As 2024 comes to a close, is now a good time to invest in syndications?

I had brunch today with a dear friend who has heard about investing in syndications and wanted to know: is now a good time to make a first investment in this kind of real estate?

It was a good prompt to come back to this little website and reflect on where things stand at the end of 2024. I think there are in fact some good reasons why now might be a good time to invest in multifamily real estate syndications heading into 2025. But there is definitely still a lot of uncertainty and, as ever, buyer beware. Not as investing advice (ever) but my own thinking at this juncture is as follows:

• As all syndication investors know, we're coming through a second terribly painful year--2023 and 2024 for sure have been bad. I'd put the last few in the "horrible" category for multifamily syndications; deals done in 2021 - 2024 have largely been under stress, and some from 2020 as well. There have been headwinds in many directions--high rates that have not come down as fast as many had hoped, valuations have remained low (and cap rates elevated) compared to a few years ago, and not yet enough of a wipe-out to produce a huge pile of great opportunities. Cash flow has slowed to a trickle. Ouch.
• Maybe, just maybe, we are close to a bottom for real estate syndications. Not everyone agrees– some think that we have a few more years to go since so many people with floating rate debt on deals have simply kicked the can down the road, with the pain to be experienced when banks don't want to play that game anymore. If inflation stays about where it is, there's no relief on rates, costs for insurance and taxes keep coming up but rent prices don't keep pace... maybe there are a few more years of pain to endure still?
• But if you find a good deal that can pencil out as truly conservative, with a motivated seller, with reasonable debt terms or an assumed mortgage, and a skilled operator--then perhaps this is not a bad time to put some capital to work. It's hard to argue that there may be good deals out there with motivated sellers. Maybe some syndicators have teams they need to compensate and they're willing to sell great properties in order to get liquidity to pay themselves and their colleagues? Maybe there are distressed properties that have to move, but the underlying economics are actually pretty good when the debt on the deal is done right? Maybe there are some poorly managed properties that just need someone to do the job the right way? Those seem like universal truths.
• Many of the longer-term secular trends seem to be in favor of those who have workforce housing to offer for rent. The influx of new builds will slow because it has been hard to finance deals the past few years. The number of housing units is still probably a few million units behind what's needed across the United States. (Freddie Mac puts the number at 3.7 million housing units short as of Q3 2024).
• There's a new resource available, Passive Pockets, for which I've shelled out the annual fee (though I have no connection to the site or the effort, other than joining in on the community). It costs $33/month (as of December 2024), billed up front. I think more transparency and more community around these investments can only be a good thing. As always, the key element is the skill of the syndicator in whom you are entrusting your hard-earned cash, so the more due diligence you can do on their track records and the experience of their LPs, the better.
• Maybe the pain and the troubles of the past few years will make those currently offering syndications a bit smarter for the bumps in the road that they've been able to endure? One hopes that syndicators learn from their mistakes as well as their wins and share honestly about what it portends for future deals.

The point is that no one can know what the future holds. But at the end of 2024, as a new year beckons, it seems plausible--just plausible--that 2025 will be a better time to invest in multifamily real estate syndications than previous years. At least I think the case can be made.