You’ve been devouring all the information possible and have become enamored with the power of passively investing in real estate syndications. How could you not be? 

The ability to invest in real, physical assets without being a landlord, possibly getting a majority share of the profits, and reaping amazing tax benefits is a pretty shockingly sweet deal. Plus, diversification opportunities with minimal legwork on your part while making a positive impact on local communities is pretty attractive. 

Even though these traits seem impossible to pass up, real estate syndications aren’t for everyone. Each investor is in a different stage of life, has a different level of risk tolerance, and maintains different goals. 

Before investing in a real estate syndication, see if one or more of the following describes you and your current financial situation.

#1 You Have More Than $50K of “Play” Money

While there are some real estate investment platforms that will accept smaller investment amounts, most private real estate syndications begin at a minimum investment of $50,000.

Ensure you have the minimum investment of $50,000, plus your standard emergency fund, and any other savings for your life’s aspirations. Think about it – a new car, fluffy retirement savings, this year’s vacation to Cabo, and college education funds, to list a few. 

Of course, there are many contingencies in real estate syndications, but if you aren’t prepared to lose your investment in its entirety and be okay financially, then syndications may not be for you …yet. You might want to head back to the drawing board with some serious savings plans and revisit real estate syndications in a year or two. 

On the other hand, if you have all the potential cash-needing situations in your own life covered, by all means, invest with confidence! 

#2 You’re Okay Having Someone Else Take the Reins

If you’re short on time, but heavy on cash, and want someone else (a professional team) to manage the property while you reap the rewards, you’ve found the right investment. 

Passive investing in real estate syndications is much less hands-on than your typical residential real estate rental property, in fact, you’ll probably never see the property in person and won’t be involved in any day-to-day decisions. 

You don’t have to be in contact with the broker, monitor the property manager, or receive and decipher contractors’ bids. Instead, you get a few emails, sign a legal doc or two, and carry on with your life while the checks roll-in. As a passive investor, you’re a first class passenger on a plane ride. So, sit back and have a cocktail.

#3 You’re Looking for a Long-Term Investment

You’ve done your research and know that crazy get-rich-quick schemes almost never workout.  So, you are looking for a steady long-term approach to wealth. Unlike stocks or other investments that you can flip quickly, real estate syndications typically have a hold period for five or more years. 

If you’re more of a set it and forget it type investor, and understand that your investment capital will be unavailable for longer periods of time, passively investing in real estate syndications may be your new obsession. Excellent returns with minimal time investment on your part.

#4 Sharing Returns In Exchange for Less Work is Attractive to You

Fix-and-flips and standard rental property approaches to investing allow 100% of the profits to flow into your pocket. Mostly because they are smaller deals, require plenty of sweat-equity, and have only one party (you) financing and managing the deal. 

Multifamily real estate syndications are completely different as there could be hundreds of individuals involved, thus some profit sharing. Usually, the passive investors get the larger portion of a 60/40 or 70/30 split, with the general partners getting the smaller percentage. 

Group investments like this take a “team” mentality versus a competitive mindset. The general partners are actively managing the property, making decisions toward renovations, and handling marketing and financial reporting. So, it only makes sense that they are rewarded for their efforts. If profit sharing and the concept of “a rising tide lifts all boats” makes sense to you, you’re in the right place.

#5 You Don’t Need the Money for a While

If you’re in a season of life where:

• Your kids’ college expenses are not an immediate concern
• You’re home doesn’t need a massive kitchen renovation
• You have adequate savings set aside to cover the unexpected
• and you are okay having your money “locked-up” for a bit in exchange for strong steady returns

Then this type of investment might be just what you are looking for.

Not needing your savings for the foreseeable future is a fantastic feeling, and if this describes you well, then you are in an ideal position to passively invest in real estate syndications. 

Recap

You’ll love being able to invest your money in real estate without the hassles of being a landlord, while also having the opportunity to invest in diverse markets and varied asset classes with multiple different sponsors. Plus, the tax benefits from passive investing will often surpass those from owning personal rental properties.

But, being a passive investor isn’t for everyone. So, if you…

• Have more than $50k of “play” money
• Are okay NOT having an active role
• Are looking for a longer-term investment
• Find collaboration and sharing returns attractive
• Want to park your cash for 3-7 years

…then investing passively in real estate syndications might be the best fit for you. 

The beauty of real estate investing is that it’s so incredibly diverse. Perhaps some of the above doesn’t describe you.  Maybe you want to roll up your sleeves and do the work yourself first to learn the ropes. Or perhaps you’re looking for a more liquid or a shorter-term investment. That’s okay.

There are so many opportunities out there to invest in great projects that positively impact local communities. Commercial real estate syndications are just one avenue.  

But, If you meet most of the criteria above, you may well have found the investment vehicle that you have been searching for.