6 Ways To Unleash the Power of Passive Real Estate Investing: The Syndication

Real estate investment has long been hailed as a powerful wealth-building strategy, but not everyone has the time or expertise to actively engage in property flipping, BRRRR (Buy, Rehab, Rent, Refinance, Repeat), or other hands-on strategies. For those seeking a more hands-off approach to real estate, passive investment through syndication emerges as a compelling alternative, offering unique benefits that set it apart from other investment methods.

We were excited to have recently closed on a 20 Unit apartment building in Davenport, Iowa, through a syndication strategy. It brought together people we already knew and had a great relationship with. Friends, family, and also real estate agents on our team - working together and investing together to achieve a common goal. But why would someone utilize this strategy? Here are 6 top reasons:

Diversification without the Headaches

While strategies like flipping and BRRRR can yield substantial returns, they often demand significant time, effort, and a deep understanding of the real estate market. Syndication, on the other hand, allows investors to diversify their portfolios without the inherent challenges of actively managing properties. Instead of dealing with contractors, managing renovations, or handling day-to-day landlord responsibilities yourself, passive investors can entrust these tasks to experienced professionals. This is the "general partner" of the syndication. They are the one actively managing the vision of the property and ensuring that the strategy is followed to help the investors make money on the deal.

Limited Time, Maximum Returns

One of the primary advantages of passive real estate investment lies in its ability to cater to individuals with limited time resources. Flipping and other active strategies require hands-on involvement, making them less suitable for those with demanding careers or other commitments. Syndication allows busy professionals to enter the real estate market, benefitting from its potential returns without sacrificing their valuable time. You get to focus your time on the things you want: your current job, your family, your passions. Yet your money is still working for you in the real estate space, without you having to take the time to manage it.

Risk Mitigation through Collaboration

Syndication thrives on collaboration. By pooling resources with other investors, individuals can spread risk across multiple assets and projects. This collaborative approach minimizes the impact of potential setbacks, such as market downturns or unexpected property issues. While flipping or individual property ownership can expose investors to substantial risks, syndication provides a safety net through shared responsibility. One simple example is if you have a single family home, your income is dependent on that one tenant occupying the property and paying rent. It's either 100% of the possible income or 0%. If you have a 50 unit property, and one tenant doesn't pay, you still have 49 other paying tenants covering your income for the month, meaning you've only lost 2% of your income.

Access to Expertise

Do you know how to recognize a "good deal"? Investing in real estate syndication grants individuals access to the expertise of seasoned professionals. Syndicators, typically experienced in real estate transactions, are responsible for identifying lucrative opportunities, negotiating deals, and implementing strategic plans for the properties. Passive investors benefit from the knowledge and insights of these professionals, reducing the learning curve associated with individual property management. An analogy often used here is "bet on the jockey, not the horse". The real estate professional runs the show for you, allowing you to skip the learning curve yourself and partnering with great, experienced people.

Scalability and Portfolio Growth

Real estate syndication enables investors to scale their portfolios efficiently. Instead of committing all funds to a single property or project, passive investors can participate in multiple syndications, diversifying their holdings across various real estate assets. This scalability allows for a more gradual and controlled expansion of one's real estate portfolio compared to the more capital-intensive nature of active strategies like flipping.

Stability through Cash Flow

Passive investors in real estate syndication often enjoy a consistent stream of cash flow. Unlike flipping, where profits may only materialize upon selling a property, syndication typically involves regular cash distributions (often monthly, or quarterly). This predictable income stream provides a level of financial stability and ongoing returns, making real estate syndication an attractive option for those seeking a reliable source of passive income.

Summary

In the realm of real estate investment, there is no one-size-fits-all approach. The decision between active strategies like flipping or BRRRR and passive investment through syndication ultimately depends on an individual's goals, preferences, and available resources. However, for those looking to leverage the power of real estate without the hands-on commitment, syndication emerges as a strategic and lucrative alternative. By offering diversification, risk mitigation, access to expertise, scalability, and stable cash flow, real estate syndication proves to be an enticing avenue for investors seeking the benefits of real estate with minimal involvement. As the landscape of real estate continues to evolve, the appeal of passive investment through syndication is expected to grow, providing a pathway for investors to build wealth without the headaches associated with more active strategies.

To learn more about how we executed on a 20 unit apartment building, listen to our podcast episode here.

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