Make Your Multifamily Syndication an Attractive Investment in 2024

A lot of people are a bit on edge about investing in real estate right now. With property values falling in some markets, rents on the decline in a whole slew of areas, and rising operating costs, I get it.

How can you set your multifamily syndication apart as a good investment? 

Current Market Trends

First, it (obviously) needs to be a good investment. Not all investments are, right now, so it’s important to understand the context of where the multifamily sector is at.

After all, if you don’t know the market data, how can you possibly anticipate your investment will perform any differently?

I can’t speak to every single market in this piece — and I won’t try to. My advice to you: Get familiar with multifamily market reports for your location and at the national level.

My go-to multifamily national report is Yardi Matrix’s monthly updates. 

Disclaimer: I worked for Yardi Matrix until 2021, and I actually wrote my fair share of these same reports. But that just means I understand why these are such valuable reports.

There are a few data points you really ought to be looking for to understand your market.

First, check out historical rent growth. A lot of reports try to project future rent growth, but I wouldn’t put much stock in a multifamily analyst’s crystal ball. They’re wrong just as often as they’re right.

Second, look at occupancy for your market and how it’s trending. The more empty units your property potentially has, the less revenue it’ll generate. Vacancy costs are significant, and you’ll have to budget for them regardless.

Finally, I always find it important to check out your area’s construction pipeline — and understand how it could impact your investment. A lot of units underway isn’t always the worst thing, depending on your property (and its location and quality). 

For example, if you’re looking to reposition a Class C asset, I wouldn’t be too concerned about a lot of Class A deliveries in the near future. You’re not competing for the same renters.

Clearly Show How You’ll Enhance the Resident Experience

It’s not enough to buy a property and sit on it, even in times of growth.

Show any prospective investors exactly how you will add value to this asset. Talk is cheap, though: Highlight how you’ve done this with previous investments…and what happened as a result.

If you plan to add amenities to a property, make a case for them, both for the community and the asset’s financials.

Which sounds more compelling to you?

Option 1: “We will add a fitness center which will enable us to increase rents in the near term.”

Option 2: “We will repurpose 2,000 square feet of common area into a modern fitness center. There is no gym or fitness center currently within half a mile of the property, and residents were surveyed and indicated a strong preference for an on-site center. The costs of the construction, which will be spread out over four months, will be fully recovered by the end of year 2. We project rent growth of 3.7% above market-influenced growth based on experience with four similar repositionings we’ve conducted in the past two years.”

Less isn’t always more. Be descriptive, clear, and data bound when you can.

Also speak to renewal rates. It’s something more investors than ever before are paying attention to, as vacancy rates spike across the country. Your experience in reducing turnover can be a huge asset here. Still, be conservative with your projections.

Operational Efficiency

Another big one is how you’re going to keep the property’s operations streamlined. It’s easy enough to come up with ideas for improving an asset, but you need to be careful not to balloon your costs at the same time.

And even if you’re not doing much improvement, costs are still ballooning anyway. Consider the meteoric rise of insurance premiums in the past few years (in some parts of the country, by more than 100%!) and it makes sense to run a very tight ship.

So show exactly how you’ll manage costs like maintenance, insurance, property management, and others. And point to any proptech solutions you’ll be implementing, as well as the expected results. Again, be conservative and not make any wild claims that may not bear out.

Market Differentiation

There are a lot of investment opportunities out there, and after a while, many of them seem pretty cookie cutter. So how will you make yours stand out?

You don’t have to stand out on everything, but you’ll find it much easier to raise capital if you separate yourself from the crowd in a few areas. This ideally should be done in the planning stages to be meaningful. 

Also, you can’t just stand out for the sake of investors, but residents as well. Why would a renter pick this property over the one down the road? Usually this needs to go deeper than just a few extra amenities.

In 2024, for example, one way many syndicators have set their projects apart is through the incorporation of sustainable features. Whether it’s adding EV chargers or solar panels (why not both?), this can be a good way to separate yourself from properties renovated even a couple years ago.

Investor Communication

Many syndicators do a webinar, send out an offering memorandum PDF with the key financials and a project summary, and that’s about it.

That’s not enough anymore.

Communicating about the investment to perspectives is an excellent way to showcase how you’ll work with investors.

Sure, it’s “passive” investing, and many are happy to just let their cash go to work — but many want to get updates, not to mention timely K-1s.

Make it a point to have a direct conversation with every investor looking at your deal. If you’re running a larger operation with many potential investors, consider hiring someone to handle this for you.

Conclusion

Nothing I’ve written is required as part of running your next syndication. (Well, except the K-1 side of things. And we can help with that!)

Required or not, it can’t hurt to increase your surface area for success. And remember: The better prepared you are on this deal, the higher the likelihood you’ll find investors who stick with you for many more to come.