Why I love investing passively in Real Estate Syndications (And why you should too!)

I’m headed out to a fun girls day out wine-hopping with my friends around the Hamptons. Out of the blue during my drive there, I got a call from my property manager.
“Hey, we’ve got some bad news. There is a car wedged into your property.”
I had to pull over… “Wait, what??”
She responds, “A car crashed into your property.”
These kinds of calls are the best, aren’t they?

At that moment, I wanted to just quit… sell the property, leave it as a loss and RUN! I really didn’t want to deal with the mess that came with something like this. While I couldn’t just do that in the moment, it definitely ruined my supposed day off and instead I spent all day on the phone with countless contractors, tow truck services, insurance, the police, etc in an area that had bad service.

It was months of calls and arrangements with insurance adjusters, contractors, tenants, the property manager, L&I inspectors from the city and on and on it went. It felt like a neverending nightmare! Honestly, to this day as I’m writing this post it’s still a battle I’m working through. 

How I got here

After around 13 years in the corporate world, I finally acted on what I always knew. I just wasn’t a good fit for what was expected out of me at work. I was hired to do a job the way I was told and that was it. Any creativity or suggestions for efficiencies were completely nixed, nipped in the bud! Whether it were managers, directors or a lot of times even colleagues, I felt a lot of animosity towards different approaches and ways of thinking. I always considered myself a little different, and this environment made me feel exhausted and low all the time. There was no fulfillment or impact in what I did. I was trading time for a paycheck, but I knew my time was worth so much more than this!

By 2019, I had a family and two very young boys who needed me. It wasn’t just a time thing, they needed their mom in her best and most ideal state to raise and support them. Every parent knows how demanding children are under age 3. I felt depressed and full of anxiety all the time. My confidence was at an all time low. I wasn’t where I needed to be in order to be the best mom for them. I knew something had to change! It was a scary move, but it was necessary!

I started learning more about real estate at the end of 2019 and into 2020. WOW! What a big world it was! I knew I was committed to investing in this particular asset class, but I didn’t know what exactly I wanted to do. I first landed on the BRRRR strategy on properties in Philadelphia. It stands for Buy Rehab Rent Refinance Repeat. It’s a little like a Fix & Flip, however instead of flipping (which means selling) I am holding it as a rental property. The biggest advantages in this strategy are the Refinance step, where I get to draw out all of the money I invested in both purchase and renovations using a Cash Out Refinance and long term appreciation by holding the asset. These properties would multiply our net worth thanks to the tried and true appreciation of real estate over time. The goal was to own the property with none of my own money in, and have tenants pay down the mortgage while I still made a nice cash flow on top. I did this once, and it was great! Then I scaled up to 4 properties, and that’s when the problems started coming all at once. It ended up taking far more time that I would have liked, especially with my priorities focused more at home with my kids. I didn’t want to be tied to my phone keeping tabs on property managers and contractors, let alone getting calls like the one above during times I least expected. 

So that’s what brought me to real estate syndications. As you read in the first blog post, Margaret was one of my first exposures to real estate investing. She was already in the multifamily syndications space and had told me all about it. I figured because I couldn’t scale as quickly as I hoped using the BRRRR strategy in SFH rentals due to time limitations, I could supplement by investing passively in multifamily syndications alongside my active investing ventures. The results were far beyond what I ever imagined! I thought my rentals helped increase my net worth, but the syndications supercharged it and I didn’t have to worry about tenants, showers leaking or cars crashing into my properties! I just saw a nice direct deposit every month coming into my bank account and reports of how the property appreciated whether it was through value-add renovations or just plain market appreciation in hot population and job growth areas. The best icing on the cake was finally seeing a refund from the IRS after almost a decade of paying nearly 6-figures annually to Uncle Sam in taxes. WOW!

What is a real estate syndication?

In the simplest sense, a syndication is a group investment. A group of investors pools their money to invest in something together. In the case of a real estate syndication, investors come together to invest in commercial real estate assets, like apartment complexes, self-storage buildings, and mobile home parks.

The beauty of a real estate syndication is that you can leverage other people’s time, energy, and expertise.

As a busy mom, I can use all the leverage I can get.

In a syndication, the sponsors are the active investors, the ones who know the ins and outs of that particular market, who spend time getting to know the real estate brokers, who visit the properties and walk the units, who pore over the due diligence documents, who work with the property managers day-to-day.

As a passive investor in a real estate syndication, I get to partner with a stellar team with a strong track record, invest my money in a great piece of real estate, and get great returns, all while doing next to no work.

Let me say that again, because I think it bears repeating. I get to invest in real estate without having to do any work.

Renovations running behind schedule? Not my problem.

Noise complaints from the tenants in apartment 2B? Not my problem.

Shower leaked into the first floor? Not my problem.

The sponsor takes care of all of that, and I get a neat little monthly report on the progress and updates.

As a passive investor, I can spend more time with my family and less time dealing with the headaches of being a landlord. #winwin

What’s the catch?

Okay, you’re thinking, this all sounds pretty good. But what’s the catch?

I hate to disappoint you, but there is no catch.

In a real estate syndication, everyone works together, and everyone wins.

Think of a real estate syndication like an airplane ride. The sponsors are the pilots. They do the active work of flying the plane. If a warning light goes off, the pilots deal with it.

The passive investors, on the other hand, are the passengers. They get to enjoy 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. They’re just along for the ride.

For their work, the sponsors get a cut of the deal, just as a pilot gets paid for their work in flying the plane. The lion’s share of the returns, though, go to investors, even though they’re doing the mouse’s share of the work (okay, I’m not exactly sure what the opposite of lion’s share is, but you get my point).

In a syndication, just as in an airplane ride, everyone works together and is going to the same place.

Interests are aligned, and everyone wins.

What do returns look like?

Just like when you invest in a rental home, the returns in a real estate syndication can vary, based on the asset, market, and business plan.

What I can tell you though, is that, on average, the deals that I invest in (which are the same deals that we offer to our investors) have a cash-on-cash return of 8 to 10 percent per year and are held for a projected 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 real estate syndications with us, you could expect around $8,000 per year in cashflow distributions. On top of that, when the asset is sold in year 5, you could expect another, say, $60,000.

In 5 years, you would likely turn your initial $100,000 investment into $200,000. All without lifting a finger or dealing with a single broken toilet.

How to Invest in a Real Estate Syndication

The process to invest in a real estate syndication is a bit different than buying a rental property. For one, you can’t just go up to a broker and ask about a syndication. It doesn’t quite work that way.

Rather, to find real estate syndication opportunities, you need to find sponsors who have deals currently under contract. Often, because of SEC regulations, sponsors cannot publicly advertise their deals, so they can be hard to find unless you know someone who knows someone.

Luckily, now you know someone who knows someone. (Hint: It’s us.)

At Noblivest, we specialize in connecting passive investors to experienced sponsors in growing markets. We do the heavy lifting of finding and vetting sponsors and deals. We cherry-pick the best deals in the best markets, and we make them available to our investors.

We’re investors first and foremost. 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 open up the investment opportunity to our investors as well.

What does Noblivest get out of it?

We’re in the business of helping people. We’ve seen firsthand the difference that great sponsors and syndications can make to a community. We’ve had tenants thank us profusely for the work we’re doing in turning their communities around.

We’ve also been thanked profusely by investors whom we’re helping to build passive income streams, so they can stop worrying about money and start living the lives they’ve always wanted.

As for how we keep our lights on, that part comes from our partnerships with the sponsors. We work hard to find great sponsors and great deals. When we find them, we partner up with the sponsors and join the general partnership.

As such, we get a cut of the sponsors’ fees and equity in the deal. That means that, as an investor, you invest your money directly into the deal; you don’t pay us any extra fees.

Ready to learn more?

The best way for you to learn more about real estate syndications, as well as our current, previous, and upcoming deals, is to join the Noblivest Investor Club.

Through the Noblivest Investor Club, you’ll get first looks at all the deals we offer. We’ll work with you to figure out your investing goals and to help you find the best deals to meet those goals. We’ll then walk with you every step of the way as you invest in those deals.

So if you’re ready to be done with the headaches of being a landlord, sign up for the Noblivest Investor Club below, and get started on your path toward becoming a passive real estate investor.

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