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5 Reasons You'll Love Investing Passively in Real Estate Syndications

11/15/2019

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If you’ve ever experienced owning single-family or multifamily homes, you know that these investments require time and energy.

Investing in residential real estate can be challenging because, typically, you as the investor wear many hats throughout the seemingly never-ending process. Responsibilities include finding the property, funding the deal, renovating the property, interviewing tenants, and even performing maintenance.

The trouble is, it doesn’t stop there. You have to repeat most of the process over again when your tenant’s lease is up.

​Why Investing in Multifamily Rentals Can Be a Lot of Work

Small multifamily rentals have some advantages over single-family homes. For example, if one tenant moves out, the tenants in the other units are still there to help cover the mortgage. Plus, it’s much easier to manage one property with multiple tenants than to manage multiple properties with one tenant each.
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But, even with a property manager on board to help with your rentals, bookkeeping, strategic decisions, and maintenance/repair costs are still in your court. You’re basically running a small business, which can be challenging if you’re working a full-time job.

The Case for Passive Real Estate Investments

On the flip side, there are fully passive investments in commercial real estate. These are professionally managed and operated investments so you don’t have to deal with any of the three scary T’s - Tenants, Toilets, and Termites. Oh my!

According to Forbes, once investors begin to understand passive commercial real estate investments, it’s common for them to move toward syndications. Here’s why:
1. Minimal Time Required
Have you heard the phrase “set it and forget it”? In a syndication deal, you put money in, collect cash flow during the hold period, and receive profits upon the sale of the property.

You won’t be fixing toilets, screening tenants, or handling maintenance. The sponsor team and the property management team expertly attend to those things so you can sit back, enjoy the returns, and focus on living life.

2. Opportunity for Diversification
It would be unreasonable for anyone to attempt to become an expert in every phase of the property investment process, and even more so when it comes to different markets.

By investing with experienced deal sponsors, you can easily diversify into various markets and asset classes while resting assured that the professionals are taking care of business. This allows you to quickly and easily scale your portfolio while also mitigating risk.

3. Did You Say Tax Benefits?
Similar to personally owned rentals, you get pass-through tax benefits when investing in real estate syndications. You’ll be able to write off most of the quarterly payouts, which means you basically get tax-free passive income throughout the holding period. Score!

You will, however, likely owe taxes on the appreciation income you earn upon the sale of the property. (Always check with your own CPA on your personal situation.)

4. Limited Liability
When you invest passively through real estate syndications, your liability is limited to the amount of your investment. If you were to invest $50,000, your biggest risk would be losing that $50,000. You wouldn’t be on the hook for the entire value of the property, and none of your other assets would be at risk.

5. Positive Impact
With personal investments, you make a difference in two to four families’ lives, which is wonderful. But with real estate syndications, you have the chance to change the lives of hundreds of families and whole communities with just one deal.

Each syndication creates a cleaner, safer, and nicer place for people to live and impacts the community and the environment positively. And that’s something you just can’t gain from stocks and mutual funds.

Conclusion

If you’re on the fence between active and passive real estate investments, the experience you gain from owning small rentals is irreplaceable. However, personally owning rental properties is not a prerequisite to commercial real estate syndications.

Either way, investing in real estate is a great way to diversify your portfolio and mitigate risk. It gives you an opportunity to have a positive impact on the families who will live in your units, as well as a positive impact on the environment and community.
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    Justin Grimes

    Ally in generational wealth creation & protection.
    Proud husband & father.

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Timbermoss Capital does not make investment recommendations, and no communication through this website or in any other medium should be construed as such. Investment opportunities posted on this website are "private placements" of securities that are not publicly traded, are subject to holding period requirements, and are intended for investors who do not need a liquid investment. Private placement investments are NOT bank deposits (and thus NOT insured by the FDIC or by any other federal governmental agency), are NOT guaranteed by Timbermoss Capital and may lose value. Neither the Securities and Exchange Commission nor any federal or state securities commission or regulatory authority has recommended or approved any investment or the accuracy or completeness of any of the information or materials provided by or through the website. Investors must be able to afford the loss of their entire investment. Any financial projections or returns shown on the website are estimated predictions of performance only, are hypothetical, are not based on actual investment results and are not guarantees of future results. Estimated projections do not represent or guarantee the actual results of any transaction, and no representation is made that any transaction will, or is likely to, achieve results or profits similar to those shown. Any investment information contained herein has been secured from sources that Timbermoss Capital believes are reliable, but we make no representations or warranties as to the accuracy of such information and accept no liability therefor. Offers to sell, or the solicitations of offers to buy, any security can only be made through official offering documents that contain important information about risks, fees and expenses. Investors should conduct their own due diligence, not rely on the financial assumptions or estimates displayed on this website, and are encouraged to consult with a financial advisor, attorney, accountant, and any other professional that can help you to understand and assess the risks associated with any investment opportunity.
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