What beats apartment syndication returns for passive income?

[Kurt Granroth]

Say I am an accredited investor and I want to allocate $500k for a type of investment that should be capital preserving; completely passive; and generates $100k annually in income.  In general that's a tough row to hoe, as the classic truly passive income flows almost never get near 20%.  But it does seem like even (relatively) conservative apartment syndication deals do hit that mark, over time.

Here's my thinking.  I take my $500k and I invest it into apartments in an investment ladder, with $100k invested each year.  That could be one property at $100k or two at $50k each.  Each year I invest $100k more until after year five, all of my cash is in between 5 and 10 apartments.

A typical deal, from what I've seen, may return 8% annually in dividends and 175% (including initial investment) during a sale in year 5.  That's a 2.1x multiplier.  This is what it looks like to me:

The 8% isn't a lot and it will increase to only $40k a year when all $500k is in play.  But on year 5, I get the original $100k back plus an extra $75k, leaving my annual return at $115k -- just above my target.  I then take my returned capital from year 1 and invest it again.

After this, there's always my one or two properties from 5 years earlier going up for sale, and so my annual return will stay at $115k (22%) indefinitely, until I finally stop the ladder.

When that happens, I will temporarily have an extra $100k each year for 5 years.

On the surface, this seems like it beats pretty much all other truly passive investments for annual income generation.   Therefore:

1. What am I missing?

and

2. What is better than this?