Benefits of Investing in Apartments during a Recession
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Navigation: Apartment Complex Investing During a Recession, Is it a Good Idea to Own Apartments in the Real Estate Market during a Recession?, Potential Concerns for Your Real Estate Investment during a Recession, What is Real Estate Syndication?, Benefits of a Syndication Deal, Why Investors Choose BAM Capital for Multifamily Real Estate Syndication
Multifamily investing offers a wide range of benefits. Apartment buildings, for example, are able to generate a strong and consistent cash flow. Unlike single family rental assets, apartment complexes can generate income from multiple units, meaning investors do not have to worry about vacancies affecting their cash flow. A well-located and well-maintained property can easily find tenants and maximize its profits. The benefits don’t end there. Residential real estate properties get a lot of leverage plus plenty of tax benefits, making it the ideal investment for high net worth individuals (HNWIs) and accredited investors alike. They can take substantial deductions via mortgage interest and depreciation. Even utility and travel costs can be deducted. However, investors may be concerned about the effects of recession on rental properties. Recession usually has an effect on investments. For example, the stock market is typically affected by recession, during which stock prices often plummet. You may be worried about the same thing happening when you buy a rental property during an economic downturn. A recession is a period of economic decline that usually combines two damaging phenomena: inflation and a slowing economy. This is a regularly occurring economic slowdown that is characterized by a fall in Gross Domestic Product (GDP) for two successive quarters. Whether you have a commercial real estate investment, a residential real estate property, or simply own real estate stocks, you may be wondering how recession may affect your investment. Apartment Complex Investing During a RecessionEven in a recession, not all rental properties are affected the same way. Some are hit harder than others, but the majority of multifamily investors typically fare well during this economic downturn. Luxury apartment investors are the ones that are usually hit harder, for example. [1] During a recession, rents tend to increase so tenants are less drawn towards luxury apartments. Tenants will use less money on housing by going for rental properties with lower rent. During this time, Class B and C buildings have their moment to shine, as fewer tenants go for Class A apartments. Investors who deploy capital during a recession may see greater returns from investing in this asset class. [1] That said, interest rates rise during a recession so multifamily investing returns remain healthy across all asset classes. We can say that apartment complex investing is one of the recession resistant investments HNWIs should look into. Is it a Good Idea to Own Apartments in the Real Estate Market during a Recession?To answer the question: yes, apartments are historically sound regardless of the economic winds and that is because people always need a place to live. [1] In fact, multifamily investors are even at an advantage during an economic downturn because the demand for apartments increases as the economy slows. We can say that there are advantages to multifamily investing even during a recession. Layoffs and inflationary pressures limit people’s disposable income, which means they have to spend wisely on housing. People who would normally look into buying a home would have to continue renting in this economy instead. Even those who own starter homes may have to sell their property and return to renting due to the recession. [2] Recession tends to increase the demand for multifamily rental properties. Apartment buildings therefore serve as a countercyclical hedge during times of economic downturn. They are the opposite of stocks that generally track the economy up and down. Apartment buildings remain strong even while the economy sinks. [2] Potential Concerns for Your Real Estate Investment during a RecessionDespite being somewhat resistant to the effects of recession, there are still certain things investors need to be wary about when it comes to investing in multifamily real estate during a recession. For example, there may be rising interest rates during a recession. This is done by the Federal Reserve to combat rising prices caused by inflation and a stagnating economy. While increased borrowing costs should slow down the economy—and in the process, inflation—it forces mortgage interest rates up instead. [2] Recession may also bring about increased costs of construction. Inflation drives up construction costs, which means multifamily projects will generally become more expensive as these costs pile up. If you are planning on building an apartment complex from scratch, a recession is not the ideal time to do it. [2] What is Real Estate Syndication?One way investors can invest in real estate without worrying too much about recession and construction costs is by participating in real estate syndication. This is a group investment wherein multiple investors pool their resources together in order to buy a real estate property. [3] This deal can be done with almost any type of real estate property, but multifamily syndication is the most popular due to the strong and consistent cash flow created by apartment complexes and condominiums. Thanks to a multifamily syndication deal, investors are able to invest in large real estate properties that they normally wouldn’t invest in on their own. Even if some investors are able to buy a $3 million apartment building on their own, this is not necessarily an investment strategy people want to pursue due to the increased risk. [3] Syndicators arrange the real estate syndication deals, acting as General Partners and locating the real estate investment property for the deal. They will arrange the deal, secure the loan, and locate investors who will participate in the syndication by providing most of the capital needed for it. These are passive investors who will act as Limited Partners and would have no responsibility over the property. As passive investors, they do not have to worry about becoming a landlord or managing a large apartment building. They do not have to collect rent, deal with tenants, handle emergencies, pay for repairs, etc. This is all handled by the syndicator. It is the perfect investment opportunity for anyone who just wants to participate in real estate investing without the hassle of becoming a landlord. [3] Some syndicators hire a property management company to run the apartment complex. Others, such as the vertically-integrated BAM Capital, are able to handle property management themselves. Syndicators make sure that the investment property is in great condition so that tenants are satisfied and the apartment continues to bring in large amounts of cash flow through rental income. Multifamily syndications are legally formed as LLCs (Limited Liability Companies) or LPs (Limited Partnerships). Benefits of a Syndication DealNormally if you purchased an apartment building by yourself, you would have to play the role of landlord and manage the entire property to make sure your investment stays profitable. You will have to develop relationships with your tenants, keeping them happy, handling emergencies around the apartment complex, collecting rent, maintaining the building, and investing in services such as laundry rooms or parking spaces. All of this comes with the headache of dealing with increased construction costs and interest rates due to the recession. With a syndication deal, you don’t have to do any of that. Joining a syndication deal means you can basically sit back, relax, and enjoy the benefits of your investment. You can let the professionals run the apartment for you. [3] Investors can spend more time managing their other investments or running their business while letting the investment property generate income on its own. You can earn a share of the monthly cash flow plus a percentage of the interest once the deal is done and the property is resold. This depends on the syndication’s deal structure. Multifamily syndication is a much less time-consuming investment compared to other investments. Syndication deals also tend to be associated with lowered risk. Since you are pooling money with other investors, you will only be liable for losses that are equivalent to what you invested. Unlike investors who are sole owners of an entire property, you do not have to bear the load of all losses. If you are looking into real estate investments, multifamily syndication should definitely be one of your top choices. Why Investors Choose BAM Capital for Multifamily Real Estate SyndicationAccredited investors who want to invest in real estate without the headache of running an entire apartment complex themselves choose BAM Capital. Multifamily syndication deals are the perfect source of passive income for HNWIs and accredited investors alike. BAM Capital is an Indianapolis-based syndicator that prioritizes Class A, Class A-, and Class B++ multifamily properties in the Midwest. This vertically-integrated company will work with you every step of the way to help you grow your wealth through syndication. [4] A vertically-integrated company is one that has taken direct ownership of the various stages of its production. This means the company no longer has to rely on external suppliers and contractors, streamlining their operations. In the world of real estate investing, this means BAM Capital handles all steps of the investment life cycle, from purchasing to remodeling, to management. BAM Capital operates under The BAM Companies, which also includes BAM Construction and BAM Management. This means BAM Capital doesn’t just set up syndication deals, but they also have their own builders. They can easily implement repairs and renovations to increase property value. [4] Plus, with BAM Management, the company is also able to manage any multifamily property themselves. BAM Capital uses an award-winning multifamily syndication strategy to mitigate risk and create forced appreciation for their investors. This syndicator has unmatched knowledge and local expertise allowing them to find the best multifamily properties for syndication. They will then negotiate the purchasing and financing of the property on your behalf. [4] BAM Capital’s track record speaks for itself. They now have $700 million AUM and 5,000+ units. No investment is without risk. Make sure to consult your investment advisor or speak to a BAM Capital investment team member before making any financial decisions. Accredited investors can work with BAM Capital and start investing today. [4]
BAM Multifamily Growth & Income Fund IIIBAM Capital created this fund in order to yield consistent and reliable cash flow, long-term appreciation, and accelerated tax benefits. The fund aligns with BAM Capital’s demonstrated track record of successful multifamily investing by continuing to implement our signature investment thesis, now in fund format. The fund aims for greater overall returns and lower risk through a multi-asset diversification strategy.
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The contents on this site are for informational and entertainment purposes only and do not constitute financial, investment, or legal advice. BAM Capital cannot guarantee that the information shared on this post or page is appropriate for you and your financial situation. By using this site, you agree to hold BAM Capital and any and all entities related to the writing & publishing including BAM Capital’s parent company harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information found on this site. Always consult your investment advisor, CPA, and other professionals before making an investment. BAM Capital is excited to help you grow your investment assets. Please contact us to see how we can help you.
The post Benefits of Investing in Apartments during a Recession appeared first on BAM Capital. Via https://capital.thebamcompanies.com/2022/12/benefits-investing-apartments-recession/
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BAM Capital AcquiresGateway Crossing in Indianapolis, INBAM Capital, a multifamily syndication company based in Indianapolis, IN, is pleased to announce its most recent acquisition for the BAM Multifamily Growth & Income Fund III: Gateway Crossing. Gateway Crossing is a 160-unit institutional quality, garden-style apartment community that was developed in 2004. It is located in Indianapolis, IN, and situated near major economic drivers, outstanding schools, and upscale retail areas. “Gateway Crossing is extremely well located and offers its residents a diverse set of floor plans along with a comprehensive amenity package. This purchase is consistent with BAM Capital’s investment thesis of acquiring assets that provide our investors with stable cash flow, appreciation potential, and capital preservation,” says Tony Landa, Chief Investment Officer. “The combination of job and population growth coupled with low supply has had a positive impact on the apartment fundamentals in the Indianapolis MSA for a long time,” says Ivan Barratt, Founder & CEO. “These strong fundamentals have resulted in substantial dividends to our investors.” Gateway Crossing has all of the attributes that investors covet: exceptional location, strong current and historical occupancy, quality construction, and value-add potential. Because of these factors, BAM Capital is confident that it can deliver a targeted IRR in the range of 15-20% and an equity multiple of 2.0x-2.5x to its investors. The BAM Companies (BAM Capital, BAM Management, BAM Construction) is a vertically integrated real estate organization. Combined, the company has over 180 years of experience among its Executive level staff. With more than $700MM in assets under management, $152.5MM in total distributions to investors to date, and 900+ investors across 40+ states, BAM Capital is a proven sponsor with a solid track record. Gateway Crossing will join Autumn Ridge, Hamilton Station, and The Bristol as part of BAM Multifamily Growth & Income Fund III. Autumn Ridge is located in the Des Moines, IA MSA, while Hamilton Station and The Bristol are both located in the Indianapolis, IN MSA. This offering is open to accredited investors only. To learn more about BAM Capital or this offering, please visit our website. About BAM Multifamily Growth & Income Fund IIIBAM Multifamily Growth & Income Fund III is now accepting capital from accredited investors in anticipation of the next acquisition. The strategy of Fund III is to acquire Class B+ to A- assets that were built after 2000. All assets in this fund have strong, consistent in-place cash flow in markets where there is a supply and demand imbalance along with major economic drivers. By using a fund model, BAM Capital eliminates “single asset risk” through “portfolio” diversification. The expectation that one or two assets may significantly outperform projections further increases the likelihood of a higher overall return to investors. This offering targets an IRR in the range of 15-20% and an equity multiple of 2.0-2.5x over a targeted 3-5 year hold period. About The BAM CompaniesThe BAM Companies specializes in the acquisition and management of multifamily apartment communities. Headquartered in Indianapolis, IN, The BAM Companies consists of BAM Capital, BAM Management, and BAM Construction. This array of real estate services utilizes the knowledge and strengths of its employees and market expertise to achieve maximum benefit for community residents and investors. The BAM Companies currently has over $700 million in assets under management.
The contents on this site are for informational and entertainment purposes only and do not constitute financial, investment, or legal advice. BAM Capital cannot guarantee that the information shared on this post or page is appropriate for you and your financial situation. By using this site, you agree to hold BAM Capital and any and all entities related to the writing & publishing including BAM Capital’s parent company harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information found on this site. Always consult your investment advisor, CPA, and other professionals before making an investment. BAM Capital is excited to help you grow your investment assets. Please contact us to see how we can help you.
The post BAM Capital Acquires Gateway Crossing in Indianapolis, IN appeared first on BAM Capital. Via https://capital.thebamcompanies.com/2022/12/gateway-crossing-acquired/ What is NOI (Net Operating Income) in Real Estate?
Table of Contents
Navigation: What You Need to Learn About NOI in Real Estate, How Do You Calculate Net Operating Income in Real Estate?, Does NOI Mean Profit?, What is a Good NOI in Real Estate?, Is Mortgage Included in NOI?, How Do You Increase Your NOI?, Why Smart Real Estate Investors Choose Apartment Complex Investing, Why the SMARTEST Investors Work with BAM Capital for Multifamily Syndication
Real estate investors are always looking for ways to increase their returns from multifamily investments. In order to do this successfully, however, there are many things you need to understand about real estate investing and the real estate market. Investors need to have a good understanding of certain financial concepts, including Net Operating Income or NOI. For real estate investors, Net Operating Income is an essential calculation. You have to know how to calculate it if you want to make better investment decisions. Understanding NOI will help you make financial decisions quickly and narrow down your options much faster. Here we will talk about NOI calculation and how you can increase your real estate investment property’s NOI. What You Need to Learn About NOI in Real EstateNet Operating Income measures the profitability of an income-producing property before adding in any costs from taxes or financing. It is a mathematical formula that is used to evaluate potential investment properties to see how profitable it is in a single year. [1] This formula is used by real estate experts and investors to quickly assess an investment property’s profitability and revenue after subtracting the necessary operating expenses. NOI considers all the income generated by a property, minus all general expenses. [1] NOI does not calculate income vs. expenses on an investor level, but rather at a property level. Total operating expenses may vary from one person to another, so keep this in mind when looking into different properties. Calculating net operating income is simple: you have to subtract operating expenses from all the revenue that is generated by the property. This simple calculation should give you an idea of whether or not a property is worth owning and maintaining. [2] Aside from rental income, a property may generate income from certain amenities like laundry facilities, parking areas, and even vending machines. Meanwhile, operating expenses include the costs of running and maintaining the building, plus other expenses like legal fees, repair costs, property taxes, janitorial fees, insurance premiums, and utilities. [2] Real estate professionals use NOI to determine the value of their income-producing properties. NOI is also used in the debt coverage ratio (DCR) for financed properties. It can also be used to calculate the net income multiplier, total return on investment, and cash return on investment. It is important to note that NOI is just one method to quickly assess properties so that investors can make better purchasing decisions. You still need to do your due diligence to get a clearer picture on any investment property. How Do You Calculate Net Operating Income in Real Estate?The formula for Net Operating Income is as follows: Net Operating Income = (Gross Operating Income + Other Income) – Operating Expenses. Although the Net Operating Income formula is simple, you need to make sure you include all the right numbers in your calculation to get the proper result. To calculate your NOI correctly, you need to calculate your Gross Operating Income (GOI) first, and this follows the formula of: Gross Operating Income = Potential Rental Income – Vacancy Rates. As demonstrated here, the gross income is not just the property’s value. That is a common misconception. GOI accounts for fluctuations and possibilities in the property’s income. [1] Your potential rental income or PRI refers to how much the property would make if it was 100% leased, 100% of the time. Unfortunately, it is not entirely realistic to expect the property to be 100% leased for an entire year, so you also have to account for vacancy and credit losses. You have to subtract the vacancy and credit losses from your PRI to get an accurate GOI. [1] Since NOI also takes into account other income generated, you have to determine how much money a property makes outside of tenant rents. This will depend on the number of amenities you have that can generate revenue. With that in mind, not all real estate investment properties make additional income. Once you have added your GOI with your other income, you can now subtract your operating expenses. However, operating expenses are not just your maintenance fees. You also need to include insurance and professional help. Here are the operating expenses that you need to include in your calculations: property taxes, insurance, property management fees, maintenance costs, repair costs, accounting and attorney fees, and marketing costs. NOI is usually calculated on an annual basis. Does NOI Mean Profit?NOI refers to the profitability of real estate investment properties. As a before-tax figure, it appears on a property’s income and cash flow statement. This includes principal and interest payments on loans, capital expenditures, amortization, and depreciation. [2] For multifamily investors, NOI is especially important because it helps them compare potential investment opportunities. Investors use capitalization rate or cap rate as one of the primary ways to evaluate properties, and NOI is part of the cap rate calculation formula. Basically, the higher the NOI, the higher the property value in terms of cap rate. [3] What is a Good NOI in Real Estate?Some investors ask: what is a good Net Operating Income percentage? NOI is actually not a percentage, but a number that is calculated based on revenues and expenses of a real estate property. NOI may vary greatly from one real estate property to another so there is no specific value that we can say is the ideal NOI. But generally speaking, the higher this number is, the better. Is Mortgage Included in NOI?As a rule, Net Operating Income does not include numbers that can be written off against taxes and future earnings. Major repairs and other one-time costs are also excluded in the calculation. These numbers are excluded simply because they do not serve the purpose of NOI. The purpose of calculating a property’s NOI is to give investors an idea on its true cash flow. It shows investors whether or not a property is profitable and worth investing in. NOI shows them the overall health of a property, which allows them to make informed investment decisions. Determining true cash flow of a rental property is the main goal of NOI, so we can exclude certain numbers from the calculation, and that includes mortgage payments and other debts. The amount of debt can vary from one investor to another, so there is no need to add it to the NOI calculation. For example, one investor may be able to put 40% down, while another can only put 10%. If this number was included in the calculation, it would significantly affect the NOI. The financials of a specific investor are not necessary to determine the overall health of a real estate property. [1] NOI calculation excludes debt so that properties may be compared on the same merit. If you want to measure a property’s cash flow to determine how much it needs to cover loans, you should calculate its Debt Service Coverage Ratio or DSCR. DSCR takes NOI into consideration. [1] When determining a property’s NOI, you should also exclude income taxes since this is a pre-tax calculation. Other numbers you will have to exclude are depreciation, tenant improvements, and capital expenditures. Depreciation is not considered an actual expense. Investors never pay for depreciation out of pocket. Instead, this is more of an accounting concept. It is only during the sale of a potential property that depreciation becomes “real money”. It’s either that or when you are writing it off on your taxes. [1] Tenant improvements are excluded because they are specific to the tenant instead of the property as a whole. Finally, capital expenditures are excluded because this expense can vary widely from property to property, and year to year. Therefore, no matter how much capital you need for the maintenance of your real estate property, you do not have to include it in an NOI calculation. [1] How Do You Increase Your NOI?For real estate investors who want to increase the NOI of their investment property, there are plenty of ways to do so. The first and most obvious method is to increase the rent for each unit. You may try this upon unit turnover or lease renewal. Most landlords base their rent increases on inflation, making sure they are at least keeping pace with it. [3] Landlords should update their lease agreements to mention that lease renewal rates may change depending on increases in the Consumer Price Index (CPI), which is affected by inflation. The costs of owning and maintaining a multifamily real estate property in an inflationary environment tend to increase. In order to increase NOI, landlords need to account for these increased costs as they adjust their rent. Aside from increasing rent, you may also consider increasing the fees that are charged to the tenants such as credit reporting fees, late fees, pet fees, etc. Another potential source of income for landlords is utility income. Consider individually metering each unit. Doing so will allow you to shift the cost of utilities onto renters. Utility income can be a tremendous source of income for you, which would translate well into your NOI. However, if you take this approach, you may have to lower the base rent since renters are going to pay for their own bills. [3] Adjusting rent and making changes to your utilities are some of the most effective ways to increase your NOI. But you can also add additional income streams by introducing services and amenities. An on-site storage is a good example of this. If the real estate property has some underutilized space, the landlord can add storage closets with locks, which tenants can rent out. Whether it’s a basement or a brand new structure outside of the main apartment building, this could be a good source of additional income. It can be an extension of your business. In any case, it will increase your NOI. If you don’t want to go this route, you can try adding a laundry room. Most landlords provide free in-unit laundry facilities. But adding a coin-operated laundry in a common area allows you to generate some extra income on a regular basis. For real estate properties that already offer in-unit laundry, landlords should consider charging a premium for those units. Collecting parking fees is another good way to increase NOI, especially in dense urban areas with limited parking. You may charge a premium for that parking space, especially if it is covered or underground. In a large apartment complex with plenty of tenants, this could be a strong source of income, especially if some tenants have multiple vehicles. [3] Why Smart Real Estate Investors Choose Apartment Complex InvestingNOI matters to real estate investors because it helps them make investment decisions. Once they own a property, they can make adjustments to increase the NOI of their investments. But why do smart real estate investors go for apartment complexes? Apartment complexes are multifamily real estate properties, meaning they have multiple units that can be rented out. This comes with a number of benefits, which we will discuss below. Thanks to the impressive number of units in an apartment building, investors can expect a strong and stable cash flow. You can rely on its consistency because tenants will provide monthly rent. [4] Tenants usually stick around for years, which means you do not have to worry as much about vacancies. Even if one or two units become vacant every now and then, your cash flow will remain stable because you still earn rental income from the occupied units. If your multifamily investment property is in a good location and offers high quality amenities, you can expect these vacancies to be filled up almost immediately. The best part is that you do not even have to collect rent yourself. Property management is a huge concern for a lot of investors who don’t want to take on the responsibilities of a landlord. That is perfectly understandable. Not many people want to go through the challenges of running a large multifamily property: collecting rent, managing repairs, handling emergencies, and dealing with tenants. Multifamily properties are profitable enough that you can afford to hire a third party property management company to handle this part of the job for you. Multifamily real estate properties also enjoy valuable tax benefits. Property owners and investors alike benefit from the current US tax laws. As an investor in multifamily real estate, you will find many different ways to lessen your tax payments. With lower tax obligations, you can enjoy greater profits. Work with a knowledgeable professional to learn more about your tax benefits as a multifamily real estate owner or investor. [4] As a multifamily real estate investor, you may also discover that investing in these large apartment buildings allows you to create forced appreciation. In a single-family home, appreciation occurs when the market price of other homes in the neighborhood increases. But for apartment complexes, the value is determined by the rental income generated. [4] You don’t have to wait for the neighborhood to keep up with you. You can just introduce new services and amenities to increase your rental fees and force appreciation. Finally, investing in multifamily real estate is a great way to build a large portfolio of lucrative real estate properties. With this type of real estate investing, you can build your portfolio within a relatively short period of time. Just imagine being able to invest in a 50-unit apartment building instead of investing in 50 different single-family properties. The latter is much more time-consuming. Why the SMARTEST Investors Work with BAM Capital for Multifamily SyndicationBecause of all the reasons mentioned above, multifamily real estate investing is already a smart move for a lot of investors. But for accredited investors with the net worth and the annual income to qualify for exclusive investment opportunities, there is an even smarter option that is worth exploring. This is multifamily real estate syndication. A lot of investors do not want to try multifamily real estate investing no matter how lucrative it may be, simply because they know it can be difficult to manage. Not everyone is interested in becoming a landlord. If you don’t have the experience, it could be tricky running something as big as an apartment building with hundreds of tenants. You could hire a property management company and have them run it for you, but this still takes a lot of work. With a multifamily syndication deal, you do not have to worry about any of this at all, because it is a passive investment. In a syndication deal, a syndicator acts as the General Partner and locates the real estate property. They put the deal together, they handle the financing, and then they look for investors who will participate and provide most of the capital needed to acquire the property. A syndication deal therefore involves multiple investors pooling their resources together to obtain a single real estate property. Multifamily real estate syndication is the most popular type of syndication deal due to the benefits we listed above. Aside from the natural benefits of an apartment complex, you also get to enjoy the fact that the syndicator handles property management. Either they will handle the property themselves or hire a third party company. You don’t have to do anything other than provide a portion of the capital. You can then sit back, relax, and focus on other important tasks. Multifamily real estate properties are usually difficult to acquire for lone investors. They are expensive and require a large capital investment. Even for wealthy individuals, this is not usually a good idea. But multifamily syndication allows high net worth individuals (HNWIs) to participate in multifamily real estate investing without actually going through all the work. Real estate syndication solves two of the biggest concerns among real estate investors: the high barrier to entry and the property management. The only thing you should take note of is the fact that your capital will be locked up for a long time if you join a multifamily syndication deal. Deals like this typically last for years, which means your funds will be inaccessible for that period. Syndication deals are often exclusive for accredited investors—people with enough financial sophistication to assess the risks of certain unregistered securities. Accredited investors also have the financial safety net that other investors do not have, thanks to their high net worth and income. Accredited investors tend to be more comfortable with a bit of illiquidity. When it comes to multifamily real estate syndication, BAM Capital is the best company to work with. BAM Capital helps accredited investors participate in apartment complex real estate investing without the headache of becoming a landlord of managing tenants. BAM Capital is an Indianapolis-based syndicator that has a strong Midwest focus. It offers high quality multifamily real estate properties that are Class A, A-, and B++. With its vertical integration, BAM Capital is an expert in the field of real estate investing. It uses an award-winning investment strategy that helps accredited investors grow their wealth through real estate syndication. [5] Known for its consistent track record, BAM Capital mitigates investor risk and creates forced appreciation to boost their ROI. In fact, BAM Capital currently has $700 + million AUM and 5,000 + units. [5] For those who want a safe and passive investment in multifamily real estate, trust BAM Capital. They will negotiate the purchasing and financing of high quality multifamily properties on your behalf. No investment is without risk. Make sure to consult your investment advisor or speak to a BAM Capital investment team member before making any financial decisions. Accredited investors can schedule a call with BAM Capital and invest today.
BAM Multifamily Growth & Income Fund IIIBAM Capital created this fund in order to yield consistent and reliable cash flow, long-term appreciation, and accelerated tax benefits. The fund aligns with BAM Capital’s demonstrated track record of successful multifamily investing by continuing to implement our signature investment thesis, now in fund format. The fund aims for greater overall returns and lower risk through a multi-asset diversification strategy.
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Sources: [1]: https://www.rocketmortgage.com/learn/net-operating-income# [2]: https://www.investopedia.com/terms/n/noi.asp [3]: https://smartland.com/resources/10-ways-to-improve-noi-at-multifamily-apartment-buildings/ [4]: https://highpeakscapital.com/why-you-should-be-investing-in-large-apartments/
The contents on this site are for informational and entertainment purposes only and do not constitute financial, investment, or legal advice. BAM Capital cannot guarantee that the information shared on this post or page is appropriate for you and your financial situation. By using this site, you agree to hold BAM Capital and any and all entities related to the writing & publishing including BAM Capital’s parent company harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information found on this site. Always consult your investment advisor, CPA, and other professionals before making an investment. BAM Capital is excited to help you grow your investment assets. Please contact us to see how we can help you.
The post What is NOI (Net Operating Income) in Real Estate? appeared first on BAM Capital. Via https://capital.thebamcompanies.com/2022/11/what-is-noi/ Cap Rates Compared To Interest RatesHow BAM Capital Creates Positive LeverageInvestors often ask about in-place cap rates on BAM Capital’s acquisitions relative to current interest rates. This relationship tells investors if BAM Capital is creating positive or negative leverage on these investments. While this question is fair, it doesn’t tell the whole story. Cash Flow In Real EstateReal estate is a cash flow business. The trick is to underwrite a property not on in-place cash flow, but on stabilized cash flow. This calculation gives us a stabilized cap/yield, which is the most important metric when evaluating real estate. Not only is this metric important relative to current interest rates, but it gives us the intrinsic value of the property. In-Place Cap Rate & Stabilized Cap/YieldBelow are two scenarios that display the difference between an in-place cap rate and a stabilized cap/yield with the corresponding cash-on-cash yield. Let’s look at the in-place proforma. BAM Capital purchases a property for a 5% cap rate and borrows money from a lender for 5.5%. This relationship represents negative leverage (in-place cap rate < interest rate) as it yields an initial levered cash-on-cash return of 4.25%. Does this initial below average return make the deal bad? The answer is unequivocally no. Now let’s fast forward to the stabilized proforma showing the stabilized cap/yield relative to the interest rate. BAM Capital acquires a property at a 5% cap rate that is underperforming the market (rents below market, occupancy struggles, above market operating expenses, etc.). All other assumptions being equal, BAM Capital executes its business plan and takes net operating income from $5 million to $7.5 million. This equates to a stabilized cap/yield of 7.5% compared to the interest rate of 5.5%. This relationship is called positive leverage (stabilized yield > interest How BAM Capital Creates Investment Opportunities For Real Estate InvestorsThis example clearly illustrates why the stabilized yield is critical to current interest rates. More importantly, the stabilized yield is paramount to the market cap rate, which creates real value for our investors. In the above example, the stabilized yield is 7.5%, and the market cap rate is 5.5%. This 200-basis point spread is all profit. Said another way, BAM Capital acquires a property for $100 million with $5 million in net operating income (5.0% cap rate). BAM Capital increases the net operating income to $7.5 million (7.5% stabilized yield). BAM Capital sells for a 5.5% cap rate on $7.5 million of net operating income ($136 million), which produces a levered equity multiple close to 2.0x. So, while the initial cash-on-cash yield wasn’t appealing, the overall investment delivered healthy returns to the investor. That’s the BAM Capital advantage. Learn why BAM Capital is the #1 multifamily syndication investment company. Author: Tony Landa, Chief Investment Office, The BAM Companies
The contents on this site are for informational and entertainment purposes only and do not constitute financial, investment, or legal advice. BAM Capital cannot guarantee that the information shared on this post or page is appropriate for you and your financial situation. By using this site, you agree to hold BAM Capital and any and all entities related to the writing & publishing including BAM Capital’s parent company harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information found on this site. Always consult your investment advisor, CPA, and other professionals before making an investment. BAM Capital is excited to help you grow your investment assets. Please contact us to see how we can help you.
The post How BAM Capital Creates Positive Leverage appeared first on BAM Capital. Via https://capital.thebamcompanies.com/2022/11/how-bam-capital-creates-positive-leverage/ |
About UsBAM Capital is the best team for private real estate funds and investing in multi family units. BAM Capital leverages local expertise and long-standing relationships with sellers, brokers, and builders to allow for expert knowledge on assets being purchased. Speak to BAM Capital today. Archives
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