4 Real Estate Strategies for Multifamily Syndication Sponsors
When you are analyzing sponsors and who to invest your capital with, you should know the strategy of that sponsor. Some sponsors will be a great fit for you and some will not. Today I am going to break down just a few of the most common real estate strategies.
Buy and Hold:
Buying and holding a property is the most common and classic approach. Buy a property, collect rents, pay down debt, and hold for (x) time. Often deals are held between 5-7 years, and sometimes as much as 10 years.
I have spoken to 1-2 sponsors this last year and they are finding deals that they have bought and sold within 1 year because of how intense and competitive the market has been. The flipping strategy is when someone acquires a property and immediately flips. Or, buys the property, adds some quick value and increase NOI and then sell the property to give return to investors. Flipping has become increasingly popular due to TV shows. Flipping can also be leveraged during any part of the market cycles.
Over the last year, competition for deals has gotten so competitive that some syndicators are breaking out more into development deals. Development can involve buying land, getting entitlements, then getting permits to shift use. Or, buying land and immediately building an asset. These far riskier investments that could go to zero, but also have lucrative upside opportunities if done well. These types should be a smaller part of your portfolio.
Value add is one of the most popular strategies that sponsors love to engage in. The sponsor will acquire an asset, make improvements, and add value. You can add value by improving the management team, making improvements to the exterior, or improvements to the interiors of the apartments.
Over the last 5 years I have also done marketing for syndication sponsors. We would do things outside of the property like, website improvements, online review improvements, better google ads management, and easier discoverability on search engines so that we could get higher quality tenants in front of our on site team so that we can funnel as many prospecting renters to our property! These are great ways to get renters to fill, and increase NOI by reducing vacancy.
At Growth Vue we are focused on Value Add deals in the B and C class property types. We prefer garden style apartments that have upside value we can create for investors. If you would like to learn about any new offerings feel free to join to our investor network and stay updated with what we are working on.