What is Multifamily Syndication? A Helpful Overview

An Opportunity for Growth

Whether you’re an experienced general partner (GP) that is considering getting into multifamily asset management or are just beginning to explore the opportunities available with multifamily properties, you’ve likely come across the term syndication. Here we’ll explore what multifamily syndication is and how — if this is the route you choose to go — you can manage this dynamic effectively.

In commercial real estate, syndication is when investors pool their capital in order to purchase an asset — in this case, a multifamily property such as an apartment building, townhouses, condos, and other related structures. While syndication is done for other asset types, its advantages for multifamily assets are clear:

• They offer stable cash flow via consistent rental income
• They enable expenses to spread across units, improving profit margins
• Demand for rental units remains high across the country
• Value tends to increase due to rent increases and property improvements

Of course, the capital from those investors, or limited partners (LPs), typically goes toward the equity portion of the overall capital stack, with debt making up the difference (and usually the majority of the funding). How deals are ultimately funded makes a significant impact on your firm’s operations after the sale closes as well. You can learn more about the impact of capital stacks in commercial real estate here.

But when it comes to multifamily syndication, it’s important to be able to manage the syndication process — both early on during the purchase process and post-close, when you and your team will need to be focusing on generating revenue — as efficiently and accurately as possible. Here, we’ll explore the advantage of consolidating as much of the process as possible into a single platform.

• New to multifamily investing? Grab a free copy of our guide with tips from experienced investors and GPs here.

Essentials for Managing Multifamily Asset Syndication Deals

Investor Database Management

Depending on the number of investors involved in your deal, collecting all of their information, keeping it updated, and also simply remembering each investor’s preferences and goals can be overwhelming. With a multifamily syndication deal, every investor plays a meaningful role and deserves your best service. Consolidating all investor information into a single system — particularly one that also supports other CRE functions — ensures you’re able to seamlessly access their information and serve them well.

Investor Communications

Keeping each investor apprised on where a deal stands both early on during the fundraising process and after you’ve closed is critical. No one wants to be left in the dark, so being able to efficiently communicate with investors as time progresses is essential. Consider tools that allow you to communicate with investors on all fronts — whether you’re marketing a new property to prospective investors or are providing an update on revenue. Learn more about the value of communication in investor relations in this overview.

Automated Distributions

As you begin to generate strong revenue with the multifamily asset, you’ll start issuing distributions to investors according to the terms of the deal agreement and structure. Things can get complex here, but whether it’s all pro rata or there’s a more detailed waterfall structure in place, it’s important to get those distributions to investors on time and accurately. If applicable, factoring in GP promote for your firm is also important. Look for solutions that allow you to automate this important process. Dig deeper into the value of automated distributions in commercial real estate deals here.

Performance Reporting

Last but not least, with multifamily syndication deals having multiple investors, it follows that reporting on asset performance could quickly get overwhelming for your team. Consolidating this for your investors in a single platform that enables you to generate reports in a matter of clicks (and personalize them further if desired) will go a long way in helping you build relationships and keep those investors apprised of your progress (and how their own investment is performing).

Experience Multifamily Syndication Success with Covercy

Whether you already have multifamily assets under management or are beginning to explore them for your firm, Covercy offers a complete solution for managing the intricacies of the multifamily syndication process at all stages.

Our platform provides comprehensive solutions ranging from fundraising with capital calls and investment database management to automated distributions and even banking capabilities — plus many more. Learn more about what our platform covers here, and why it matters for both GPs and LPs.

When you’re ready, connect with us for a private demo tailored to the multifamily syndication process.