Market Appreciation in Multifamily Syndications

Market Appreciation in Multifamily Syndications

Yet another advantage to investing in a multifamily syndication is market appreciation. This is what makes multifamily apartment investing especially powerful. Appreciation, by definition, is the increase in value of an asset over time. It’s like a wave you ride to higher and higher heights of profit.

A multifamily syndication property already experiences appreciation once the property is purchased and your sponsors make improvements upon it. Market appreciation is another step beyond that, when the value of the property increases over time due to surrounding factors in the real estate market.

Market Appreciation and Real Estate

Market Appreciation and Real Estate

Just what are the surrounding factors we are talking about? There are three factors that make for the perfect trifecta of market appreciation:

  1. Relative low cost of living
    Makes an area highly desirable for people to live in.
  2. Laws that are landlord friendly
    This makes it easier for your sponsors to acquire attractive real estate properties and your management team to handle tenants responsibilities.
  3. Increasing job growth
    Tenants need a secure and steady income stream in order to pay their rent. A diversity of employers and increasing growth of jobs is not only appealing for tenants, it is also incredibly important for market appreciation.

It’s best to avoid real estate location “extremes” on either side of the spectrum. San Jose, for example, may have incredible job growth thanks to the intensely diverse types of jobs available, but it also has a very high cost of living and the laws are not as landlord friendly. The market would not appreciate at the same rate as, say, up-and-coming suburbs of Orlando.

On the other hand, investing in an apartment syndication in a one-industry-one-stoplight town isn’t wise either. Though the cost of living is very low and the laws would be landlord friendly, job growth may be close to a standstill if the single industry in the area collapses, and the population growth with it.

As the saying goes, the most important factor in real estate is location, location, location. And that location, when chosen wisely, can bring about significant market appreciation.

Market Appreciation and Tenants

Market Appreciation and Tenants

There will always be a demand for real estate because shelter is a basic human need. Everyone needs a place to live. A multifamily syndication offers tenants a chance to fulfill a very important priority: a roof over their heads.

Out of all the monthly bills an individual has to pay, their rent or mortgage is the most compelling. Statistically, a housing payment is also the largest monthly bill a person pays out.

As the population increases in an area, the demand for multifamily living spaces grows with it. Your investment appreciates as rents rise over time.

Market Appreciation in Action

My friend Mick wanted to know how market appreciation worked before he invested in a multifamily syndication. I drew up this simple scenario for him: along with his minimum investment of $50k, the entire syndication raised $8 million for a multifamily real estate property. After several years, the property appreciates by 30%, thus gaining a profit of $2.4 million.

$8,000,000 × 0.30 appreciation = $2,400,000 profit

This kind of profit and appreciation would be possible for Mick on his own, but by investing in a multifamily syndication, he can receive a share of a much larger profit thanks to the appreciation of the high-value asset.

Riding the Wave of Market Appreciation

Riding the Wave of Market Appreciation

Passively investing in a multifamily syndication means you receive the profits of your investment without having to deal with the day-to-day responsibilities of the property. Your sponsors, especially if they are experienced and highly regarded, should already have a good management team in place.

The cash flow produced by a multifamily syndication produces enough for high-quality professional property management services without significantly cutting down the profits shared with investors.

A real estate investor of a single-family home, by contrast, has to manage the property themselves. On top of maintenance and repairs, they are responsible for finding, screening, collecting rent from, and handling any issues with tenants. The profit of their small portfolio would be significantly cut into if they had to pay for a separate property manager.


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Delphine Nguyen, Investor

Delphine Nguyen is a real estate investor and a licensed real estate broker in Illinois. She learned to be successful from a variety teachers, including her own mistakes. Real estate investing is her passion. Helping others to achieve their goals is another passion that she has. She does what she knows best, therefore, her focus is solely on multifamily and co-living investment types.

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