Let me ask you a question. What first interested you in real estate syndications? Most likely, it was the potential to put your hard-earned money to work for you to create a good return and thus grow your wealth over time.
And in fact, that’s the number one question that most of our investors ask us when they first consider investing in a real estate syndication with us. They want to know, if they were to invest
$100,000, how much money they could stand to make.
And believe me, we love good returns, and those returns are a big part of why we do what we do. However, while returns are certainly important, there’s an even more important aspect that we focus on when we evaluate potential deals.
Can you guess what it is? I’ll give you a hint. It’s not nearly as exciting as passive income and double-digit returns. In fact, it’s more boring than taxes and K-1’s.
The most important thing we focus on in a real estate syndication is capital preservation. In other words, we focus on how NOT to LOSE money. That’s our number one priority, as boring as that might sound.
Once you choose a real estate syndication deal, sign the PPM (private placement memorandum), and send in your funds, you have very little control over the performance of the asset. You’re truly a passive investor at that point and must fully trust the sponsor team to manage the daily operations effectively, execute the business plan, and guard (and grow!) your investment.
This is exactly why you should be absolutely confident in the deal and the sponsor team up front. Do your research, squash any doubts you may have, and ask questions BEFORE investing with a new real estate syndication sponsor.
This list of questions provides some great ideas and may guide you toward subjects and concerns that should be on your mind as a new investor. It will also give you some ideas of things that other investors are asking that you might not have thought about. Some of these can be found on your own in the investment summary or through independent research, but others you may need to ask the sponsor directly.
Have you ever heard about or explored the opportunity to sponsor a child through a non-profit program such as Children International? Contributions through these organizations change children’s lives exponentially in areas of health, education, and even safety.
As you may know, when you choose to help a child through such programs, you receive updates about the child regularly, including notes they’ve written and even pictures of them. You get to have a supportive hand in their growth from afar while never having to enforce a bedtime or wash the ice cream off the child’s shirt.
Investing in a real estate syndication is very similar in this aspect. As a passive investor, you would receive regular updates on the progress of the project after the deal closes, but you don’t have to field phone calls from tenants when an issue arises.
Typical Real Estate Syndication Communications and Touchpoints
There are 5 key communications you should receive at important intervals once you invest in a
real estate syndication. From the closing date, through the hold period, until the asset sale, here’s what to look for:
Investing in real estate outside your local market, in an area you may never visit, and where you have no trustworthy friends on whom to call can seem absolutely terrifying, especially for new investors.
However, this leap into seemingly scary territory may be the key to real estate investing success.
Most real estate investors begin with local deals, and while some get lucky, others do not. The truth remains: There are more opportunities “out there” than you could ever imagine, and you’ll never see or know about them without the courage and wisdom to explore outside your local market. Having a wide net to cast for deal flow and potential returns can be a powerful thing.
Investing Out of State, and Why Everyone Should Do It
Investing across state lines allows you to align your real estate portfolio to your long term investing goals through:
Are you considering investing in a real estate syndication but are leery that it sounds a little too good to be true? You’re not alone.
Many investors are shocked when they first learn about the potential cash flow returns they could receive through investing passively in real estate syndications.
The key, though, to putting your doubts and skepticism to rest, is to understand where that cash
flow comes from and how it makes its way from the asset itself to your pocket, and that’s exactly
what we’ll cover in this article.