Skip to content
  • About
  • Contact
  • Contribute
  • Book
  • Careers
  • Podcast
  • Recommended
  • Speaking
  • All
  • Physician
  • Practice
  • Policy
  • Finance
  • Conditions
  • .edu
  • Patient
  • Meds
  • Tech
  • Social
  • Video
    • All
    • Physician
    • Practice
    • Policy
    • Finance
    • Conditions
    • .edu
    • Patient
    • Meds
    • Tech
    • Social
    • Video
    • About
    • Contact
    • Contribute
    • Book
    • Careers
    • Podcast
    • Recommended
    • Speaking

Syndicators and risk management: Educating investors on multifamily syndication

Pranay Parikh, MD
Finance
June 15, 2023
Share
Tweet
Share

In a recent Wall Street Journal article titled “A Housing Bust Comes for Thousands of Small-Time Investors,” the foreclosure woes of Jay Gajavelli, the head of Applesway Investment Group, were brought to light. Gajavelli’s ownership of multiple units across Houston took a turn for the worse, shedding light on the risks associated with syndicators in the real estate market. However, it is crucial to note that this case does not represent the entire landscape of multifamily syndication, as many success stories are worth highlighting.

Drawing parallels between the medical profession and syndication, it becomes apparent that generalizations based on a few individuals’ actions can be misleading. Just as a few doctors making poor choices does not discredit the entire medical community, the actions of a select group of syndicators should not tarnish the reputation of the entire industry. Trustworthiness and credibility depend on how syndicators handle their responsibilities and the partners they choose.

Recognizing the significance of the partnership, it becomes evident that selecting the right team is just as important as the investment itself, if not more so.

To prevent a repeat of unfortunate scenarios like the one involving Applesway, there are three key factors to consider when assessing syndication deals:

Avoid overpaying for properties: Over the past few years, property prices have surged, leading to instances of inflated payments. This phenomenon is reminiscent of the 2007 collapse when many individuals bought homes beyond their means. Syndications operate on a larger scale, emphasizing the need for cautious evaluation to avoid overpaying for properties.

Emphasize cash flow: Investing in deals that immediately generate cash flow is crucial. Such investments cover all expenses, maintain substantial cash reserves, and provide regular distributions to investors. By prioritizing cash flow, investors can fortify their position against economic downturns.

Opt for fixed, long-term debt or interest rate caps: The risk of failing to meet mortgage payments poses a significant threat to property investment. In recent years, adjustable-rate mortgages were popular due to low-interest rates. However, concerns regarding potential rate hikes led to the purchase of interest rate caps, ensuring that rates do not surpass a predetermined threshold. Applesway’s failure to secure rate caps left them vulnerable to an interest rate hike from the low 3 percent range to a burdensome 7 to 9 percent. Protecting against such fluctuations, new deals should now focus on fixed debt with a consistent interest rate throughout the term, guarding against potential interest rate increases by the Federal Reserve.

The Wall Street Journal article exposed the poor conditions of Applesway’s properties and the detrimental impact on tenants and investors. However, it is crucial to distinguish responsible syndicators from those who neglect their duties.

Unlike the properties highlighted in the article, responsible syndicators prioritize the well-being of their tenants. They strive to provide safe, clean, and attractive living spaces, fostering a sense of home for residents. Many syndicated properties even go beyond the basics, offering afterschool programs that focus on financial education or English as a second language. In fact, some properties have earned special green loans due to their environmentally friendly and energy-efficient features, demonstrating a commitment to sustainable practices.

The unfortunate investors who suffered losses in the Applesway case deserve empathy and support. Their hard-earned money, upon which they relied to sustain their lives and support their loved ones, is no small matter. While there are avenues for leveraging tax benefits from such losses with the guidance of knowledgeable CPAs and tax advisors, it underscores the importance of selecting the right team from the outset.

Education plays a central role in empowering investors and ensuring they make informed decisions. Syndicators who focus on capital preservation and cash flow prioritize educating their investors about the intricacies and potential risks associated with multifamily syndication. By providing comprehensive educational resources, they equip investors with the tools and knowledge to navigate the syndication landscape and make sound investment choices.

Syndicators can mitigate risks by avoiding overpaying for properties, focusing on cash flow, and opting for fixed, long-term debt or interest rate caps. Responsible syndicators prioritize tenant welfare, offering safe and attractive living spaces while investing in educational initiatives. Through education and a diligent selection process, investors can participate in syndication deals that emphasize capital preservation and cash flow, ensuring a secure and profitable investment experience.

Pranay Parikh is a practicing physician, a top podcast leader, an event speaker, and the president of a private equity firm, Ascent Equity Group. He has a unique entrepreneurial journey and a compelling story that has captivated audiences nationwide. Ascent Equity Group can also be reached on Instagram and LinkedIn.

ADVERTISEMENT

Prev

Unveiling the true origin of "first, do no harm" in medicine: Discover the father of clinical medicine

June 15, 2023 Kevin 0
…
Next

Can chatbots help choose the right doctor or hospital?

June 15, 2023 Kevin 0
…

Tagged as: Practice Management

Post navigation

< Previous Post
Unveiling the true origin of "first, do no harm" in medicine: Discover the father of clinical medicine
Next Post >
Can chatbots help choose the right doctor or hospital?

ADVERTISEMENT

More by Pranay Parikh, MD

  • Navigating recession with cash flow: a vital lesson for savvy investors

    Pranay Parikh, MD
  • Why embracing money conversations is good for your health

    Pranay Parikh, MD
  • Embrace an expanded identity: Become more than just a doctor

    Pranay Parikh, MD

Related Posts

  • The risk physicians take when going on social media

    Anonymous
  • A paradigm shift in acute pain assessment and management

    Myles Gart, MD
  • The slippery slope of utilization management

    Sneha Tella, MD
  • Medication management and how consultant pharmacists can help

    Michael R. McGuire
  • It’s time to learn the basics of financial management in medical school

    Aashish Shah
  • Think twice before prescribing opioids as a first-line treatment for pain

    Gary Call, MD

More in Finance

  • 5 blind spots that stall physician wealth

    Johnny Medina, MSc
  • The most overlooked skill in medicine: contract negotiation

    Cynthia Chen-Joea, DO, MPH and Peter Baum, DO
  • The business lesson new doctors must unlearn

    Stanley Liu, MD
  • The hidden impact of denials on health care systems

    Diana Ortiz, JD
  • Why physicians are unlike the “average” investor

    David B. Mandell, JD, MBA
  • Signing bonuses and taxes: What physicians should know

    Shane Tenny, CFP
  • Most Popular

  • Past Week

    • Why are medical students turning away from primary care? [PODCAST]

      The Podcast by KevinMD | Podcast
    • Here’s what providers really need in a modern EHR

      Laura Kohlhagen, MD, MBA | Tech
    • Why “do no harm” might be harming modern medicine

      Sabooh S. Mubbashar, MD | Physician
    • How community paramedicine impacts Indigenous elders

      Noah Weinberg | Conditions
    • Addressing U.S. vaccine inequities in vulnerable communities [PODCAST]

      The Podcast by KevinMD | Podcast
    • How to speak the language of leadership to improve doctor wellness [PODCAST]

      The Podcast by KevinMD | Podcast
  • Past 6 Months

    • Why tracking cognitive load could save doctors and patients

      Hiba Fatima Hamid | Education
    • Why are medical students turning away from primary care? [PODCAST]

      The Podcast by KevinMD | Podcast
    • Why “do no harm” might be harming modern medicine

      Sabooh S. Mubbashar, MD | Physician
    • Here’s what providers really need in a modern EHR

      Laura Kohlhagen, MD, MBA | Tech
    • What the world must learn from the life and death of Hind Rajab

      Saba Qaiser, RN | Conditions
    • How medical culture hides burnout in plain sight

      Marco Benítez | Conditions
  • Recent Posts

    • Addressing U.S. vaccine inequities in vulnerable communities [PODCAST]

      The Podcast by KevinMD | Podcast
    • Why Canada is losing its skilled immigrant doctors

      Olumuyiwa Bamgbade, MD | Physician
    • Why doctors are reclaiming control from burnout culture

      Maureen Gibbons, MD | Physician
    • Would The Pitts’ Dr. Robby Robinavitch welcome a new colleague? Yes. Especially if their initials were AI.

      Gabe Jones, MBA | Tech
    • Why medicine must stop worshipping burnout and start valuing humanity

      Sarah White, APRN | Conditions
    • Why screening for diseases you might have can backfire

      Andy Lazris, MD and Alan Roth, DO | Physician

Subscribe to KevinMD and never miss a story!

Get free updates delivered free to your inbox.


Find jobs at
Careers by KevinMD.com

Search thousands of physician, PA, NP, and CRNA jobs now.

Learn more

Leave a Comment

Founded in 2004 by Kevin Pho, MD, KevinMD.com is the web’s leading platform where physicians, advanced practitioners, nurses, medical students, and patients share their insight and tell their stories.

Social

  • Like on Facebook
  • Follow on Twitter
  • Connect on Linkedin
  • Subscribe on Youtube
  • Instagram

ADVERTISEMENT

  • Most Popular

  • Past Week

    • Why are medical students turning away from primary care? [PODCAST]

      The Podcast by KevinMD | Podcast
    • Here’s what providers really need in a modern EHR

      Laura Kohlhagen, MD, MBA | Tech
    • Why “do no harm” might be harming modern medicine

      Sabooh S. Mubbashar, MD | Physician
    • How community paramedicine impacts Indigenous elders

      Noah Weinberg | Conditions
    • Addressing U.S. vaccine inequities in vulnerable communities [PODCAST]

      The Podcast by KevinMD | Podcast
    • How to speak the language of leadership to improve doctor wellness [PODCAST]

      The Podcast by KevinMD | Podcast
  • Past 6 Months

    • Why tracking cognitive load could save doctors and patients

      Hiba Fatima Hamid | Education
    • Why are medical students turning away from primary care? [PODCAST]

      The Podcast by KevinMD | Podcast
    • Why “do no harm” might be harming modern medicine

      Sabooh S. Mubbashar, MD | Physician
    • Here’s what providers really need in a modern EHR

      Laura Kohlhagen, MD, MBA | Tech
    • What the world must learn from the life and death of Hind Rajab

      Saba Qaiser, RN | Conditions
    • How medical culture hides burnout in plain sight

      Marco Benítez | Conditions
  • Recent Posts

    • Addressing U.S. vaccine inequities in vulnerable communities [PODCAST]

      The Podcast by KevinMD | Podcast
    • Why Canada is losing its skilled immigrant doctors

      Olumuyiwa Bamgbade, MD | Physician
    • Why doctors are reclaiming control from burnout culture

      Maureen Gibbons, MD | Physician
    • Would The Pitts’ Dr. Robby Robinavitch welcome a new colleague? Yes. Especially if their initials were AI.

      Gabe Jones, MBA | Tech
    • Why medicine must stop worshipping burnout and start valuing humanity

      Sarah White, APRN | Conditions
    • Why screening for diseases you might have can backfire

      Andy Lazris, MD and Alan Roth, DO | Physician

MedPage Today Professional

An Everyday Health Property Medpage Today
  • Terms of Use | Disclaimer
  • Privacy Policy
  • DMCA Policy
All Content © KevinMD, LLC
Site by Outthink Group

Leave a Comment

Comments are moderated before they are published. Please read the comment policy.

Loading Comments...