While in the past, commercial multi-tenant real estate was an exclusive asset for the super-wealthy, these days, thanks to private real estate syndications, commercial real estate is accessible to a far more comprehensive range of investors.
Savvy everyday investors are using commercial multi-tenant real estate deals to access higher yields, tax benefits, and greater asset security, thanks to the expert management of commercial real estate investment managers and syndicators.
This blog looks at five benefits of multi-tenant real estate and how one investment group leverages deep research and relationship-building strategies to deliver a safer investment option with consistently higher-than-average returns.
Explore the list below to discover five of the leading reasons why today's real estate investors are backing multi-tenant real estate as a tool for wealth creation.
Appreciation is the increase in the value of an asset over time. While this can occur thanks to the intrinsic value of land, factors such as updates to the property and renovations can also increase the overall property value. These capital expenditures will all contribute to a higher sale price meaning a larger payout for investors at the end of the investment period.
Additionally, multi-tenant deals have inbuilt lease increases, meaning higher returns for investors and more money to reinvest into the asset to boost its value.
Appreciation is not a certainty, so investors should consider the strength of the management team and cash flow as the primary factors in their investment decision-making.
Due to the strength of commercial real estate leases and multi-streamed cash flow, multi-tenant property investors can enjoy regular dividends on their investments. In addition, even with a less than 100% occupation rate, the asset can still produce income due to the multiple lessees, as the risk is spread across numerous rent-paying businesses in various industries.
While some listed companies may choose not to pay dividends, this is generally not the case with commercial real estate. At Kenwood Management, we offer annualized regular dividends at a 7-8% rate. Each of our assets has exceeded the Vanguard Real Estate Index Fund over the same period and performed higher than projected.
Positive cash flow means more money for investors and reinvesting into the asset to increase its value over time.
Smart syndicators and investment managers will leverage tax reduction strategies to benefit investors. Due to the power of depreciation and interest rate deductions, investors can use losses on paper to reduce their tax burden while still making money over the investment's lifespan. These strategies are accessible to investors in private syndication through a K-1 partnership tax form to access depreciation offset on the property's net income.
Additionally, multi-tenant real estate deals often have inbuilt structures such as pre-determined rental increases and contractually obligated vacancy periods, creating a safer asset class in precarious market conditions. During times of high inflation, a higher cost of materials and goods can also mean less competition on the market as fewer properties are constructed.
When you invest in a multi-tenant deal, you're accessing not only a traditionally vital asset but also a team of experienced asset managers with experience, connections, and resources to manage properties. This means investors don't deal with late-night phone calls about a broken HVAC system, parking lot issues, lengthy court battles over delayed payments, or illegal occupation.
Our team only manages properties within our portfolio and invests in each asset to create a more equitable, focused, and localized investment opportunity. In addition, our investment strategy and transparent philosophy mean investors know where the property is, its asset class and features, financial projections, and a full range of information before purchasing.
Additionally, due to our investment strategy and commitment to investors, our sponsors only recoup their investment once investors have been paid in full and recouped their investment amount.
As the value of the property increases and repayments are made, so does the equity of the investor's position. If the property's value increases over time, so does the investor's equity. In some cases, an increase in equity can give syndicators the power to refinance loans at more favorable rates or to make capital changes to the property.
This means that along with cash flow, investors will also be paid a percentage of the sale amount of the property at the end of the investment lifecycle.
While the multi-tenant property itself is a vital asset that can provide security and cash flow to investors, success relies heavily on the administration and management of the asset. Without the right team to look after the property and act in the best interests of investors and tenants, even the best properties in the most elite locations can fail.
Due to our specialized knowledge of our local investment areas, unparalleled relations with tenants, and value-focused investment strategy, Kenwood Management provides commercial multi-tenant investment opportunities that have outperformed projections. To learn more about how our team and asset portfolio can help you achieve your investment goals, reach out to a team member today.
Learn more about what you could be missing in your investment portfolio when downloading our free resource, "Why Multi-Tenant Commercial Real Estate Is a Good Investment."