Multifamily properties make up the bread and butter of real estate syndications (group real estate investments).
In particular, most syndications available to non-accredited investors are multifamily. A guiding principle in our Co-Investing Club is inclusivity for non-accredited investors, not just wealthy investors—and I can tell you firsthand how hard it is to find reputable syndicators who allow non-accredited investors in deals outside multifamily.
Don’t get me wrong; they’re out there. We’ve invested in plenty of non-multifamily deals. And we intend to invest in proportionally fewer multifamily deals moving forward.
I won’t sugarcoat it: I’ve grown increasingly wary of multifamily. Our investing club meets every month to vet different passive real estate deals, and I’ve started going out of my way to propose more “alternative” types of property or investment partnerships.
Here’s why.
Regulatory Risk
Tenant-friendly states and cities have continued ratcheting up regulations against owners over the last five years.
Take New York State, for example, which earlier this year passed a “good cause eviction” regulation. It not only enacted rent stabilization rules, but also requires landlords to renew all leases unless the renter has violated it. So when a property owner signs a lease, they no longer know whether they’re committing to the unit for a single year or 10.
New York is hardly alone, either. California and several other tenant-friendly states have done likewise over the last decade.
States enacting laws that fit their politics doesn’t bother me. That’s how our federalist model of government works. I don’t have to invest in those states.
But federal laws are another matter entirely.
Federal regulation and growing political appetite
What worries me is that the political appetite for multifamily regulation has increased—not just in tenant-friendly states but nationwide. The