What is a Real Estate Syndication

What is a Real Estate Syndication?

The concept of a real estate syndication is not difficult to grasp especially if you’ve ever played poker.

In a syndication, you’re throwing money into a “pot” with others with the difference being in poker, you’re trying to win the entire pot.

In a syndication, you’re able to split the pot with the other players (investors) in a deal including the dealer (syndicator).

This “pot” of money is used to purchase property (apartment buildings, hotels, self-storage facilities, etc.) and hold for an extended period of time.

By “joining forces” with other investors, this type of investing becomes a team sport where everyone wins.

Basics of Real Estate Syndication

So when I get the question, “James, how does a real estate syndication work?”, I typically will compare it to traveling on an airplane.

There are several groups of people involved such as:

  • pilots
  • passengers
  • flight attendants
  • mechanics
  • luggage and ground crew

Using this analogy, the deal sponsor of a syndication are the pilots and you and I (passive investors) represent the passengers.

Even though both groups are traveling to the same destination, each have considerably different roles during the process.

If surprises occur such as unexpected weather conditions or engine problems, it’s the pilots who are responsible for the flight.

They’re the ones who will monitor and update the passengers during the flight:

(“Good afternoon, this is your captain speaking. We’ve hit an area of turbulence but should be through it shortly….”).

And it’s the passengers job to sit back and allow the pilots to make the decisions on what’s best to flying the plane.

Make Sense? 

“90% of millionaires become so through owning real estate.” – Andrew Carnegie

Hopefully you now get a gist of what’s involved during this process as real estate syndication deals works much the same way.

There’s several groups of people that all share a vision and want to improve a particular asset such as:

  • Sponsor (general partner)
  • Passive investors (limited partners)
  • Brokers
  • Property management

However, each person’s role within the project is different.

Let’s take a look at the two main groups involved:

#1 General Partner (GPs)

They’re also known as the sponsor group and typically:

  • find the deal(s)
  • get it under contract
  • arrange inspections
  • evaluate the numbers
  • obtain financing
  • keep it leased
  • manage the property

#2 Limited Partner (LPs)

This group is made up of those that choose to invest passively with limited risk.

Remember, they have no active responsibilities in managing the asset.

How can you profit from a Real Estate Syndication?

Now that you understand the basic operation of how a syndication works, let’s discuss how you can profit from investing in this type of deal.

Profit in any type of real estate opportunities, regardless of a syndication or not, comes from:

  • rental income
  • appreciation

Profit is generated when the operating costs of the property are LESS than the rents collected.

This is known as the NOI or net operating income which represents the cash flow distributed to the limited partners via distributions (monthly or quarterly).

Investors will receive an additional benefit as typically a property’s value usually appreciates over time. Because of this, the investors can net higher rents and earn larger profits when the property is sold.

Syndication example

In order to drive this concept home, let’s use an example.

Let’s say that you’ve been researching about the syndication process via blogs and other forums and decide to jump in and invest.

A group buys a 350-unit apartment complex in Charlotte, NC for the purchase price of $50 million.

Everything you need to know is outlined in the Private Placement Memorandum (PPM) which you read BEFORE investing.

You learn that the bank financing the deal requires a 30% down payment ($15M). Of this amount, the sponsors cover $1.5M and then they raise money from limited partners (LPs) for the remaining $13.5 million of the required equity.

A syndication is now formed (Limited Liability Company or LLC) between the general partners and limited partners and the apartment complex is purchased.

The projected hold time for this project was initially set forth at 5 years. During this time period, the business plan including “forced appreciation” as it was a value-add deal.

Improvements to the property were made such as:

  • upgraded fixtures
  • new flooring
  • granite countertops
  • stainless steel appliances
  • new cabinets
  • new signage
  • update fitness center
  • rehab existing pool
  • parking lot upgrades
  • painting (interior and exterior)
  • new landscaping
  • internet and wifi update

During this time period improvements were being made, the rents were gradually raised to the same amounts being charged by other local apartments with the same amenities.

Due to the increased rental income, the syndication sends the passive investors a share of the profits from the rental properties every quarter. (Profit #1 rental income)

After five years, a buyer is found and the complex is sold for $15 million ($65M) over the original sales price.

At this time, the limited partners get back their initial investment plus a share of the $15 million profit from the sale. (Profit #2 appreciation)

Remember, during this five year hold period, all of the passive investors received distributions on a quarterly basis from the profit made with the rental income.

What’s the Investing Process?

The next logical question you’re probably asking yourself is, “How do I invest?”

Here are the steps for getting into the syndication game.

  1. The sponsor sends out a “deal offering” email that an investment is open.
  2. Review the offering memorandum (property description) and make an investment decision.
  3. Submit the amount you want to invest to the sponsor.
  4. The sponsor holds an investor webinar, where you can get more information and ask questions.
  5. The sponsor confirms your spot in the limited partnership and sends you the PPM (private Placement memorandum)
  6. Fund the deal via wire or check.
  7. The sponsor confirms that your funds have been received.
  8. You’ll receive a notification once the deal closes and what to expect next.


Multi-family prices will not come down significantly.

Multi-family prices will not come down significantly

We know that Commercial Real Estate Investments have some of the best advantages for returns when compared with Residential Real Estate. In this new post-COVID higher interest rate market, our strategies for buying apartments is changing. Here is what we see, and what we are doing.

If you think we are on the precipice of another 2008, you are smoking crack. Keep waiting, I’ll keep buying. It makes for good rhetoric, but this is not going to happen.

Here is why;

  1. More demand than supply, this is still increasing in the areas we buy in.
  2. Rents are still going up-they will not fall. Look at the historical MF Rent charts for the last 50 years. Rents don’t do down. Ever.
  3. Increase in rents continue to drive NOI and values.
  4. Sellers have been “price anchored” by 2021. They think their properties are worth a lot, and they won’t take significantly less.
  5. Single Family housing is more expensive now. Rates are making housing MORE unaffordable. We are seeing, and will continue to see, a shift in the total economy. The American dream is dying. The house and white picket fence? Not anymore. Now its the 2 bedroom with a community pool in a pet-friendly complex.

Multifamily prices have come down a bit, this is true, but are a far cry from the bloodbath of 2008.

Our Strategy – Focus on debt, not the purchase price.

This is how you are going to get ahead in this cycle and be looking smart in the next 5-10 years.

Here are the tactics;

1) Lots of great debt was placed over the last 3 years. Take advantage of it. Assumption loans used to be the red-headed stepchild, now they are the prom queen. If you have to pay more to assume a loan of 3.63% with a 7-10 year fixed term, pay it. Run your underwriting taking into account your new debt will now be 5.5%-6.5%, and over 8% for bridge!

2) Get the seller involved. Sellers want a high price, so get them on the equity side of your deal. Offer them a piece of the new deal, or maybe a promissory note, or pref equity. Every dollar they finance to you is a dollar you don’t have to raise, a % of equity not given away, and bump in IRR for your investors.

3) Shy away from the heavy lifts. Cash is king, and they need lots of it. Big remodels don’t work with assumptions typically. Grab the operational play, bump those rents, pay down the loan, and ride the inflation wave.

4) Inflation is your friend, not the enemy. For every dollar your rent rises, your long term fixed debt becomes easier to pay off. In fact, the “powers that be” know this, and because inflation benefits the wealthy land and business owners, it will always just be a political talking point. Remember-they will never stop inflation. Grab as much good debt as you safely can, and manage your costs.

What This Means For You

We have created a system for you to invest directly into cash-flowing, hard assets that don’t require you to manage tenants or deal with any of the headaches that come from owning Single Family Homes. This gives you the freedom to use your time as you wish while we grow your wealth through these amazing assets! 

If you are looking to secure your financial future, we would love to connect with you and explore partnership opportunities! 

To Learn More about the many benefits of investing in Multifamily Apartments, Download our Free Passive Investor Guide today!

You can set up a complimentary discovery call to join our investor network with one of our team members here!


What is Value Add Real Estate Investing and How You Can Make It Work For You

We know that Commercial Real Estate Investments have some of the best advantages for returns when compared with Residential Real Estate. What strategies allow us to achieve great returns for our investors? 

When it comes to Commercial Multifamily real estate investing, there are three main strategies:

#1 – Core Investments

The Core Strategy is for those looking for a conservative return with minimal risk. Regarding multifamily properties, a core real estate example would be Class A properties. These are newer properties in upscale neighborhoods with high quality luxury amenities. Typically, core properties have higher rents with a lower vacancy rate. 

This in turn helps to mitigate risk generating a lower cap rate in exchange for the decreased amount of problems with the property.

#2 – Opportunistic

Unlike the core real estate strategy, using opportunistic strategies are the riskiest of all. These investors are looking for the potential highest returns in “opportunity” which is usually property that is bought low with the hopes of selling high for a quick profit. 

These projects often initially have minimal to no cash flow with a larger potential later once the property has been rehabbed. 

An example of this type of investment in the multifamily space would be new construction of an apartment building. Usually large amounts of capital are needed due to high construction costs which in turn will hopefully attract tenants that can pay an above average rent. 

The key to success in this area is using a highly successful team with experience in:

  • land development
  • repositioning buildings from one use to another
  • ground up developments

#3 – Value-Add Real Estate

Most of the syndication deals we’re invested in reside in the value add class which consist of Class B and Class C property.

Most are familiar with fix and flips as this would be a type of value add in the single-family home space. This is where someone finds and purchases a home that needs some TLC, rehabs it then sells to a new owner for a profit.

So this person is rewarded for taking on a high risk hoping to improve a home to the point where it’s sold to someone at a cost that will at least cover the home’s price and rehab cost.

The value-add component is similar to the fix and flip model when it comes to the multifamily space except on a much larger scale. 

Instead of renovating one unit, we’re talking about multiple units depending on how large the apartment complex is. 

What Are the Risks In Value Add?

As you can imagine, when purchasing a property that needs improving, its condition could be lacking in several areas. 

Depending on how run-down the property is, the amount of construction could be quite high which would significantly add to the risk of the project. Usually the more involved renovations (major overhauls) needed, the higher the risk

Other risks can involve the tenants.

Typically rents can be increased after the rehab has been completed. Occasionally this can cause some to move out and also make it difficult acquiring new tenants which contributes to the overall risk of the project.

Value-Add Examples – Physical Improvements

Value-add real estate is typically a B or C class property that has outdated appliances, peeling paint, distressed landscaping and more. Many times updates need to be made to both the exterior and interior of the buildings.

Here’s a few capital improvements that can be performed.

Interior updates

Common value add interior updates include:

  • upgraded fixtures
  • new flooring/carpet
  • granite countertops
  • stainless steel appliances
  • new cabinets
  • painting units
  • new lighting

Exterior updates

Adding value to the exterior of the buildings along with some of the shared spaces include:

  • new signage
  • update fitness center
  • new pool or rehab existing one
  • parking lot
  • painting 
  • update clubhouse
  • new landscaping
  • covered parking
  • playground update
  • shared spaces (BBQ pit, picnic area, etc.)

3 Reasons Value-Add Investing Can Work For You

#1 Rent bumps

One of the major reasons why a value add play can work has to do with increasing rents.

Many times the property has below average rents which sets it up nicely for the sponsors to justify the increase.  Once they make interior and exterior improvements, the net operating income (NOI) will increase which can greatly increase the building’s value (an example of this is below).

#2 Additional income streams

We all love extra conveniences, right? Your tenants will too when it comes to making their lives easier. And they’ll also be willing to pay more for these such as:

  • covered parking
  • high-speed internet
  • cable/satellite
  • Amazon package lock boxes
  • washer/dryer

#3 Analysis of existing operations

On occasion, the property’s different revenue streams and expenses can be placed in incorrect categories on the profit and loss statement making it tough to find opportunities for value add (poor management).

A good sponsor team will be able to find creative ways to create extra income if some of the expenses found can be passed along to tenants.

Also, the Net Operating Income (NOI) can be increased if some of these expenses can be somehow reduced.


The bottom line is that every commercial real estate strategy has both risks and benefits. Higher risks have the potential to produce higher than average returns, but when making the decision to invest passively, be sure you know the team’s track record and experience with that specific strategy.

What This Means For You

We have created a system for you to invest directly into cash-flowing, hard assets that don’t require you to manage tenants or deal with any of the headaches that come from owning Single Family Homes. This gives you the freedom to use your time as you wish while we grow your wealth through these amazing assets! 

If you are looking to secure your financial future, we would love to connect with you and explore partnership opportunities! 

To Learn More about the many benefits of investing in Multifamily Apartments, Download our Free Passive Investor Guide today!

You can set up a complimentary discovery call to join our investor network with one of our team members here!


What is the Capital Stack?

A Commercial Real Estate Investment’s ‘Capital Stack’ is arguably one of the most important concepts an investor needs to analyze the equity, debt, and risk return profile of a project. Ultimately, as with any investment, commercial real estate comes with some downside risk. Investors who understand the Capital Stack can assess risk and repayment, where they fall in the pecking order of cash flow, and whether or not that investment is worth the assumed risk.

Let’s Dive In!

The Capital Stack is the structure of all capital that is invested into a company. At a high level, this means that the capital stack includes both equity and debt invested. More specifically, though, this means all types of both equity and debt.

  • Tiers of financing sources – such as equity and debt
  • Order in which investors are paid back through income and profit distributions over the entire holding period.
  • Repayment rights in the event of a default

Layers of the Capital Stack

  • Capital Stacks prioritize different capital types by seniority, with the least senior on the top and the most senior on the bottom. Equity positions are registered first, with debt positions below.
  • When it comes to properties that are unable to generate enough cash to pay all investors or lenders, capital listed on the bottom of the stack will be paid first and any leftover cash then flows to the capital that holds the next lowest position.
  • Should issues arise and the property goes into default, claims to assets are processed in order of seniority in the capital stack with the lower placed capital retaining foreclosure rights superior to those higher up in the stack.
  • In most cases, higher risk capital sits at the top of the stack, while lower-risk sit below, and the lowest at the bottom. In a similar vein, higher return potential typically sits at the top of the capital stack, with expected returns that decrease as you go down the stack.

Here is a run-down of primary sources of Capital most commonly seen in the ‘Capital Stack’:

Common Equity

Common equity sits on top of the capital stack and offers the highest potential reward in exchange for the highest level of risk. People who invest in the common equity of a project own a piece of the property and receive a share of the recurring cash flow and percentage of profits when the property is sold. However, funds are distributed to common equity investors only after the debt has been serviced and the investors at the lower levels of the capital stack have been paid.

Preferred Equity

Similar to the way that a first position mortgage has priority over a second position mortgage, preferred equity holders have priority over holders of common equity. Investors with preferred equity have the first right to receive a pro rata share of the monthly cash flow, along with a percentage of the profits when the property is sold, before the common equity holders are paid. Although preferred equity has priority to common equity, the rights of a preferred equity investor are lower than those of the debt holders.

Mezzanine Debt

Mezzanine debt is similar to a second position lender, and is usually unsecured by the real property. The rights of mezzanine debt holders are subordinate to senior debt holders, but hold priority over preferred equity and common equity investors. Because holders of mezzanine debt are not paid until payment has been made to senior debt holders, the interest rate paid to mezzanine debt holders is usually higher than senior debt. Sometimes mezzanine debt holders will also receive a small percentage of the profits when the property is sold, or an interest rate ‘kicker’ if the project performs better than expected.

Senior Debt

Senior debt sits at the bottom of the capital stack and serves as the foundation for financing a real estate investment. Because the real property typically serves as collateral for senior debt holders, investing in senior debt comes with the lowest level of risk. Holders of senior debt receive periodic interest payments before all other investors higher up in the capital stack are paid, and are first in line to have any outstanding debt repaid when the property is sold. Interest rates paid on senior debt are usually lower than rates paid on mezzanine debt, and may be viewed as having bond-like characteristics for investors seeking a truly passive income stream.

We at The Joint Chiefs of Real Estate have created a system for you to invest directly into cash-flowing, hard assets that don’t require you to manage tenants or deal with any of the headaches that come from owning Single Family Homes. This gives you the freedom to use your time as you wish while we grow your wealth through these amazing assets! 

If you are looking to secure your financial future, we would love to connect with you and explore partnership opportunities! 

To Learn More about the many benefits of investing in Multifamily Apartments, Download our Free Passive Investor Guide today!

You can set up a complimentary discovery call with one of our team members here!


Build a Multifamily Real Estate Investment company during a Pandemic!

All of our lives have been forever changed since the COVID-19 Pandemic hit the U.S. in 2020. The economy experienced major shifts that made everyone uncertain about the future that still affect us today. 

Although fear gripped the world, The Joint Chiefs of Real Estate (JCORE Partners) a multifamily real estate investment company, was formed in the midst of this uncertainty. Our goal is to provide opportunities for investors looking to reach a state of financial peace through any economic event while working to make a difference in the lives of military veterans struggling with homelessness and PTSD. 

In this post, I’ll explain more about why these causes are so important and why investing alongside us can not only set a successful course for your financial future, but make a difference in saving the lives of our U.S. Military Veterans!

Our Story of Military Investing

After my wife and I spent several years investing in Single-Family Homes while I was on Active Duty in the Army, we realized that we were limited in Residential Real Estate investing. In 2019, we learned more about the scalability of Commercial Real Estate, specifically Multifamily Apartment Buildings and made the decision to pivot into that industry.

After spending the time, money and energy to receive the right education and mentorship to dive into the industry, I met Myles Spetsios, an Air Force Captain in early 2020. After a meeting over coffee, we discovered we shared the same goals and vision and we each possessed skills that were varied, but complementary. This began the journey to the formation of JCORE, which was completed with the addition of James May, a Marine Corps Veteran and Foreign Service Officer and Tom Groves, a 26-year Navy Veteran.

We faced many challenges during this time, as there was so much uncertainty in the Real Estate Industry due to the pandemic. We were all working remotely from various locations in the country but we molded as a team, sharing a common vision to acquire Apartment Complexes with the partnership of Passive Investors, providing them high yield returns through these tax-advantaged assets. Additionally, we set goals to give back from our own proceeds toward causes directly serving homeless Veterans and those struggling with the effects of Post Traumatic Stress Disorder.

Despite the challenges, we learned many great lessons on how to start a real estate syndication company and we closed on three acquisitions from 2020- 2021 – totaling 250 units! We are working tirelessly to become one of the top real estate syndication companies in the industry, creating wealth for Investors like you.

What This Means For You

We have created a system for you to invest directly into cash-flowing, hard assets that don’t require you to manage tenants or deal with any of the headaches that come from owning Single Family Homes. This gives you the freedom to use your time as you wish while we grow your wealth through these amazing assets! 

If you are looking to secure your financial future, we would love to connect with you and explore partnership opportunities! 

To Learn More about the many benefits of investing in Multifamily Apartments, Download our Free Passive Investor Guide today!

You can set up a complimentary discovery call with one of our team members here!


Active Income vs Passive Income

Why keep working hard, paying the highest amount of taxes possible when you can work smarter?

The goal is to get your passive income to match, at some point in your career, your active income and that’s what we’re going to be talking about today….exactly how to do it.

3 Types of Income

Let’s discuss the basics when it comes to earning money.

There are only three types of income

  1. active (earned) income
  2. passive income
  3. portfolio income

1. Active income

Active or “earned” income is the most familiar to us as it’s what we make while we work at our jobs. It is also the highest taxed of the three income types. Unfortunately, we focus all of our efforts on earning this type of income which causes us to pay the highest amount of tax.

If you earn active income ONLY, you’re trading your time for money.

2. Passive Income

Passive income is income derived from a rental property, limited partnership or other enterprise in which he or she is not actively involved.

Passive income from real estate is not subject to high effective tax rates. Why? It’s typically sheltered by depreciation which results in a lower effective tax rate compared to earned income.

3. Portfolio income

Portfolio income is generated from dividends, interest, and capital gains from selling stocks.

Education Doesn’t Prepare Us

Unfortunately our education system doesn’t prepare us financially. It ONLY focuses on earning active income.

This includes

  • Work
  • Labor
  • Time

They teach us how to work and trade our time for money. Again, this type of income is the MOST highly taxed.

For Example, the Mr Smith gradates with a Bachelor’s Degree and is making $100,000 in their office job.  He’s so excited and tells his friends that he’s making $8333 a month and doesn’t have to live off Ramen noodles anymore.

Little does he know that he’s getting ready to only focus on work that trades his time for money. If they give him $8333 a month, then the government is going to take 24% of that money. Uncle Sam is going to get his share no matter what.

In Mr. Smith’s case, $2000 comes off his $8333 a month leaving him with $6333 a month. Unfortunately, most people don’t even know what their taxes are.

If he was earning $8333 a month in all passive income, only $1250 would be taxed so he’d end up with $7083. Which would you rather have?

Most people have never been taught about active income and taxes. I know I wasn’t

You Still Need Active Income

Now, you can’t just go out and make passive income today. You need the active income first. Also we need workers. People need to work as it gives them a purpose. Even if I had more money than I knew what to do with, you’d still see me working (only difference is work that I’m passionate about not about how much I’m making).

Financial Freedom

I thought the way to get there was hiring a financial advisor but after awhile I learned they were pitching their products and services for their commissions. They did do a good job though of laying out investing advice with regards to retirement plans. Only thing was the financial advisor focused on active income only and gave different scenarios of how compound interest would cause my money to grow after I worked for 30-40 years.

For most of us, this is the only financial advice we know about…work our entire live, invest our money, hopefully have enough saved to retire and never run out.

My financial planner nor anyone else ever mentioned passive income, specifically real estate passive income. If you want to someday experience financial freedom, then you must have passive income coming in.

We call Real Estate Syndication investing mailbox money and a great form of passive income.

I know some of you think the stock market is the way to earn passive income but compared to Real Estate you would be surprised. Read my blog on What’s better the Stock Market or Real Estate? 

Real Estate Investing For Passive Income

Whether you realize it or not, everybody is an investor. People are constantly investing their time and energy and exchanging it for money.

What you have to learn is how to invest your money so that it continues making money so that you don’t have to invest your time for it to grow.

Also there are many friends of mine that I talk to that have cash that they’re sitting on. When I ask them about that, they tell me that it’s for a “rainy day.”

Cash money is going down in value. If you think saving it will get you somewhere, it won’t. Unless you enjoy your money not growing.

Get rid of the money and buy hard assets.


If you want to stop trading your time for money then you’ve got to get out of playing the active game. The active income game that is. I want you to go all in playing the passive game.

Invest in yourself, focus on growing your active income and begin putting money on the side. Once it grows then buy assets that are going to go up in value and start paying you passive money on a routine basis.

Do you know what holds most people back from doing this? FEAR. That’s right, fear. Any book on being successful or any person that’s made it will tell you the same thing.

It starts with a mindset shift. It takes courage to deplete your cash reserves and put it in something such as real estate.

It’s up to you. You’ve got to make a choice.

Do you continue to let your money sit in a bank and die or not?

If you are ready to begin replacing your active income with passive then join JCORE Investor Club.

It’s Free!!!


10 Reasons to Invest in Multifamily


1. Attractive, Risk-Adjusted Returns and Relatively Low Volatility

Multifamily is less impacted by cyclical downturns than  other property types. It was the first sector to recover from the 2008 recession and has achieved superior returns through the recovery and expansion phases. The 2010-2016 average return was 12.1%, based on data from the National Council of Real Estate Investment Fiduciaries (NCREIF). In 2016 and 2017, the annual investment returns reflect the maturity of the sector, yet the income components remain healthy at 4.5%.


Over the past 25 years, multifamily investment has had the highest average returns of any commercial real estate asset class. The 9.8% average annual return is slightly ahead of industrial, and more than 100 basis points greater than office.

Multifamily can be considered a “defensive play”. Using standard deviation as a measure of volatility over the 25-year period, retail and multifamily had the lowest levels of volatility in return performance.

Demand for multifamily housing has been robust in the past several years. From mid-2012 through Q2 2017, net absorption—the measure of demand—totaled 948,445 units or about 189,689 per year (based on the 62 major markets tracked by CBRE Econometric Advisors). This total represents a healthy 7.3% increase to total multifamily demand over the five-year period. The high level of demand is due to a combination of cyclical and secular trends.

The U.S. has a relatively landlord-friendly regulatory environment. While many governmental regulations exist, especially at the local and state level that protect apartment renters’ health, safety and tenure rights, most multifamily properties are owned and operated without restrictions on rents. There are some exceptions, including metros with rent control (principally city laws limiting rent increases). New York City is one of these metros, and the laws can be complicated. In cities where there are no rent controls, market dynamics and operator skill dictate rents.

With respect to “social” housing, the U.S. has a lower level of subsidized/low-income inventory than many other countries. These properties require additional expertise on the regulatory environment, but represent only a small portion of the total inventory (estimated 5% to 10%).

Transparency in the commercial real estate industry, including multifamily, has been rising steadily over the past few decades, and the U.S. has one of the more transparent markets in the world. This transparency allows investors to understand pricing, market conditions, development activity, property ownership trends and other key elements of the industry with relative ease.

Many professional associations, such as the NMHC and National Apartment Association (NAA), regularly host conferences and events with experts discussing key trends  and risks in the industry. Industry groups with a broader spectrum, such as the Urban Land Institute, Pension Real Estate Association and Mortgage Bankers Association (MBA), also host educational and networking events, publish news briefs and trends reports, produce podcasts and webinars, and speak with media.

Public information sources such as the U.S Census Bureau and local and state governmental agencies regularly produce housing, demographic and socio-economic  statistics that provide insight into demand drivers. CBRE is the world’s largest commercial real estate services and  investment firm and provides research and data analysis on multifamily trends, property types, specific properties, market statistics, sales transactions and more.


U.S. multifamily assets have a high degree of liquidity (generally defined as the ability to sell or finance assets at the seller’s chosen timing). While there is no good single measure of liquidity, investment volumes provide some sense of liquidity in the marketplace.

The multifamily sector represented more than $1 trillion or 27% of all commercial real estate sales based on the dollar value of all sales over the past 16 years. Over the recovery and expansion years of the current real estate cycle (2010- 2016), investment in multifamily assets totaled $680 billion or 29% of all real estate investment, slightly below office at $700 billion. Multifamily also represented a larger market share in this period than in the 2001-2009 period where the sector attracted 24% of all investment.

One of the principal factors behind the multifamily sector’s high degree of liquidity is the large and diverse pool of investors. Not only is this broad-based capital attracted to primary markets, it is also interested in secondary and tertiary markets. For example, in 2016, the top-10 metropolitan areas for multifamily investment were Dallas/ Ft. Worth, Atlanta, Denver, Miami, Seattle, Phoenix, New York, Los Angeles, San Francisco and Washington, D.C. Another way to consider liquidity is to review the ranges of capitalization rates. Lower and less volatile cap rates suggest greater liquidity, as does a smaller cap rate range between the peaks and troughs of the cycles. From 2004 through Q2 2017, cap rates for multifamily acquisitions averaged 6.3%—nearly a point lower than the  office-industrial-retail average, according to RCA. Cap rates can vary significantly by asset class.


Loan terms, leverage and pricing are more favorable for multifamily than other property types. The availability of  debt capital is important for investment in any commercial  real estate sector. Leverage is used for most transactions, with acquisition financing usually in the 50%-to-75% loan- to-value (LTV) range.

The largest sources of capital for financing acquisitions of  all property types in the U.S. are banks, life insurance companies and CMBS or conduit lenders. The multifamily  sector also benefits from U.S. government-backed lending programs not available for other property sectors.  specifically, Fannie Mae, Freddie Mac and the Federal Housing Administration are major sources of debt capital for existing assets. Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) because they are backed by the U.S. government.

The GSE share of multifamily mortgages has risen  dramatically over the past two decades, and the availability of capital from Fannie Mae and Freddie Mac provides a unique financing advantage. These capital sources increase investment and financing liquidity—important during economic downturns—and help the multifamily sector sustain premium pricing.

Multifamily’s strong market performance, active investment arena and the availability of agency GSE for financing acquisitions and refinancing assets (during both favorable and unfavorable phases of the market) have contributed to the sector’s ability to obtain more favorable loan pricing and terms than other property types. Current loan underwriting metrics reflect the preferential loan underwriting characteristics that multifamily mortgages received in Q2 2017 compared with other major property types.

Multifamily borrowers have obtained higher LTV ratios and lower debt-service-coverage ratios. The average mortgage rate was lower than all other property types combined by 30 bps. Multifamily’s preferential treatment is not limited to 2017. Historically, multifamily debt capital has been more favorably priced than other commercial property assets.


In commercial real estate, there is always risk that leases will not be renewed or easily back-filled when space is vacated. In addition to revenue loss from vacancies, there are costs to release and physically prepare available space for new tenants. Multifamily shares this risk in the aggregate, but the sector is very different in that each individual lease only represents a very small portion of overall income of the asset.

Because multifamily assets have a large volume of leases, it also means that credit is well diversified across many leases and lease holders. Diversified credit mitigates risk and gives the sector a distinct advantage over office, industrial and retail assets, each with much smaller numbers of tenants.


Short-term leases—typically one year vs. five or more years for office, industrial and retail—means that leasing activity is a constant part of multifamily operations. Short-term leases and the steady leasing/renewal activity provide a financial cushion for operations which generally results in higher occupancy. In other sectors, the loss of an individual tenant can seriously disrupt cash flow and create more risk for owners.
The short-term lease structure, relative to other property types, provides an advantage with respect to both market conditions and inflation. In periods of high rent growth, the short-term leases provide owners the ability to adjust rents upward quickly. More importantly, if the U.S. moves into a period of higher inflation, short-term leases provide  owners with the ability to make upward adjustments to  over the increased costs of operations.


Multifamily investments tend to provide elevated net cashflow. While multifamily properties require ongoing maintenance and, occasionally, major capital improvements, the amount of capital expenditures (“cap ex”) needed to maintain them is typically lower than the cap ex investment required for other commercial real estate assets.

Similarly, apartment unit turnover requires only minimal investment in contrast to what can be unpredictable and significant tenant improvement expenses needed to attract and retain office, industrial or retail tenants. Annual unit turnover costs are predictable within a tight range and do not result in dramatic swings in cash flows for multifamily owners and investors.


In the U.S., it is common to outsource property management and leasing for all types of commercial real estate, including multifamily assets. Management and leasing are almost always handled by the same organization in the multifamily sector.

The NMHC reported that the 50 largest multifamily management companies in the U.S. managed 3.2 million units. Many management companies also own assets, and these units are included in the count. The largest 50 firms each managed at least 30,000 units; the top five are each responsible for more than 100,000 units. Additionally, many of the larger firms have a broad geographic coverage and operate in all or most major metropolitan areas across the U.S.

Revenue management systems are used by nearly all major management companies. These sophisticated software programs are like those used in the airline and travel industries and help determine optimal rent pricing based on market conditions, property occupancy, availability of units by size and other market and property-level criteria. Revenue management systems greatly assist in obtaining the best pricing for new leases and renewals, enhancing revenue for the owner.


What is U.S. Multifamily?

Multifamily housing is a type of residential structure with more than one dwelling residence in the same building.



CORE: Stabilized real estate. Typically new assets in top quality locations. Tend to be the lowest yielding, institutional quality assets

CORE PLUS: Similar to core, but with a small value add component and/or less favorable location to the investment. Should trade with a slightly higher yield.

VALUE ADD: Most tend to be older assets requiring varying degrees of renovation, whether it be repairing deferred maintenance or upgrading the interiors to take advantage of raising rents, or mis-managed assets requiring repositioning.

OPPORTUNISTIC: Can be a more comprehensive value add with significant asset repositioning and higher risk. Can be new construction or redevelopment.

CLASS A: Generally a core asset. Newly constructed or fully renovated, which is well-located with high-end finishes and fixtures, and full spectrum of amenities.

CLASS B: Positioned somewhat lower than Class A. Potentially a combination of any of the following factors: age, inferior location, limited amenities, deferred maintenance, basic fixtures and finishes. Generally a value add strategy of varying degree.

CLASS C: Inferior age and/or location with original/ outdated/low-end finishes and fixtures, and possible deferred maintenance and/or substandard management, possible value add or an opportunistic strategy.

Multifamily housing is a common form of housing in the U.S., especially in urban areas, with most of these assets renter-occupied. The multifamily sector includes 14.5 million units across the 62 largest metro markets in the U.S. (population > 1 million).

The portion of the multifamily sector that is of most interest to domestic and international investors is professionally managed rental communities with at least 150 units. The National Multifamily Housing Council (NMHC) estimates that the total value of U.S. multifamily rental properties is more than $3.3 trillion.

Real Capital Analytics (RCA) divides commercial real estate owners into four major groups: institutional, public companies (predominantly publicly traded REITs), private buyers and international (all types of companies).


Private buyers own 68% of the multifamily market (based on value). These buyers include entities of all sizes, businesses and domestic and international capital partners, and high net-worth firms and developers, primarily focused on individual metros or regions within the U.S.

Institutional ownership of multifamily assets has been rising over the past few decades, and this trend is expected to continue. For example, 25 years ago, multifamily assets represented only 11% of the NCREIF Property Index; retail, office and industrial all had substantially higher market shares. Today the multifamily sector represents 24% of the total and is second only to office for total market value.
Institutional owners include investment managers, pension funds, equity funds, insurance companies and sovereign wealth funds (SWFs). The majority of multifamily assets in the U.S. are owned by domestic privately held companies. Currently only about 4% of multifamily holdings are owned by non-U.S. companies.

In the past few years, direct investment by offshore investors of all types (from large SWFs to high net-worth individuals) has averaged approximately 6% of the total. International investors are very active in the sector indirectly through investment funds, REIT stock purchases and equity investment in companies. **According to recent study by NMHC and MBA

If you would like to learn more about Multifamily Real Estate and how to invest, please email me directly at James@jcoreinvestments.com


Multifamily Market is on fire!!!

We were outbid again on a phenomenal asset in the Dallas Fort Worth (DFW) Area. It fits perfectly into our wheelhouse on every angle so we were prepared to push hard to get it.


Our initial underwriting put us at $12MM – in line with the guidance we were receiving.  After some further research, we felt comfortable pushing to $12.2MM, maybe even $12.3MM if we had to.  Not bad to have a few $100K to play with if need be.  Our lender even mentioned we could still get 70% LTV at $12.5MM.  While our returns began to take a hit at that point, it settled out in the 8% COC and 13% IRR.  While that may seem a little low, you have to remember that we’re talking a home run asset in a home run market so you’re going to have to give a little with the expectation that the team and the market will allow you to outperform in the long run.  Long story short the word on the street says this deal went north of $15MM before the dust settled.  WOW!

With yet another crazy price in the books, we went to go back to double check our data.  Are we being too conservative, are we missing opportunities with too much of a rearview mirror?  We don’t think so.  We think our pricing was spot on and takes into account the upside in the market.  On the flip side, I also don’t think that 4-5% returns are market either (which is what the deal would have penciled at $15MM).

We’ve been tracking the market pretty closely the past few months given all the money that’s flooded into our space and have made a couple interesting observations.

First, beginning in March of this year, rental rates literally took off on a tear.  We’ve been seeing healthy rental rate increases across the board for the past decade, but something happened in March to really amp that trajectory significantly.  Traditionally leasing season gets underway in a serious manner around that time for southern states, but usually doesn’t get it’s stride until May or June up north.  However, this trajectory was pretty consistent across all of our markets regardless of geographic location – and it’s not a small deviation, it’s massive!

Second, the spreads and rates for debt have gone to yet another record low level.  Bridge debt, the more risky debt for value-add deals, which even a month ago was 4.5%, is now in the low 3% range.  Lenders are practically climbing over themselves to sign up multifamily debt.  While occupancy, rental rates, and collections continue to make new highs as the economy improves, we suppose it’s not too hard to understand some of the enthusiasm.  This is interesting, though, considering we’re about to, hopefully, see an expiration to the eviction moratorium and potentially millions of evictions from people who have chosen not to pay rent for the past months (or year).  Maybe the market has already priced in this potential downside?

In the DFW market, the average effective rent growth was 1.9% for the quarter.  Yes, that’s the quarter, not the year.  While Class A and B took the lions share of that rent growth, that’s still an amazing statistic.  Lease concessions drove much of that increase as properties phased out previous leasing concessions that were no longer needed as demand came roaring back.  We’ve seen the same in our properties as rental rates and collections reach all time highs.  With new construction moderated by the inflationary situation for raw materials, this continues to bode well for stabilized assets.

All this to say, it is somewhat understandable why some buyers are throwing caution to the wind just to get their hands on a deal – especially in Dallas.  And while it can be frustrating and the old FOMO (fear of missing out) can set in, we have to remind ourselves that this is a long game and these are times when it’s easy to make mistakes.  We’ll continue to push forward and do the best we can to adjust our expectations (within reason) to the current market conditions, but don’t expect us to throw caution to the wind just to put another notch on the deal belt!

If you would like to learn more about Multifamily Real Estate and how to invest, please email me directly at James@jcoreinvestments.com


Why we like the Texas market

With COVID-19 cases continuing to fall and vaccination rates rising, things are beginning to feel a bit more normal. The economy is growing, and the outlook remains positive as the health crisis abates. Here’s a quick look at current conditions and our latest projections for business activity in Texas.


Texas has recovered more than one million of the nearly 1.5 million jobs lost in March and April of last year due to the pandemic. The state added 13,000 jobs in April (on a seasonally-adjusted basis) as strong gains in a few industry groups, such as leisure and hospitality and professional and business services, were partly offset by losses in construction, manufacturing, mining and logging—which in Texas is essentially oil and gas activity—and several others. The state’s unemployment rate has improved significantly, but is still above the national level. The bottom line is that while we’re moving in the right direction overall, there are still a few bumps in the road.

One issue is worker shortages, which were already a significant problem before the pandemic. Competition for knowledge workers and other skilled occupations is intense, industries such as restaurants and hospitality are having difficulty coaxing employees back, and school and childcare challenges restrain the entry of many (particularly females). Supply chain challenges also remain. The pandemic disrupted the entire global manufacturing and distribution complex, and it is quite a process to restore the relatively smooth functioning that typically supports production processes. This situation results in both cost escalation and bottlenecks that inhibit or even interrupt activity.

Our most recent forecast indicates an estimated 1.6 million net new jobs are projected to be added to the Texas economy by 2025, representing a 2.39% annual rate of growth over the period. This expansion is somewhat front loaded, as the state continues to regain the activity lost during the downturn and returns to long-term patterns. Services industries will drive job gains, with wholesale and retail trade businesses also forecast to see notable hiring. Real gross project is projected to gain $424.4 billion over the next five years, and output in all major industry groups is forecast to expand, with the mining and services segments leading the way. In particular, the energy sector is expected to continue its strong comeback.

I expect Texas to reach pre-pandemic employment levels in the next year or two. The state’s combination of natural resources, a large and growing population, and expansion in emerging industries position it well for expansion. While there are challenges ahead, such as providing the requisite education and training for future jobs and assuring the provision of essential infrastructure, Texas has the potential to remain a growth leader for the foreseeable future. Stay safe.

If you would like to learn more about Multifamily Real Estate and how to invest, please email me directly at James@jcoreinvestments.com


Return on Investments - Multifamily

In the world of real-estate syndicating, there are multiple metrics tossed around to help determine the return on potential investments.  The ones I want to focus on today are the ones we use:

  • Average Cash-on-Cash (CoC) Return
  • Total Return on Investment
  • Average Internal Rate of Return (IRR)


I will briefly mention why we use them, the pros and cons, and what to watch out for.

We will start off with the Average Cash-on-Cash return. 

This is calculated by taking the cash distribution divided by the cash in the deal and averaging that out over each year of the deal.

Example:  You invest $100K, receive an $8K distribution year 1, $9K year 2, and $10K year 3.  Your returns over the years would be 8%, 9%, and 10% respectively and the average Cash on Cash comes in at 9%.  Pretty straightforward especially for deals that do not have any refinance or return of capital events.  Now, if a deal does have a return of capital events then this can get a bit tricky and a bit mis-leading.

Example:  Same scenario as before except at the end of year 3, beginning of year 4 there was a refinance event that returned 75% of your capital back to you.  The return for year 4 was $6K and for year 5 was $8K.  Because of the refinance event, you only have $25K left in the deal yielding a cash-on-cash return of 24% year 4 and 32% year 5, creating an overall average cash-on-cash return of 16.6%.  That’s a pretty great return but it definitely feels skewed a bit.  Any error in the projections (good or bad) could drastically increase or decrease the CoC return after the refinance which doesn’t make this the best metric to use necessarily all the time (i.e. a $2K miss is only a 2% cash-on-cash decrease before the refinance but an 8% decrease after).

So what is ideal and what do you want to see? 

Ideally you want to see a fairly strong cash-on-cash early in the deal as this lowers the overall risk of the investment because unless projections are way off, that cash-on-cash should be more stable.  Note:  A low average cash-on-cash return with a high total return on investment and internal rate of return generally means most of the returns will come from the exit of the investment.  That means there is more risk in the investment as who knows what is going to happen between now and five, seven, even ten years down the road.  A good rule of thumb is you want a good amount of the total return to be from cash on cash as that means the investment has lower overall risk.

The next metric to discuss is the Total Return on Investment. 

This metric is simply telling you how much money you receive back during the life of the investment.  I.e. if you invested $50K and received $100K back your total return on investment would be 100%.  By itself, this metric isn’t very useful as it doesn’t give good insight on the risk of the investment nor what strategy is being used.  Combined with the IRR and CoC it allows you to determine if either of those are misleadingly due to a high return of capital event.  In a “straight” deal with no refinance event this will tell you the total return to expect after the set hold time but it does not account for time in the deal.  In other words, this metric may tell you your money will double but at a glance it won’t tell you if that will happen in 3 years or 10 years.

So what is ideal and what do you want to see? 

Ideally you want to see a fairly strong cash-on-cash early in the deal as this lowers the overall risk of the investment because unless projections are way off, that cash-on-cash should be more stable.  Note:  A low average cash-on-cash return with a high total return on investment and internal rate of return generally means most of the returns will come from the exit of the investment.  That means there is more risk in the investment as who knows what is going to happen between now and five, seven, even ten years down the road.  A good rule of thumb is you want a good amount of the total return to be from cash on cash as that means the investment has lower overall risk.

The next metric to discuss is the Total Return on Investment. 

This metric is simply telling you how much money you receive back during the life of the investment.  I.e. if you invested $50K and received $100K back your total return on investment would be 100%.  By itself, this metric isn’t very useful as it doesn’t give good insight on the risk of the investment nor what strategy is being used.  Combined with the IRR and CoC it allows you to determine if either of those are misleadingly due to a high return of capital event.  In a “straight” deal with no refinance event this will tell you the total return to expect after the set hold time but it does not account for time in the deal.  In other words, this metric may tell you your money will double but at a glance it won’t tell you if that will happen in 3 years or 10 years.

The final metric to discuss and is my personal favorite, the Average Internal Rate of Return. 

The average internal rate of return is shown as the interest yield as a percentage expected from an investment and helps us capture distributions throughout the years as well as the time value of money.  This is good because a distribution in year 1 is worth more than a distribution in year 5 of the same amount (due to the time value of money).  If we factor that into the equation it helps us make good comparisons for various opportunities.  See the examples below:

In these examples you can see that all investments have the same Total Return on Investment as well as Average Cash on Cash Return, however, they each have a different Average IRR.  You can clearly see the benefit to IRR from receiving cash earlier on in a deal vs later.  The sooner you get the money back the sooner you can put it back to work for you.

If you would like to learn more about Multifamily Real Estate and how to invest, please email me directly at James@jcoreinvestments.com


Inflation in Multifamily

For those of you who follows financial or political news, you may have seen a lot of recent chatter about inflation.  Most people view high inflation as a bad thing. Just look how the cost of a cup of coffee has increased over the years. It causes the cost of goods to go up making everyday life more expensive.  But how does it affect investments in apartment complexes?


I personally see inflation as a good thing in our investment space.  The reason for this is the time value of money.  As you may know, money today is worth more than money tomorrow.  This is primarily because of inflation.  If we have 5% inflation in the cost of goods a year from now, you would require $1.05 a year from now to be equal to $1 today. In addition, because we generally go with a fixed interest rate, rising inflation only serves to benefit us.  Imagine a scenario where we are paying interest only on a loan of 3% and there is a 5% year-over-year inflation rate.  We essentially just profited on our loan because we came out ahead on loan rate vs interest rate.  This works because if I borrow a $1 from you today and owe you $1.03 a year from now, however due to inflation that money is worth $1.05 now, we just made $0.02.

Now, realistically that won’t happen because the Fed has indicated if inflation were to begin to take off, they would work hard to reel it back in, but, the higher inflation goes the narrower the gap becomes it and our interest rates which benefits us and our leveraged capital

If you would like to learn more about Multifamily Real Estate and how to invest, please email me directly at James@jcoreinvestments.com


What's better the Stock Market or Real Estate?

Foreign Service Officers are well positions for retirement with the 3-Legged Stool – “FERS + Social Security + TSP.” The question is do you want to wait till retirement to start earning passive income. There are so many options out there to invest so what’s better the Stock Market or Real Estate?

What if I told you there is a way you can take total responsibility for your financial outcomes NOW, and can keep those fees that Wall Street & the IRS would of taken year after year from stock market investing. This Blog will provide an alternative that you may have never considered that provides immediate cash flow, higher returns with less headaches. Also very easy to manage especially while serving overseas. And NO the Stock Market isn’t going to get you there.

But what about your other investments in the stock market? Are you concerned about the future of the stock market? If so, you’re not alone. How can you possible plan for your financial future with the uncertainty and volatility of the stock market. After exploring the Pros and Cons in investing in the stock market, I’ll suggest an alternative for you to consider and NO its not Single Family Homes (SFH) either.

I know many Foreign Service Officers are purchasing SFH rentals using their disposable income while stationed overseas or turning their primary house into a rental properties to earn passive income.    This is a great introduction into real estate but have you ever considered Multifamily Real Estate Investment?

Before getting in Multifamily, let’s review my I no longer invest in the Stock Market nor Single Family homes.

Stock Market returns will surprise you. The average stock market return over the last 20 years from the S&P 500 was 6.41% (from 2000 to 2020) and 9.65% over the last 30 years (from 1990 to 2020) [1] That means that if you invested $100,000 in 2000 it would be worth $346,456 in the end of 2020 – not bad right? But wait…not so fast.

Market volatility can crush your returns. What most investors don’t realize is that the same $100,000 isn’t actually worth $346,456 twenty years later – that’s because of the volatility of the stock market from year to year. In fact, that same $100,000 was actually worth $255,891 – which is only 4.81% return compounded every year. Not nearly as good but still not bad … until we realize these returns are BEFORE brokerage fees.

Fees stealing you blind?

The average expense ratio for actively managed mutual funds is between 0.5% and 1.0% and can go as high as 2.5% or even more. For passive index funds (ETFs), the typical ratio is approximately 0.2%[2]. Most investors have a blended portfolio of ETFs and mutual funds, so let’s assume the average fee is 1.0% per year.


After taking out a 1% fee each year, instead of being worth $346,456, your $100K invested twenty years ago is now only worth $209,066 – a mere 3.77% compounded return!

What makes it even worse is you still have to pay fees even if you lost money that year.

Let’s not forget taxes!

If you’re filing jointly and making more than $77,201, your long term capital gains rate is 15%. If you sold your entire portfolio, the taxes you’d have to pay would push your average annual return from 3.77% to 3.34%.  Reducing the worth to $192,707. ($100K Initial investment + $92,707 Net Gain after 15% taxes)


Inflation – The Silent Killer

The dollar had an average inflation rate of 1.99% per year between 2000 and today, producing a cumulative price increase of 51.12%. This means that today’s prices are 1.51 times higher than average prices since 2000, according to the Bureau of Labor Statistics consumer price index. Of course, inflation silently erodes the buying power of your portfolio. So your initial investment of $100K now only has a buying power of $67,297 in today’s dollars. Compounded over twenty years, an inflation rate of 1.6% reduces your after tax return from 3.34% to 1.62% and investment worth to $150,925. Wow!!!

What does this all mean?

This means that if you invested $100,000 in 2000, your ACTUAL return, i.e. the kind of return you can actual BUY something with in 2020 dollars AFTER you pay brokerage fees and taxes is a mere 1.62% compounded per year. More specifically, after getting your initial investment back, you have $50,925 in net gains after twenty years.

I had no idea that even when losing money in the stock market I was still on the hook to pay broker fees,  after pulling profits out (if any) I had to pay 15% capital gains tax while also losing value through inflation. I remember when I use to investment with Amerprise, I could never get a clear answer from them on what my real returns where and now understand why. They didn’t want me to know that the average person like you and I aren’t making money in the stock market. This is a big reason I no longer invest in the stock market and started to look for other ways to earn passive income.

What’s the Alternative?  – “Real Estate”

You might be saying “That’s great, I appreciate you breaking this down for me. But what else is there? I’m so glad you asked, because some Foreign Service Officer believe that Single family Homes (SFH) is your only alternative in Real Estate. Even SFH rentals have their limits too.  I’m going to show you a viable alternative to both SFH and the stock market with less risk and volatility, above average returns, lower taxes and a hedge against inflation.

Why not single family homes (SFH)?

Yes I agree there are Pros to SFH investing but it took me 15 years to realize that with my large SFH Rentals portfolio that I was limited on how big I could, that cash flow is not substantial, vacancies are costly and a hassle to manage while overseas. Ask me how I know.


Most Foreign Service Officers, who are considering investing in real estate consider investing in single family rentals (SFH) first. What most FSO do is buy one or more SFH’s and either hire a property manager or become a landlord managing themselves. The challenge with this option is that it’s not very passive or cuts into your cash flow. Actively managing as a landlord, you’re responsible for finding the tenant, taking calls when something breaks, making repairs, dealing with bad tenants, etc. This is even more difficult while serving overseas. On the other hand, if you hire a property manager you are charged leasing fees and a monthly management fee anywhere from 8% to 10% monthly. Also, finding good property manager for single family rentals can be a challenge in itself. It is hard to get out of a contract with a bad property manager without having to pay for future earnings per the contract. That sure does eat into your cash flow and your time.

I also thought turnkey rentals would be a better option since most turnkeys are either new construction or fully remodeled properties that should have less repairs for the first few years of ownership. Also these turnkeys usually have a property manager that as already leased out the property with immediate cash flow. I think for FSO that are serving overseas, this is a good option but you are usually paying a higher price to purchase this property. Also, some of the turn keys that I’ve purchased did not provide the returns that the turnkey provided advertised.

Finally, SFH is very expensive when it goes vacancy. Not only do you lose each month’s rent payment when vacant but also there are leasing fees, utilities to pay to get a new tenant placed. This is a  real problem with SFHs that might be in area with a  market downturn. Look at what happened during the great recession of 2008: SFHs suddenly had higher vacancies as tenants fled into cheaper apartments and property values plummeted, resulting in a massive loss of capital.

The Alternative is Multifamily Investing or called Multifamily Syndication

What is a Multifamily Syndication? A multifamily syndication is where a group of people pool their resources to purchase an apartment building which would otherwise be difficult or impossible to achieve on their own. This typically involves the “general partners” who organize the syndication, including finding the property, securing financing and managing the property; the general partners are sometimes referred to as the “sponsors” or “operators”.

The group of people who are providing the cash investment are often referred to as “passive investors” or “limited partners”. In return for their investment, the limited partners receive an equity share in the syndication along with cash flow distributions and profits.

Benefits of Multifamily Syndication

There are 5 main advantages of passively investing in multifamily syndications over any other investments:

  1. Below-Average Risk
  2. Above Average Returns
  3. Passive Income
  4. Extraordinary Tax Benefits
  5. Inflation Hedge

Below –Average Risk Perhaps the greatest advantage of investing in apartment buildings lies in its extremely low risk profile. For decades, the multifamily market has proven much less volatile than residential real estate, the stock market and cryptocurrency. When the housing bubble popped in 2008, the delinquency rates on Freddie Mac single-family loans soared, hitting 4% in 2010. By contrast, delinquency on multifamily loans peaked at 0.4%. The same can be said for 2020 and how multifamily has continued to be strong through the entire Pandemic. So, if you’re looking for a recession-proof way to invest your money, there is no better option than apartment building investing.

2. Above Average Returns As we’ve seen, the average stock market return over the last 20 years was 6.41% but after fees, inflation, and taxes that return becomes a paltry 1.6%. On the other hand, multifamily syndications routinely return average annual returns of 10% and above. That’s compounded (i.e. without volatility) and after fees, inflation, and yes, even taxes.

3. Passive Income Unlike stocks and bonds, multifamily syndications generate cashflow for its investors from the income generated by the property. This cashflow afforded by multifamily investing generates the kind of passive income that leads to financial freedom. (Can you say early retirement?) The brilliant part is that the multifamily asset itself is appreciating in value over time and can usually be sold for a significant profit. The combination of passive income and appreciation lends itself to the kind of generational wealth you can pass on to your children.

4. Extraordinary Tax Benefits Real estate has advantages over nearly every other investment, from stocks and bonds to business investments to precious metals. In Multifamily Syndication as a Limited Partner, you invest directly in the real estate and become a fractional owner of the property. This is important, because it positions you to take advantage of the other tax benefits of this profitable asset class. The biggest tax benefit to Multifamily investors is Cost Segregation.

What is Cost Segregation? In general, residential properties can be depreciated over a 27.5 year period based on their classification as Section 1250 property, but certain categories of assets within a building can be depreciated more quickly, over five, seven, or 15 years due to their reclassification as Section 1245 property. These include non-structural personal assets, land improvements, leasehold improvements and indirect construction costs, when applicable. Separating these faster depreciating assets into their proper categories allows for the frontloading of the appropriate tax deductions, lowering upfront payments and increasing cash flow. Which means you shouldn’t have to wait all those years to get a tax deduction for them.

The IRS allows multifamily investors to write off each year as an expense through something called “depreciation”. This is only a “phantom” expense, meaning it doesn’t actually cost you anything but it does reduce your taxable income. The reason for this is simple: the U.S. government wants people to invest in real estate; it’s actually a tax incentive, and it’s required by law. To illustrate the magic of depreciation, let’s look at this example.

The main thing to note here is that the $10,000 you put into your pocket is entirely tax free.  Instead of showing a taxable income, your tax return shows a taxable loss. Amazing, isn’t it? You can even “carry forward” your “loss” to future years or you can use it to offset gains from other passive income – further reducing (or even eliminating) taxes in the future, too.

WOW! Do your stocks do this for you?

Depreciation is a benefit of ALL real estate investments, but multifamily gives you an additional tax bonus – called “bonus depreciation”. Recently Pass into law, bonus depreciation allows us to deduct the entire value of the investment from our taxable income in the first year. This produces a GIANT tax loss that we can carry forward and apply to other passive income – reducing our even eliminating taxes paid on any gain. And if we sell for a big profit at the end, we can do something called a “1031 Exchange” that allows us to defer taxes – indefinitely. No other investment on the planet offers such incredible tax benefits.

5. Inflation Hedge Multifamily investments are a fantastic hedge against  inflation. If you recall, the Federal’s Reserve’s inflation target is 2% each year, which means everything goes up in costs, including rents. And as income goes up, so does the value of the property. I hear you saying “Yes, but no so fast. It’s true that rents are going up by 2% but so are expenses! And that  keeps the net income of the property the same and with that the value of the property, isn’t that right?” Actually no … take a look at the following table that shows both the rents and expenses going up 2% each year, look at what happens to the Net Operating Income:


The Net Operating Income (or “NOI” for short) is going up!  And the higher the NOI, the higher the value of the property. In fact that small 2% inflation rate results in a 10% average annual return on the cash invested in a typical real estate syndication. It’s like magic: the more inflation goes up, the more the apartment building appreciates – the perfect hedge against inflation!

The best investment no matter where you are overseas – by far – is passively investing in “multifamily syndications”.

Most investors invest their hard-earned money in the stock market. It’s not their fault, really, because that’s what 99% of financial advisors advise their clients to do! But as we’ve seen, the average annual returns of the stock market (after fees, inflation and taxes) are a mere 1.62% over the last 20 years. Coupled with the uncertainty of a market crash makes this investment class questionable at best. After studying every other possible alternative, I’ve come to the definitive conclusion that investing in multifamily syndications is the best investment on the planet. No other investment performed so well in the last recession and offers above average returns (including cashflow), extraordinary (and legal) tax advantages and a built-in hedge against inflation.

If you have any additional questions, please email me directly at James@jcoreinvestments.com


Have you ever heard of a Self-Directed IRA (SDIRA)?

Did you know you can invest in real estate with you IRA?

Over the years, I’ve experienced that real estate is a better investing strategy for my family compared to the stock market.  Even though I personally don’t like investing in the stock market, I continued to invest in an IRA for tax deferred reason.   What I didn’t know is there is a thing called “Self-Directed IRA” that gives you control over where and what you can invest your IRA in.

These investments grow tax-deferred; so, earnings can compound faster than they could outside of the account. The IRS allows a wide variety of investments choices for these accounts and the one that attracted me the most is real estate.

Here are a few examples:.

  • Real estate.
  • Undeveloped or raw land.
  • Promissory notes.
  • Tax lien certificates.
  • Gold, silver and other precious metals.
  • Cryptocurrency.
  • Water rights.
  • Mineral rights, oil and gas.
  • LLC membership interest.
  • Livestock

The catch is you must move your IRA from your current account to a specialized firm that offer SDIRA custody services. Most of the traditional IRA account holders do not do provide SDIRA accounts and will try to talk you out of transferring your account. The reason is they are losing the fees that they are currently charging you. There are many SDIRA custodians to choose from and they also have fees so it’s important to shop around.  You also need to be aware that SDIRA custodians can’t give financial or investment advice, so the burden of research, due diligence, and management of assets rests solely with you as the account holder. They are only there to ensure that when you are investing that you are following the IRS rules to keeping this a tax deferred investment.


Lastly, the most important thing to be aware of when investing in Real Estate with your SDIRA is you still could be taxed because of what is called an Unrelated Business Income Tax (UBIT). This tax comes from any of the funds that you leverage to purchase the property.

If your IRA took out a loan to purchase property, any earnings yielded from the leveraged portion of the asset (referred to as Unrelated Debt-Financed Income or UDFI) may incur UBIT. For example

  • Your IRA holds a rental property. It paid cash for half and financed the other half (50%).
  • The rental property earns $10,000 in a given year. Since the debt percentage is 50%, half of those earnings ($5,000) will be taxed at the current UBIT rate.

The debt percentages from each of the previous 12 months will be averaged to represent the single debt percentage for that year. Profits garnered from the sale of a debt-leveraged property will also be subject to UBIT, but not at the current Trust Rate. Such profits would be taxed as capital gains.

If you have any additional questions, please email me directly at James@jcoreinvestments.com


6 Amazing Reasons You’ll Love Passively Investing in Multifamily

Over the years, I have learned that investing in single-family homes (SFH) would not get me to the financial freedom I was seeking, especially while serving overseas. For example, trying to research new markets, find that next investment property, complete the due diligence, and form the team to fix and manage my rental property took up a lot of my time and effort.  These are just a few of the challenges that investing in single family rentals presented.

While serving overseas, I became even more frustrated as my SFH investing plateaued but luckily I was introduced to Multifamily real estate. In just one year, I was passively invested in over 4 different apartment complexes (over 1000 doors total) and learned quickly that multifamily allowed me to 10X my rate of investment.

When I speak about investing in multifamily real estate, many people do not even know that there are options available in these investment vehicles. For the longest time, I never even considered the idea of large apartments deals since I didn’t have the capital or experience to purchase a multifamily complex. I was very stubborn to look at anything other than SFH, until a mentor introduced me to the idea of Multifamily Syndication.

My mentor opened my eyes to that fact that there are opportunities to passively invest in multifamily real estate while still enjoying all the benefits of real estate investment.  I remember him saying “every time you drive by an apartment complex just think that someone owns that property, why can’t it be you?”

To get in on Multifamily investing, I invested Passively in a Multifamily Syndication as a Limited Partner. Passive investing is an approach for investors who are looking to establish long-term financial returns while minimizing their time investing.  By investing in multifamily syndication, you can enjoy the six benefits listed below, and more, of this investment class.


  1. Time – Let’s face it, your time is one of your most valuable resources, and you should spend it on doing things you love. By investing passively, sponsors like JCORE Partners are spending the time to find the right property and execute a sound business plan so that you focus on doing other things.  (we like to call this making money in your sleep, a.k.a. mailbox money!)
  2. Tax Benefits – Like any investment, you should anticipate some sort of return, but along with the opportunity to earn income, investing in multifamily properties offer several tax benefits to investors. Taking advantage of these tax benefits allows you to increase cash flow in the short term while maximizing tax savings.
  3. Diversification – The most commonly cited reason for investing in multifamily real estate is portfolio diversification. Meaning you are looking to add real estate to your investment portfolio. You can also diversify your real estate investments across several properties in different areas with different property types and other sponsors.  Doing so keeps you from over-allocating assets to any one group and will help you learn what you do and do not like from a multifamily sponsor.
  4. Liability – With syndications, one of the greatest benefits to investing passively is that you have no liability beyond your investment.
  5. Philanthropy – With most investments, only you or your family are receiving the benefits of the investment. However, when you invest in a multifamily syndication, you have the opportunity to not only receive monetary returns but positively impact the lives of many families.  Each multifamily syndication we execute aims to create a clean, safe, and pleasant place for people to live.  Doing so also has a positive influence on the community and environment.  This is a benefit you typically do not see from investing in stocks or bonds.
  6. Leverage – When you invest in multifamily syndications, it all comes down to leverage. In this instance, we define leverage as using something to its maximum advantage.  Leverage allows you to use various instruments of the sponsor to increase the potential return of your investment.  Passive investing enables you to leverage things like experience, knowledge, research, time, network, teams, and ability to syndicate with other like-minded investors to take down large multifamily deals.

Passively investing in multifamily real estate is a great way to diversify your portfolio and mitigate risk. It allows you to use your most finite resource, time, on the things you love instead of doing so much effort to find that next SFH investment. Also, you aren’t involved at all with fixing toilets, screening tenants, or handling the day-to-day operations of your SFH property. You benefit from several tax advantages, have minimal liability, and positively impact many families and communities. That said, we hope that this article helps you build a stronger foundation in making an informed investment decision.