Clearly, apartment investing appeals to you. Who could blame you? After all, commercial multifamily real estate has the best long-term Sharpe Ratio (risk-adjusted return) of any other major asset class. Simply put, investing in apartments has historically meant lower risk with higher returns. It’s hard not to like that.
But if you’re going to join the apartment investing universe, you need to make a couple decisions. First, you need to decide if you want to be active or passive. You also need to decide if you want to invest in residential real estate or commercial real estate.
Active investors are typically involved in every aspect of ownership. They manage the property from acquisition to operation all the way through disposition. Most people do not have the time, energy, or expertise to be effective at active ownership. Instead, they hire professionals to do that work for them.
Next, they should decide which type of real estate they want to invest in. Four units or less is the definition of residential real estate. So you could play small ball and buy a duplex or a triplex. People absolutely make money this way, but you must realize that with small properties come small returns. The real wealth in this space comes 30-years down the line when you pay off the mortgage.
Other downsides of residential real estate are lack of professional property management, full recourse loans that encumber your credit and increase your liability, and lack of economies of scale.
Apartment Investing Is Much More Stable in The Commercial Space
To better illustrate the security that comes with economies of scale, let’s look at one vacancy in a 100-unit property versus one vacancy in a duplex. A single vacancy in the larger property translates into a safe and secure 99% occupancy rate. Conversely, one vacancy at a duplex can spell disaster, as you are only 50% occupied.
Due to their small size, residential real estate is inherently more volatile than commercial real estate. It can be hard to sleep at night knowing that you are one vacancy away from negative cash flow.
Consequently, commercial multifamily real estate is much more stable than residential apartment investing. However, the high cost of entry makes them unobtainable for most active investors.
For that reason, most commercial investors choose to invest passively by pooling their money with like-minded investors. This allows them to participate in prime cash flowing properties in stable markets around the country. They do this by purchasing fractional shares of properties offered to them by professional private real estate companies like 37th Parallel Properties.
We frequently get asked how people can gain access to our deal flow and have the opportunity to invest in our projects. We have a simple three-step process to qualify.
Step 1: Determine if you are an Accredited Investor
The SEC regulates our industry. We are mandated to only offer our apartment investments to accredited investors. What is an accredited investor? If you meet any ONE of the criteria below, then you are accredited:
- Have an individual (you) gross income of $200,000 or more a year for the last two years and a reasonable expectation of achieving the same in the current year
- Or have a combined (you and your spouse) gross income of $300,000 a year for the last two years and a reasonable expectation of achieving the same in the current year
- Or have a minimum net worth of $1 million not including the value of your primary residence.
If you don’t meet one of these criteria, then regrettably we cannot show you our offerings. Again, this is not our rule, but something that we must comply with. For those that do qualify, step 2 awaits.
Step 2: Schedule a phone call with our Director of Investor Relations
As long-term holders of apartment investments, we look to partner with our investors. Ideally, we want to build a relationship that lasts many years over multiple profitable investments. We strongly believe that the best way to accomplish this is through excellent operations and transparent communication.
Before you ever have the opportunity to invest, we want to make sure that you understand this asset class and our services. We also want you to have the opportunity to ask us any question you like.
This phone call typically takes just 30 minutes, but we won’t rush it. However long you need to get your questions answered is however long it takes.
If it appears that our apartment investments are a good match for you and your portfolio, then the last step is quick and easy.
Step 3: Complete the Suitability Questionnaire
The suitability questionnaire is on a secure online platform and takes less than five minutes to complete. It helps us stay compliant with the regulatory matrix in our industry.
Once you’ve completed this brief three-step process, then you will have access to our deal flow. This allows you to see our deals and gives you the opportunity to invest.
If you want to see if you qualify, then there is no time like the present.
If you’re accredited and want to schedule a phone call, book some time or email us at [email protected]. If you provide us with your best contact number, your time zone, and a couple of dates and times that work in your schedule to speak then we’ll get it scheduled for you.
Professional apartment investing is what we do and we have a 100% profitable track record. Our qualifying process is brief and we look forward to serving you.