Investing in CDs vs multifamily syndication, which one is better? Understanding the key differences between CDs and multifamily real estate can be an example that helps you decide where to invest your capital. These investment strategies offer a range of differing benefits and risks. Let’s take a look!

What is Investing in CDs?

When you open a CD (Certificate of Deposit), you agree to entrust a certain amount of money with a bank or credit union for a/over fixed period of time: generally ranging from a few months to several years. In return, the bank or credit union agrees to pay you a guaranteed interest rate on your deposit during the term of the CD. This is different from a savings account since the money must not be withdrawn for the entirety of the term. Generally, CDs have a higher interest rate than a savings account, however, the rate of return is typically lower than other investment types. CDs are still appealing, though, because they are considered a safe and predictable investment with minimal risk.

What is Multifamily Syndication?

Multifamily syndication is a real estate investment that is a way for investors to pool their capital into a larger real estate project, such as an apartment complex or other types of residential or commercial properties that have multiple units. In this type of investment, a professional real estate sponsor researches and identifies a real estate investment opportunity and then invites multiple investors to contribute their capital to passively invest alongside the sponsorship team. The best part of this type of investment is that you will not be responsible for managing the property, leasing, and dealing with the many day-to-day issues. Instead, the sponsor will manage the investment on your behalf. You can receive returns in the form of positive cash flow generated by the property and from the appreciation of the property’s value over time.

Multifamily real estate syndications can be an attractive investment option for investors looking to diversify their portfolio without the responsibilities of property management. It can also provide access to larger, higher-quality real estate assets that may not be available to individual investors.

Investing in CDs vs Multifamily Syndication: Which is Better?

Risk and Return: Multifamily investments have higher risk and higher potential returns; whereas CDs are low-risk investments with a low rate of return. According to the National Council of Real Estate Investment Fiduciaries (NCREIF) report, the return rate for multifamily real estate investments was 7.52% over the past 10 years, while CDs typically provide a lower rate of return: usually 1% to 2%.

Liquidity: CDs are very liquid, which means you can withdraw your money at any time, however, if you withdraw your money before the fixed period, you may have to pay a penalty. On the other hand, multifamily real estate is illiquid, which means it can be difficult to sell your stake quickly. Typically, real estate investment takes more time and effort to sell compared to liquid assets.

Management: Both require little management. CDs require you to simply deposit your money and wait for the CD to mature; multifamily syndication management responsibilities are handled by the sponsor.

Diversification: CDs investments are stable and diverse, but they’re low-risk, and therefore low-returning. Multifamily real estate investments also provide diversification with the potential for high returns, especially since they are not directly tied to the stock market or other traditional investments.

CF Capital: Your Investment Partner

Ultimately, the decision between CD investing vs multifamily real estate investing depends on your goals and risk tolerance. However, if you are looking to make the most out of your capital, then multifamily investment may be the right investment opportunity for you. When you invest alongside the CF Capital team, we will be committed to maximizing your returns and minimizing the risks associated. Get in touch with CF Capital to see how we do it and get started on passively investing with us.