FREQUENTLY ASKED QUESTIONS
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Whether You’re New to Multifamily or Expanding Your Portfolio, These FAQs Will Guide Your Next Step.
From first-time investors to seasoned syndicators, we’ve answered the most common (and critical) questions about apartment investing, deal structure, and Think Multifamily coaching.
What Is Multifamily Investing?
Buying and owning properties with multiple housing units (apartments, duplexes, triplexes, etc.) to generate income through rents and appreciation. Five units and above is considered commercial and opens us a number of additional loan options.
How Does Multifamily Syndication Work?
A group of investors pools money to buy a larger apartment property, typically led by an experienced operator (the Sponsor).
Investors (Limited Partners) contribute capital and receive a share of profits, but are passive and don’t participate in the management of the property.
What Are the Main Benefits of Investing in Multifamily Properties?
🔷 Cash flow
🔷 Tax benefits (depreciation, cost segregation – which is accelerated depreciation)
🔷 Appreciation potential
🔷 Leverage (use of debt to increase returns)
🔷 Scalability vs. single-family
🔷 Multifamily is a needs-based asset → demand is always there
What Is a Syndicator or Sponsor, and What Do They Do?
The lead operator of the deal.
Responsible for finding the property, raising capital, securing financing, managing the property, and executing the business plan.
How Much Money Do I Need to Invest in a Multifamily Syndication?
Typical minimum investment is $50K–$100K, depending on the deal and sponsor.
What Is the Difference Between Active and Passive Investing in Multifamily?
Active: You find, buy, manage, and operate the property yourself.
Passive: You invest capital in a syndication and the sponsor handles operations — you receive distributions.
How Do I Evaluate a Multifamily Investment Opportunity?
Review:
🔷 The track record of the sponsor
🔷The market and location
🔷 The property’s business plan (Value-add? Turnkey?)
🔷 Projected returns vs. risks
🔷 The financials (underwriting assumptions, rent comps, exit options)
What Are the Risks Involved in Multifamily Investing?
🔷 Market risk (rent softening, job losses, inability to evict)
🔷 Execution risk (operator performance)
🔷 Financing risk (interest rates, loan terms)
🔷 Property-specific issues (maintenance, capex surprises)
🔷 Potential for loss of capital
How Are Profits Distributed in a Syndication Deal?
Typically quarterly, if funds are available.
Profits are typically distributed as follow:
🔷 LPs receive a preferred return.
🔷 Remaining profits split between LPs and GP per the waterfall (for example, 70% to LPs and 30% to GPs).
What is a Private Placement Memorandum (PPM)?
The legal document that discloses the deal terms, structure, risks, and rights of investors in a syndication.
All investors must review and sign it before investing.
What Is the Minimum Investment Period or Hold Time?
Typical hold period = 3–7 years. However, this can be less or more.
Investors should plan to keep their money in the deal for this period, as syndications are illiquid.
How Do I Know if a Syndicator Is Reputable?
🔷 Review their track record
🔷 Speak to prior investors
🔷 Ask for references
🔷 Assess their transparency and communication
🔷 Check for alignment of interests (skin in the game)
🔷 If your gut tells you something isn’t right, then don’t invest
What Questions Should I Ask a Syndicator Before Investing?
🔷 What is your track record?
🔷 What is your personal investment in this deal?
🔷 What is your communication process?
🔷 How do you underwrite risk?
🔷 What happens if the deal goes sideways?
What Is a Preferred Return and How Does It Work?
A minimum return paid to LP investors before the GP earns a share of profits.
Example: 8% preferred return → LPs receive 8% annually first, then remaining profits are split.
What Are the Tax Benefits of Multifamily Investing?
🔷 Depreciation reduces taxable income
🔷 Cost segregation accelerates depreciation
🔷 Ability to offset passive income
🔷 Potential for 1031 exchange tax deferral
What Is the Typical Structure of a Multifamily Syndication (GP/LP)?
General Partner (GP) / Sponsor → active role, manages the deal
Limited Partners (LP) / Investors → passive role, provide capital
Profits are shared per the PPM terms (often 70/30 or 80/20 LP/GP after the LPs receive their preferred return)
How Is Property Management Handled in a Syndication?
Either the sponsor has their own property management company or they use a 3rd-party professional property management company to manage day-to-day operations.
Sponsor oversees property management to ensure the business plan is executed. This is referred to as Asset Management.
What Is a Cap Rate and Why Is It Important?
🔷 Cap rate = Net Operating Income ÷ Purchase Price
🔷 Used to value properties and compare opportunities
🔷 Lower cap rates → higher property value (and vice versa)
🔷 Critical for buy/sell/refinance analysis
How Do Interest Rates Affect Multifamily Investments?
🔷 Higher interest rates increase borrowing costs → can reduce cash flow.
🔷 Can also impact cap rates and valuations as mortgage payment will increase for a new Buyer.
🔷 Affects refinancing risk and exit strategy.
You need to stress-test deals for interest rate sensitivity. Long-term, fixed debt reduces the amount of variability and reduces risk.
What Is the Difference Between Value-Add and Turnkey Multifamily Deals?
Value-add: Property has upside potential (renovations, better management, rent growth). Higher risk/higher return.
Turnkey: Property is stabilized and performing well. Lower risk/lower return — more about cash flow.
How Do I Analyze the Financials of a Multifamily Property?
🔷 Review the T12 (Trailing 12-month financials)
🔷 Review the rent roll
🔷 Study underwriting assumptions
🔷 Assess projected cash flow, expenses, and exit
🔷 Look at debt terms and capital stack
What Is the Exit Strategy in a Multifamily Syndication?
Common exit strategies:
🔷 Sell the property.
🔷 Refinance to reduce your interest rate and potentially return some investor capital while keeping ownership.
🔷 1031 exchange into new property.
Can I Invest in Multifamily Syndications With my IRA or 401(k)?
Yes — using a Self-Directed IRA or certain Solo 401(k) plans.
You’ll need a custodian who supports alternative investments.
→ Watch for UBIT/UBTI tax exposure. This is a tax that can exist even for retirement accounts.
What Happens if the Property Underperforms or There's a Downturn?
🔷 Distributions may be paused or reduced.
🔷 Sponsor may adjust the business plan (delay renovations, hold longer, etc.).
🔷 Capital could be at risk.
🔷 Property could be foreclosed on.
How Is the Debt Structured and What Are the Key Loan Terms?
In today’s market, debt is often the biggest risk.
Investors want to know:
🔷 Fixed or floating rate?
🔷 Interest rate caps (provides a hedge against how high your rate can go) in place?
🔷 Number of years?
What Fees Will the Sponsor Collect and How Are They Aligned with Investor Success?
Sophisticated investors don’t mind sponsors getting paid — as long as fees are reasonable and incentives are aligned.
Common fees are below, but not always part of all deals:
🔷 Acquisition fee
🔷 Asset management fee
🔷 Disposition fee
🔷 Refinance fee
🔷 GP promote / split after preferred return
How Do I Start Investing in Real Estate?
Start by getting clear on your investment goals and learning the fundamentals. At Think Multifamily, we guide new investors through a proven 7-step process that includes defining your criteria, building your team, and analyzing deals confidently. Our coaching helps you go from confused to confident with real-world strategies from over $1B in closed transactions.
What Are the First Steps to Buying an Apartment Building?
Begin by defining your market, deal size, and team. You need a strong foundation that includes a property manager, lender, attorney, and a clear buying criteria. Our resources like '7 Critical Steps to Buy Your First Apartment Building' walk you through the exact playbook.
What’s the Difference Between Investing in Single-Family vs. Multifamily Properties?
Multifamily offers economies of scale, better financing options, and professional property management. It’s scalable and resilient, especially in market downturns. One 100-unit deal is far more efficient than owning 100 single-family homes.
What Are the Main Benefits of Investing in Multifamily Properties?
🔷 Cash flow
🔷 Tax benefits (depreciation, cost segregation)
🔷 Appreciation potential
🔷 Leverage (use of debt to increase returns)
🔷 Scalability vs. single-family
🔷 Multifamily is a needs-based asset → demand is always there.
What Is Multifamily Syndication and How Does It Work?
Syndication is a group investment structure where multiple investors pool capital to purchase larger apartment deals. General Partners (GPs) handle acquisition, management, and execution. Limited Partners (LPs) invest passively and earn returns. It’s the fastest way to scale wealth without doing all the heavy lifting.
What Happens if a Multifamily Deal Doesn’t Perform as Expected?
If a deal underperforms, communication is critical. Transparency and proactive management are key. Options may include refinancing, capital calls, restructuring, delaying renovations, or even selling the property. Distributions may be paused or reduced, and in extreme cases, capital could be at risk.
How Do I Legally Raise Money for Multifamily Real Estate Deals?
You must follow SEC regulations. This usually involves creating a PPM, filing Form D, and ensuring investors are accredited or sophisticated depending on the exemption used. Think Multifamily walks you through this step-by-step.
Where Can I Find Investors for My Apartment Deals?
Start with your network. Focus on educating others rather than pitching. We teach our students how to attract capital by building trust, sharing content, and hosting webinars—not begging for money.
What Is a Capital Call and How Does It Work in Syndications?
A capital call is a request for additional funds from investors if the property needs extra cash. While investors can’t be forced to contribute, refusal may result in dilution or deferred returns. The best approach is to avoid capital calls by over-raising and planning conservatively.
What Is a Preferred Return and How Does It Work in a Multifamily Deal?
A preferred return is the first cut of profits (e.g., 8%) that goes to investors before the GP gets paid. It ensures LPs receive a minimum threshold before profit splits kick in.
How Do I Evaluate if a Deal Is a Good Investment?
Review the sponsor’s track record, the market and location, the property’s business plan, projected returns vs. risks, and the underwriting assumptions. Look beyond flashy returns and stress test deals against worst-case scenarios.
What Should Be Included in a Property Management Agreement (PMA)?
Termination clauses, spending thresholds, lease approval rights, and clear reporting expectations are non-negotiable. Use a PMA checklist to protect yourself from common traps.
You can download our free PMA Checklist here.
How Do I Find and Analyze Good Apartment Deals?
Leverage broker relationships, direct-to-seller outreach, and property management insights. Use detailed underwriting tools and vet submarkets for population growth, job diversity, supply, insurance, and landlord-friendly laws.
How Do I Choose the Right Property Management Company?
Vet them thoroughly: number of units managed, experience in your submarket, and how they communicate. A strong PM can make or break your deal.
How Do I Increase the NOI (Net Operating Income) of an Apartment Property?
Strategies include RUBS (utility bill-backs), better lease renewal pricing, reducing delinquency, and increasing occupancy. Even small operational tweaks can boost property value significantly.
What Are the Most Common Mistakes New Apartment Investors Make?
Underestimating CapEx, overpaying based on pro forma, taking on floating rate debt without a cap, poor partner selection, and not raising enough capital.
What Should I Do if My Multifamily Deal Is Losing Money?
Analyze your P&L, negotiate with lenders, cut unnecessary expenses, and consider options like a BOV sale, loan modification, or bringing in new capital. Having a survival plan is essential.
How Do Rising Interest Rates Affect Multifamily Investments?
They increase debt service, reduce cash flow, and lower valuations. Always model interest rate scenarios upfront and prioritize fixed-rate debt when possible.
How Can I Protect My Real Estate Investments During a Market Downturn?
Use fixed debt, raise extra capital, underwrite conservatively, and have multiple exit strategies. Leading with discipline, not emotion, is the key to surviving downturns.
What Is the Impact of Cap Rate Changes on Property Value?
Cap rate expansion decreases property value significantly. Even a 1% cap rate increase can wipe out significant value. Always underwrite assuming higher future cap rates.
What Makes Think Multifamily Different From Other Coaching Programs?
We’re not theory-based. We’re operators with $1B+ in real deals. You get direct access to Mark and Tamiel, plus battle-tested systems, legal templates, and a community of serious investors.
What Kind of Support Does Think Multifamily Offer for New Investors?
We offer group coaching, 1:1 mentorship, deal reviews, legal and financial referrals, underwriting help, and community support. You’re never on your own.
How Do I Apply for Think Multifamily Coaching?
Visit thinkmultifamily.com and click 'Apply for Coaching.' We’ll schedule a discovery call to see if it’s the right fit and help map out your next step in multifamily investing..