How much profit can you expect from a real estate syndication?

SITUATION

I was talking to a friend the other day who was very frustrated about how every time our President Trump tweets about Russia and China, his stock portfolio drops! It seems like an emotional roller coaster for those investing in stocks and 401ks/IRAs; of course, I don't invest in Fiat currency... thats another story! I then proceeded to tell him about the returns on multifamily syndications.

BACKGROUND

First and foremost before we talk about any returns, a disclaimer must be said:

Actual returns can vary and we do not guarantee any return. "Projected" returns are just that projected!

With that said, you're still probably curious on how returns are projected in a multifamily syndication. It is important to understand these concepts when looking at any deal!

I don't want to bore you with complicated formulas so...

Let's keep this simple!

ASSESSMENT

First the basics! Let's start with some definitions.

• -Cash on Cash (COC)- a % return based on amount of dollars invested. For example, you invest $100, and you get $8 for the year. That is an 8% COC return! Yay!

• -Internal Rate of Return (IRR)- the IRR is the percentage of interest you earn on each dollar you invest in a property over the entire holding period. The timing of when cash flow is received has a significant impact on IRR. The sooner you receive your cash, the higher the IRR. (Don't hurt your head over this, keep reading and it'll make sense)

• -Equity Multiple (EM)- how much your initial cash investment multiplied over the entire life cycle of the deal. For example: you invest $50,000 and in 5 years after sale of the property, your total profit (COC +Sale) is $100,000. Thats an EM of 2x!

When we analyze deals we always look for these returns:

• Hold period- 5 years
• COC- 8-10%
• IRR- 15%
• EM- 2x

Example of a $100k Investment

• Total return invested = $102,351. (total member cashflow= $41,405 + $60,946 Net Proceeds/Profits from Refinance or Sale)
• IRR=17.35%
• Average COC= 8.28%
• Equity Multiple= 2X ($102,351+ 100,000=$202,351)

You start with $100k and you end with $200k. A nice 8% return on years 1-4, then a big POP of a 60% return on sale!

BOOM! This deal hits all our investment criteria! It's a great deal in todays mid 2019 market! But let's remind you, these are all projections and not guaranteed. Sometimes we've seen conservative returns, and sometimes much higher returns!

RECOMMENDATION

Take a deep breath. Relax. That wasn't so bad! After I explained the profits to my friend, I asked him if any of his stocks could double his money in 5 years. His response... nope! And with the way trade wars are happening, more and more people are selling their Apple shares and buying bonds, further decreasing bond yields.

Multifamily Syndications give you the control to create wealth. We don't wait for the market to go up and down, we take action and make it go up ourselves! That's what makes multifamily investing so fun and lucrative!

Did you know, if you do have a 401K/IRA, you can invest it in a multifamily syndication, tax free? Click here to find out more info!

Lets end with a quote:

Your field of focus determines what you find in life. Focus on opportunities and thats what you'll find - T Harv Eker