Sources of Risk in Multi-Family Syndication Deals
There are several sources of risk in multifamily syndication deals, including:
Market risk: The risk that changes in the real estate market will negatively impact the performance of the property.
Tenant risk: The risk that tenants will not pay rent or vacate the property, leading to a loss of income.
Interest rate risk: The risk that an increase in interest rates will increase the cost of financing and negatively impact cash flow.
Operating risk: The risk that the property will not be well-maintained and will require significant capital expenditures to keep it in good condition.
Leverage risk: The risk that the property will not generate enough cash flow to cover the debt service on the loan used to purchase it.
Legal and regulatory risk: The risk that changes in laws or regulations will negatively impact the property or the syndication structure.
Management risk: The risk that the property will not be well-managed, leading to a decline in performance.
Exit risk: The risk that the property will not be able to be sold at a desired price, resulting in a loss for the investors.
