE · Member since 2021 · 9 posts · 4 votes
    4y

    Jay, it all comes down to what you and your investment goals are. Pref Equity is good for when a property has higher risk associated with it; means you get paid first. However, I would find a syndicator who you trust and have a relationship with. It is much easier to invest in those deals rather than with someone you do not know. 

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