So… You want to invest in real estate but your time is limited and you do not want to have to manage tenants, toilets and trash.
Many of us know that investing in multi-family real estate can be much safer than investing in the volatile stock market. We want to preserve and even grow our wealth, retirement fund or our nest egg.
The purpose of this platform is to teach you how to safely invest in multi-family real estate syndications. This is an area of investing that is quickly opening up to normal people like us, where it has traditionally been the domain of the wealthy and the institutions. Because of this, you might be new to the world of investing in syndications. I believe that this type of investing is the most recession-resistant form of wealth preservation, and provides for considerable capital growth. This is not something that can make you millions overnight. Rather, it is a slow and steady way toward personal financial success.
Before getting involved and committing our money to these types of projects, it is imperative that we learn everything we can about this financial niche. It is also just as important to continually learn about this subject and keep abreast of new ideas, laws and market conditions. It is the objective of this platform to break these complex ideas down into easily digestible bite-sized pieces. If you are here right now, you will probably agree that there is a lot of material, and you just want to have an orderly way of learning everything you can. As such, I have broken the content on this platform into the areas that I think make the most sense.
Getting started in multifamily real estate as a passive investor.
There is no free lunch or easy path to victory. It takes education, perseverance and dedication to wisely invest your money. If you are like me, you have been told that as you earn during your career, your savings should be invested in Wall Street via a 401k, money-market fund, bonds, or other similar investment vehicle. While this might be fine when you are starting out in life, as you accumulate wealth, you want to find the highest and best use of those funds.
You may have also been told that investing in real estate is a great way to keep your money safe and even make more of it. Further, you might have even purchased a single-family home for the purpose of renting it out. You quickly learned that you actually bought yourself a job. It can be very difficult to successfully manage a rental property, especially if you are still working a 9 to 5 job. So, where’s the balance?
Brian Burke wrote a whole book to answer this and many more questions. It is called The Hands-Off Investor, an Insider’s Guide to Investing in Passive Real Estate Syndications. I highly recommend it, as it is a very good read. This platform will also answer the many questions you might have about this alternative way of investing your money. We will discuss:
- What is Passive Real Estate Investing?
- What is Multifamily Commercial Real Estate?
- What is a syndication in real estate?
- How to make money the slow and steady way by investing passively in multi-family real estate
- How to keep and protect that money
- The tax benefits associated with equity ownership of passive real estate investments
- Finding and deciding between the many investment opportunities out there
- Meeting and vetting the sponsors who put real estate syndications together
- Quiz – Winner or Dud? – Choosing the Right Investment
- Liability Protection – CYA – Cover Your Assets.
- Putting your retirement funds to work in a predictable manner
- Learning the language and terms used in syndication investments
- We will also invite guests to give us their two cents and opinions on all aspects of passive investing
We are about to embark on an incredible journey together and I am glad that you are here with me.
Income and Preservation
How to create and increase passive income. Learn how investing in multi-family real estate is a recession resistant wealth preservation strategy and how it compares favorable against the stock market.
Making money with real estate is not all that difficult… So is losing it. We will discuss how money can be made through passive real estate investing, as well as identifying the pitfalls. Also, on the agenda are the different ways you make money, such as quarterly or monthly cash distributions, and profiting at the tail end of the project through the sale or disposition of the property. There is also the possibility, though not that common, to receive an infinite return on your investment. This is when the sponsor refinances the property and is able to return all your equity (that can then be invested in another project), but the original project continues to yield cash flow for the investors. Very exciting stuff when it happens.
You have spent your career building your personal wealth. You have worked very hard. So, the last thing you want is to have it all taken away from you. I woke up to this during the 2020 Covid-19 and market downturn when I lost up to 40% of my net worth in March and April of that year. This was due to market conditions that were beyond my control. Although there was a bit of recovery, I never want to be in that position again. I felt helpless.
- How to Earn Passive Income from Real Estate
- Preferred Return vs. Non-Preferred Return – Which One Should You Pick?
- The Split – Sharing in a project’s profit
- Rates of return to expect
- IRR – How the periodic distributions work with return of capital and return on capital
- What does a good syndication opportunity look like? A hypothetical example of a project with a fair return
- Stock Market vs. Passive Real Estate Investing
- Why to seriously consider passive investing in apartment syndications
- The Challenges of Active Real Estate Investing: Tenants, Toilets and Trash
- Understanding Returns – What Are CoC, IRR and AAR and How Do They Differ?
- Make an Extra Income Outside of Your Day Job – Without Becoming a Landlord
Learn about depreciation and other tax benefits that real estate investing makes possible.
One of the ways real estate gives back is through depreciation, a write-off in the decrease in value of an asset due to wear and tear. Some people call this a ‘phantom loss,’ and it is something that you can claim against your income on your tax returns. This can usually help offset your income especially in the first few years into an investment. The law allows for straight depreciation over 27.5 years, but a syndicator can do what’s called a cost segregation analysis to further and aggressively yield income protection.
Identifying the right investment opportunity.
I have invested a lot of time watching and listening to different syndicators’ investment presentations. Some have made sense, others have not. Your goal is to find an investment opportunity in a good area that has the ability to take advantage of forced appreciation. This is what is known as a value-add opportunity where the syndicator can physically fix and update a property and bring rents up to the market value. You are also looking for conservative underwriting assumptions along with other indicators that will tell you the opportunity is a sound one.
- The Sponsors NEED to make money – Why it is important to YOUR returns – Alignment of Interest
- Accredited Versus Sophisticated Investor – Which Are You?
- Reviewing the Business Plan for a Syndication – Does it make sense to invest?
- There are Different Classes of Multi-Family Real Estate – What are the ABCs?
- 5 Multifamily Investment Opportunity Characteristics
- Forced Appreciation – How It Works and Why We Like It
- Underwriting 101
- Besides multi-family real estate, what are the other types?
- How Do You Value a Multifamily Property? NOI & Cap Rates
- Due diligence – Why it matters
- The Offering – What to Expect During an Investor Presentation
- What to Expect During Your Passive Syndication Investment
- The Process to Expect from the Offering Through to the Closing: What is the investor responsible for?
How to find multi-family real estate syndications and invest with them.
Although this goes hand in hand with finding good opportunities, it is important to work with syndicators who you trust with your capital. In this section, we will explore various ways of finding these groups of sponsors, and what to look for. But what is a syndicator? It is the person or group of people who identify a property, put it under a purchase contract, create a business plan, and fund that purchase with your equity. Once the purchase is completed, they are the ones who manage the property, complete their business plan, and finally sell the property. In legal terms, they are the general partners.
- Using your network to find sponsors
- 8 Ways to Find Syndicators This Week
- Finding Sponsors by Looking at SEC Filings – a Tutorial
- Researching podcasts and YouTube channels
- Getting to Know the Sponsors to Invest with Them Directly – Ask the Right Questions
- How Crowdfunding is Making it Easier to Passively Invest in Real Estate
- Where to Find the Best Real Estate Syndication Deals
How to exploit real estate metrics and demographics to analyze investment opportunities.
Like finding a good syndicator, reviewing the demographic data will help you identify the opportunities. Finding an opportunity in a highly desirable place to live will often yield fewer risks than opportunities located in what some people call war zones.
- Listening to the Data – Why is it important to verify demographics?
- Population growth
- Income levels and growth
- Rent growth projections
- Crime rate
- Flood zones
- Unemployment vs. job growth
- Single family home value growth as an indicator
How investing in multiple syndications diversifies your portfolio, and how a syndication’s LLC structure protects you from liabilities.
Most good syndicators will provide several layers of protection that are intended to keep you safe from tenant court actions and the like. Though not always necessary, you can even form an entity yourself and use that to further isolate you from liabilities.
- Risk Diversification
- How much real estate should be in your investment portfolio?
- Managing Investment Risk in Commercial Multi-Family Real Estate
- Pros and Cons of Investing in Multifamily Syndications
Get other recommended free sources of learning content beyond this website.
Investing in multi-family real estate is a team sport. We have to always surround ourselves with like-minded individuals as well as those with opposing views.
Find out how you can convert your retirement savings into a SDIRA (self-directed IRA) or Solo 401k to invest in real estate.
It didn’t occur to me until recently that I could take my retirement funds out of the volatile stock market and put it to better, more stable use in passive real estate investments. Like most things, there are pros and cons, and a myriad of things to consider.
- How to Start Real Estate Investing with Your Retirement Funds
- What types of retirement vehicles are available for available for RE investment? Which one to choose.
- Should You Buy an Investment Property with an IRA or 401k? SDIRA / Solo 401k
- Are there taxes involved when investing in multifamily with your self-directed retirement account?
Learn terms like Cap Rates, NOI (net operating income), DSC (debt service coverage ratio), IRR (internal rate of return), cash-on-cash return and more to better understand your investment opportunities.
Did you know that the value of an apartment community is not based on comparable properties (comps) like a single-family home is? It is the NOI divided by the prevailing cap rate. “What does all this mean?” you might be saying to yourself. No worries… I’ll do my best to get you up to speed.