Are you considering passive investing?

Question

Are you considering passive investing?If you’re considering your first syndication and feeling hesitant, I recommend doing your research, connecting with other investors, reading through previous deals, and taking your time. Do Your Research The best way to build your investing confidence is through self-education and research. Listen to podcasts, read books, and find websites on real estate. Books: Rich Dad, Poor Dad by Robert Kiyosaki It’s a Whole New Business by Gene Trowbridge Principles of Real Estate Syndication by Samuel Freshman Podcasts: BiggerPockets Podcast Best Real Estate Investing Advice Ever with Joe Fairless Rod Khlief - Lifetime Cashflow Ask Questions Relevant Facebook groups and forums like BiggerPockets can help you learn what questions you should be asking. It’s likely that other people have asked about your same concerns and, just by reading through the forum’s questions and answers, you’ll gain clarity. Remember there are no dumb questions and that you have the right to be diligent about gathering answers to your concerns. Connect with Other Investors A successful investor needs a supportive community, and considering that syndication is a group investment, you’ll want to get networking. Any new investors will share similar anxieties, questions, confusion, and excitement. Experienced investors can provide invaluable firsthand accounts of their experience with various projects and sponsors. Find other investors through online forums like BiggerPockets, local networking events, or by asking sponsors if they’ll connect you to their current investors. Review Previous Deals Finding comfort with financial projections, summary data, and investment lingo may feel overwhelming. As you review more investment summaries, you’ll start to understand the flow of the deal packages, how each sponsor communicates, and exactly which investments interest you. Take Your Time Each new investment opportunity fills up quickly. This can make new investors panic and start to believe they are missing the best deals. Remember, there will always be another opportunity. Allow yourself time to complete the steps laid out here, so that when you make your syndication choice, you are confident about every step. Considering Everything If you take nothing else from this article, remember it’s completely normal to feel skeptical, anxious, and even timid when making your first syndication commitment. The ability to take action is what separates the successful from those who give up. I know many people in this forum strive to be active investors, but can anyone share their experience with passive investing? What questions/concerns did you have at first? What caused you to take action and go through with it? Were you happy with the experience and what would you have changed? Most importantly...what did you learn? Thanks for any input.

AJ Shepard · Answer

@Justin G.All great information. I would add Brian Burke’s book, the hands off investor, to the list. It goes through in depth how to consider syndication deals and really dives in a lot. All great content for those considering investing with a syndicator!

Arn Cenedella · Answer

@Justin G.To the point post - lays out concrete actions to help investors evaluate potential passive investments. There is a wealth of free and excellent education online. Folks should take advantage of it. After 40 years of single family rental house investing, I have made five passive investments in 2020 and love getting my monthly checks via ACH with no landlord responsibilities.

Taylor L. · Answer

"Take your time" is so important and not said frequently enough. As you said, there will always be another deal. No need to feel FOMO.

Marlen Weber · Answer

Excellent 101 on passive investing. Thanks for putting this together, @Justin G.

Evan Loader · Answer

Care to elaborate a bit more as to why? Do you speak from experience on the passive side?

Greg Dickerson · Answer

The first rule of passive investing is do your due diligence before you wire the money. Caveat Emptor.

Evan Polaski · Answer

@Justin G. to answer one of your closing questions: what caused you to finally take action? When I had to replace two roofs on two single families at the same time, and $12,000 went out the door. It made me realize that my budgeting for reserves was off. Thankfully I had capital to cover this cost. But I started doing the math on what my TRUE take-home was on my single families to hopefully NEVER be out of pocket for repairs, Capex, etc. When I did took this approach, I realized that my ROE was less than I could make in a syndication.Houses started getting listed, and money started moving from SFR to passive apartment syndications, and I am making more money with less work.I do have a different background than most, working for commercial owner/operators since 2007, so like to think I understand where assumptions make sense and how to decipher unrealistic underwriting.

Justin Goodin · Answer

@Marlen WeberThank you for reading!

Danny Randazzo · Answer

@Justin G. @Dan Handford has a great article about the red flags to consider before investing passively in any opportunity

Justin Goodin · Answer

I agree Greg. I am always preaching analyze the Sponsor FIRST and the deal second.