Although passive income plays a crucial role in ensuring our individual and family’s wellbeing, people are often confused about what it is, or how to obtain it. Put simply, passive income is money that we earn monthly that involves little or minimum effort. Stock dividends, rental income, interest on investments, and multifamily syndication are all forms of passive income, and generating passive income is one of the most essential steps towards retirement.
What is Real Estate Passive Income?
Real Estate Passive income is an incredible tool that everyone should include in their retirement plans. It differs from traditional investing due to the ease in which you earn returns on your investment. Traditionally, you depend on the stock market to increase the value of your investments over time. Generally, the longer your money is invested, the more it will grow. Passive income from the stock market is possible from investments that pay dividends. These dividends are a small way to generate low returns while your money is invested. These dividends can be thought of as a small reward for keeping your money invested for a minimum period in those stocks.
Most stock market returns come from selling stocks when their value has increased sufficiently to realize a good return. Usually, several buying and selling cycles of buying low and selling high are needed to compound and accelerate the return. This requires close attention to market dynamics and economic forces which is why most stock market investors elect to invest their money in mutual funds which are managed by so-called “experts.”
Unlike traditional investing, passive income generates returns continuously and with minimal effort on the part of the investor. What’s more, because you earn money every month without having to sell your investment, passive investment minimizes the risk of you running out of money when you retire. There are many ways to invest passively. My favorite? Investing in multifamily real estate syndication.
What is a Multifamily Real Estate Syndication?
A Multifamily Syndication is a form of investment in which investors pool their money together as a group. In multifamily real estate syndication, investors come together to invest in commercial, multifamily real estate’s assets like apartment complexes, self-storage buildings, and mobile home parks.
The advantage of multifamily real estate syndication is that you leverage other people’s time, energy, and expertise to ensure the success of your investment. In syndication, the sponsors, general partners, are the active investors. They manage the many responsibilities required, which include: knowing the ins and outs of that particular market, connecting with multifamily real estate brokers, visiting properties, analyzing the due diligence documents, and collaborating with property managers day-to-day.
“As a passive investor in multifamily real estate syndication, you partner with a stellar team that has a strong track record, invests your money in a prime piece of multifamily real estate, and generates high returns, all while you expend minimal effort.”
Why Invest in a Multifamily Real Estate Syndication?
It cannot be overstated that investing in multifamily real estate syndications is the most accurate way to make money without having to do any of the day to day work.
If the renovations are running behind schedule? It’s not your problem!
If you receive noise complaints from the tenants in apartment 2B? It’s not your problem!
If the tenant blocks up the sinks and floods two units? It’s not your problem!
Why? The sponsor handles all headaches, and you receive a regular monthly report on the progress and updates.
By being a passive investor, you can spend more time with your family and less time dealing with the headaches of being a landlord.
In multifamily real estate syndication, everyone works together, and everyone wins.
Think of multifamily real estate syndication as an airplane ride. The sponsors are the pilots: they fly the plane, and if they encounter turbulence or a warning light goes off, it is the pilot’s responsibility to handle it.
The passive investors, on the other hand, are passengers. Passengers are afforded the luxury of enjoying the ride while reading, watching a movie, or dozing off. They don’t have any responsibilities in making sure the plane gets to the right place safely because they’re just along for the ride. For their work, the sponsors receive a cut of the deal, only as pilots are paid for safely flying the plane. Unlike flying though, the lion’s share of the returns go to passive real estate investors even if they are doing the mouse’s share of the work. Passive investors are “first in line” to get paid.
In syndication, just as in an airplane ride, everyone works together and is going to the same place. Interests are aligned, and everyone wins.
What Can I Expect from my Returns?
Just like investing in a rental home, returns on a multifamily real estate syndication can vary based on the asset, market, and business plan.
On average, deals typically have a cash-on-cash return of 8 to 10 percent per year and are held for a projected term of 5 years.
When factoring in the profits from the sale of the asset at the end of the 5 years, the average returns are around 20 percent per year. Not bad, right?
In other words, if you were to invest $100,000 in one of these multifamily real estate syndication’s with us, you could expect a preferred return around $8,000 per year in cash-flow distributions. On top of that, when the asset is sold in year 5, you could expect another $60,000.
We specialize in connecting passive investors that are accredited investors to experienced sponsors, a general partner, in growing markets. We do the heavy lifting of finding and vetting sponsors and syndication deals. We cherry-pick the best deals in the best markets, and we make them available to our investors. So we’re always looking for deals that we want to invest in ourselves. When a deal meets our strict criteria, we invest our own money into the deal, and we
The generation of passive income is key to retiring comfortably, and early. Retiring early by investing in traditional investment vehicles (I.e., stocks, bonds, mutual funds) requires saving enough money to enter the stock market, then requires more work as you manage those investments over time (buying low and selling high) in several market cycles. Moreover, the money that you save with traditional investing will have to last you for a long time, and retirement calculators depend on you to use your investment to fund your retirement.
With passive income from real estate investing, you will generate income as you own the investment, without ever eating away at the principal invested. With multifamily real estate syndication’s, in 5 years, you would likely convert your initial $100,000 investment into $200,000–all without lifting a finger.