Real Estate syndications are one of the most attractive alternative investments available to passive investors today.
And how do you go about getting started?
Maybe you've heard about the awesome benefits of real estate syndications, but you're a little unclear about how it all works.
Today, I'm going to share with you the basics of real estate syndication, how it works, who's involved, who can invest, and how to get started.
Before we dive into the who, what, when, and how…let’s start with the why.
The why for me and many other people is that it allows you to build up passive income to achieve financial freedom.
Attaining financial freedom with the stock market is very difficult to do.
As you know, you have to have a certain net worth – usually in the millions – and you live on 4% of the principle so you don't run out of money in retirement.
With real estate syndications, you don't need to do any of that, because you have tax advantages.
You are not only building wealth, but you also have cash flow, so you don't actually have to get into your principal at all.
You invest in real estate syndications to achieve financial freedom so you can control your time and have options.
This is due to five main benefits that you don't get with alternative investments, like the stock market:
- There’s below average risk. The way multifamily performs in a recession is exceedingly better than the stock market and other asset classes.
- The returns are above average.
- You get passive income to cover your expenses, so you can quit your job.
- You get extraordinary tax benefits that allow you to defer paying taxes…potentially forever.
- It’s an unbelievably good inflation hedge.
These are amazing benefits that you're not going to find in that combination anywhere else in any other investment vehicle.
So how do you get started?
Like anything, it’s not always what you know, but who you know. If you're looking to invest in real estate syndications, you have to know kind of what kind of investor you are.
Are you an accredited investor or a non-accredited investor?
If you have $200,000 in annual income, or $300,000, if filing jointly, or you have a million dollars in assets outside your primary residence, then you're an accredited investor.
If not, you’re going to be limited in some ways, but you can get around some of these things by becoming what’s known as a sophisticated investor.
Educate yourself around these different asset classes so you can say,
I'm not an accredited investor, but I'm a sophisticated investor. I've done classes and I've invested in real estate, (maybe in single family houses.) I’ve done these things outside the stock market.
Who's involved in real estate syndication?
The general partners and the limited partners.
General partners are the operators, the sponsors, the active investors – people who are finding deals, financing the deal, raising the capital, managing and dealing.
Limited partners are passive investors.
Limited partners have very little control sometimes, and the general partners make the day-to-day decisions, but at the same time, the general partner carries full legal responsibility. So if there's a lawsuit of any sort, the general partners have to deal with that and the limited partners are shielded. By law, their loss can only be whatever they invest, but no more.
Those are the two different roles in real estate syndication.
Next, there are different asset classes you might consider: self storage, mobile home parks, retail, office buildings, light industrial, and, of course, my favorite multifamily apartment buildings.
The reason I love this so much is because of the way it performs during recessions and down cycles.
Every asset class performs great in an upmarket, but in the down market, you can clearly see a difference. For example, retail offices during a recession are awful.
I do like self-storage and mobile home parks, but they’re just not my style.
So, If you want to get started in real estate syndications, on your path to financial freedom, there are two things you should do now:
First, continue to educate yourself.
That’s the best thing you can do to make smart moves with your money. I have a resource center that you should check out called Get Started With Passive Investing.
Second, start networking and create relationships with potential deal sponsors.
In fact, if you want to set up a call with our company, our investment firm is Nighthawk Equity. Head on over to NighthawkEquity.com, click the Join button, fill out a short form, and you'll be able to have a call with us so we can share some of our upcoming exciting opportunities with you.
Before you go, check out this special report just for you, What's the Best Investment – the Stock Market or Real Estate? It's gonna blow your mind!