Edited in 2021

Multifamily real estate investments, in our opinion, is the best vehicle for wealth building. Here are 7 ways multifamily rentals help you build legacy wealth.

1. Strong ROI – The most important metric for measuring returns for investors (before investor capital contributions are returned on a refinance) is the Cash On Cash (COC) Return.
The COC is the annualized return that you, the investor, get in return for your total cash contributions in the deal. Our multifamily real estate syndication can yield 6% to 10% COC per year, and sometimes higher!
Depending on the deal, we offer preferred returns, which is part of the aforementioned COC return. For example, if the preferred return is 8%, that means that the preferred return investor would receive there 8% from the free cash flow distribution FIRST, before paying any other general partners.

2. Cash Flow – NuRoots Investment Group focuses on multifamily real estate syndication. We purchase residential complexes where we collect rents every month.
Rents collected from the tenants minus the operating expenses incurred gives us the Net Operating Income (NOI). The only expense not included in the NOI is the cost-to-service the debt. When you subtract this number from the NOI, you get the total cash flow available for distribution. This is shared with our investors on monthly or quarterly basis depending on the deal’s specifics.

3. Equity Growth – Equity is simply the value of the property minus how much debt is owed on the property.
Although the main goal for our multifamily real estate syndications is to achieve strong cash flow through the term of owning the deal, building equity is a strong component of our investment strategy.
Market appreciation – This is achieved through buying in the right cycle of the market, and the value of the building increases based off of the market and economic drivers. The property has an NOI of $235,000 and the market (CAP) rate for the deals sub-market on purchase was a 9% CAP. Giving the property a value $2,600,000 on purchase (NOI/Market CAP=Value). Additionally, the borrowed capital from the lender for the deal was $1,425,000. Let’s say in one year the deals sub-market CAP changed from a 9% CAP to a 8% CAP, this brings the value of the property to $2,900,000 ($235,000/0.8=New Value) We now have a total of $1,475,000 of equity in the property (not including the principal pay down of $20,000 towards the loan, which would also increase equity).
Forced Appreciation – The value of multifamily properties are based on the NOI, not nearby property comparables. When you increase the NOI, you increase the value of the property. We achieve this by “Forced Appreciation”, buying properties where we can add value, bring the current rents up to market rents, adding other income drivers, leaning out the operating expenses and much more.
Let’s say we buy a 50 unit property for $2,000,000 with a current NOI of $120,000. The NOI would then reflect a 6% capitalization rate (CAP) (NOI/Value=CAP). The previous owner was collecting below market rents and also had some vacant units. We now add $90,000 in improvements to the property, so units reflect the comparable surrounding apartments that are achieving market rents. This allows us to increase rents by $50/unit, which adds $30,000 in gross income per year. This now brings the properties NOI to $150,000 ($30,000+$120,000=Total NOI). The new value of the property is $2,500,000 (NOI/0.6%=Value). By adding $90,000 in improvements, it instantly added $500,000 of equity into the property. Additionally, more free cash flow is now available for distributions to investors!
Amortization – Equity to our investors is increased when we pay down the debt on the mortgage principle with the NOI. This equity can be shared with the investors with a refinance or sale of the property. Let’s say the property is worth $2,900,000 on purchase and we purchased it for $1,900,000. The borrowed capital from the lender for the deal was $1,425,000. In three years, we made a principal pay down of $65,000 towards the $1,425,000 loan, adding a total of $65,000 of equity in the deal. On year three, when we go to refinance the deal, the property is valued at $3,100,000. We now have a total of $1,740,000 worth of equity in the property

4. Passive Income – A real estate syndication is a 100% passive investment for the investor. When you invest into one of our multifamily properties, NuRoots Investment Group (the syndicator) manages the deal to ensure highlighted returns are met.Once the investors w ire capital contributions into the proposed deal at hand, there is no active contribution required from you as it will be stated in the LLC. investors simply collect returns and we manage all the day-to-day!

5. Capital Preservation – Multifamily real estate is one of the strongest asset classes in capital preservation. Focusing on safe investments, which provides returns on day one on the investors capital contribution is the number one goal. Purchasing stabilized cash flowing properties under market value or value add deals allow us to achieve the above goal.

6. Leverage – Multifamily real estate syndication is true leverage. By borrowing capital to fund a large deal, which typically is anywhere between 60% to 80% of the purchase amount, allows each person involved in the deal to achieve higher annual returns on their invested cash in comparison to funding 100% of the purchase price.
Leverage in real estate allows your money to really go to work for you. The higher leverage you have, the higher cash flow is distributed. Additionally, investors achieve a higher return as the building’s equity appreciates through principal pay down, forced appreciation and market appreciation.

7. Tax Benefits – Ownership in the LLC of the multifamily property allows for investors to partake in tax benefits of owning commercial real estate (e.g., depreciation, cost segregation, deferred taxes while receiving cash distributions, potential of 1031 Exchanging a property into purchasing the next project we partner on in an effort to defer taxes). Generally, the income generated would be tax free from all these tax deductions. This gives us the ability to have larger purchasing power for the next deal.