Invest in Apartment Buildings as a Private Equity Partner: The Vehicle of Choice
Large to mid sized multifamily investments are traditionally owned by only the largest institutional investors such as mutual funds, insurance companies, or large pension plans for their stability and investment power.
Being a private equity investor allows the qualified indivudual investor the opportunity to buy a passive ownership stake and participate in these same type of large revenue generating investments. Private Equity Investments or “group investments” allow the individual investor the ability to experience the same buying power, leverage, and enjoy the many additional benefits the large institutional investors enjoy along side other like-minded and sophisticated investor partners.
As a partial owner, the private equity investment allows the investor to participate in all the benefits of owning apartment communities without the day-to-day management obligations. These benefits include monthly cash-flow, potential income sheltering through depreciation, tax benefits, leverage, principal pay-down, and appreciation.
Private Equity Investments bring the same power, benefits, and leverage the large institutional investor deploy to the individual investor.
Real Estate provides predictable revenue
A property’s revenue is derived from rents paid for the use of leased properties. A strong property management team will focus on attracting only the most suitable occupants to the properties and bind them to carefully structured lease agreements, contracted for long periods of time with staggered renewal dates. These practices in turn generate consistent cash flows for our Investor Partners.
The ability to have control and force capital appreciation
By making improvements, the property values are increased through the repositioning process. By increasing rents or occupancy rates, higher levels of stable monthly distributions are generated. When properties are refinanced or sold, the proceeds can be used to acquire additional properties to further increase value and wealth preservation.
Real estate will provide steady cash flow
One of the greatest advantages of real estate investments is they generate steady, strong, partly tax-sheltered cash flow and provide distributions. With the other advantages real estate has to offer, few other forms of investments can be bought with the same kind of steady cash flow return combined with the appreciation of the investment over time.
Distributions to Investor Partners are treated more favorably than other investments from a tax perspective because a significant portion of distributions are not considered income. This is due to the flow through of expenses and depreciation. Furthermore, the capital appreciation is deferred from taxation until the assets are sold.
Impressive Total Returns
A property’s combination of stable revenue (from rents), capital gains (resulting from increased property values), principal paydown (from renters paying down loans) and tax savings (thanks to the investment’s special flow-through structure) provide returns that can be quite impressive given the state of the stock market and returns that the backs are currently offering.
Real estate is a great Hedge Against Inflation
Not withstanding cyclical variations due to supply and demand imbalances, in the long run, rents, values, and the replacement cost of real estate improvements rise in line with inflation. Multifamily assets also tend to have shorter term leases that can adjust to current market conditions much faster than other investments. This makes real estate investing a particularly effective hedge against inflation, and should be a key component in any well-diversified investment portfolio.
Ownership of Real Estate
Investors desiring a regular income, with an optimal balance between risk and reward, generally will prefer real estate consisting of land, buildings and fixed equipment. Moreover, the supply of land is limited and of fairly stable (though generally increasing) value. Real estate, therefore, is widely considered the best ultimate security and a solid basis for building lasting wealth.
Call us at 510-863-1447 If you have additional questions about Apartment buildings.
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