If real estate investors are so successful, why do they raise and use outside money for new projects and redevelopments?
This is a great question — one which every individual investor, small group and family office should be asking. Certainly, if developers, fund managers, and multifamily syndicators are so good at what they do, and should be making so much money, why bring in capital from others?
Everyone’s Raising Money
All the wealthy individuals and companies seem to be raising money today. What’s up with that?
Warren Buffett is doing partnerships; the biggest fund managers are going on personal real estate shopping sprees while raising funds for commercial property deals. Amazon is taking the city and state money for a new HQ2. Kushner Co. is looking to Fannie Mae for a $1B plus loan for a new suburban apartment complex. Even venture capital firms rely on individual investors.
Why do they do it, even if some of these executives could afford any building they wanted, for cash?
The main reason is diversification. It is one of the most basic financial and investment principles. By just putting some of their own money into each of these deals, they get to accumulate wealth and income faster, while dramatically lowering risk across more assets. Good multifamily syndication opportunities also empower individual investors to do this with their portfolios.
Giving Others the Opportunity to Participate
Whether it is a REIT, syndication or partnership, some organizers genuinely want to give others the ability to participate in better investment opportunities. If you’re on to a good thing, you want to share that with others.
Access to Bigger & More Profitable Deals
Bigger deals can be more profitable. They offer a lot of efficiencies of scale. They have less competition from amateurs who are notorious for overbidding on single-family homes and small apartments. Though even if you’ve got a couple million in extra cash in your bank account, you are wise to limit your exposure in one asset.
Check out one of the recent assets that our investors participated in at this Atlanta apartment complex.
ABOUT THE AUTHOR
Bill Zahller is the President of Park Capital Properties and resides in Asheville, NC. As a Multifamily Real Estate Investor and Syndicator, he founded Park Capital Properties in 2016 after 14 years involvement in real estate investment. He works with accredited investors and professionals who are interested in real estate investment, diversification, and financial freedom.
Bill has been flying since high school. His father was a Naval Aviator and Captain for TWA. Bill has been flying professionally for over 25 years, 23 of those at his current company. He has accumulated over 12,000 hours and 7 Jet type ratings. He has also held Instructor, IOE Instructor and NRFO pilot positions with a large fractional flight company. He is currently flying the Global 6000 in a long range mission capacity. This keeps it interesting – one week its Beijing or Sydney; the next Rio or Rome.
Bill is also the founder of the Asheville Multifamily Investor Club. Visit www.ParkCapitalProperties.com for more information.