Tax Free Passive Income Through Passive Investing

One thing we all have the same amount of is time. The same cannot be said of money. Too often there is more month at the end of the money than money at the end of the month. Most all of us work hard for our income, usually from the labor of a full-time job, and we feel like the only way to get ahead or afford the things we’d like to do is to work harder. We often are not able to enjoy the pleasures of life, the things we truly want to do or the time to spend with the people we want to be with. The choice faced seems to be a sacrifice of time to make money or a sacrifice of money to have time.

So how can you get ahead financially to buy the new house, or have the resources to visit loved ones, take the Italian vacation, save for your child’s college education, or put away extra for your retirement? And how can you do so and still have the quality of time to enjoy it all?

Passive income

Passive income is money you’re making when you’re not working or requires little to no effort to earn and maintain. It is that steady stream of cash you receive when money is working for you, not you working for money. Wealth, aka time or freedom, can be accelerated by having multiple streams of passive income. Passive income is what can build your wealth without sacrificing your time, allowing you to focus on family, lifestyle and luxury.

For some, the word passive can have a negative meaning or represent a sign of weakness or lack of involvement. When it comes to your money and your time, passive is not a bad thing. When it comes to income streams making money for you, there is an incredible power in doing so passively.

Passive Investing

There are a number of ways you can invest passively, where you are investing your capital, not your time, and not actively participating.

• Savings Accounts
• CD’s
• Bonds
• Dividend Stocks
• Robo Investing
• Real estate rental

Of the above mentioned, real estate is one of the best passive income strategies available. Specifically, one of the best investments you can make is passively investing in multifamily syndications.

Multifamily Syndication

A multifamily syndication is where you partner together with a group of investors to pool capital and resources to purchase an apartment building which would otherwise, most likely, be unobtainable as an individual. The group is formed as a limited liability corporation (LLC) with “General Partners” and “Limited Partners”. The general partners, also known as the sponsors or operators, organize the syndication, find the property, secure the financing, and hire or run property management. The limited partners are the passive investors. As the title implies, they do not actively participate in the management and operational execution of the property. Their involvement is an investment of money, not an investment of time. In return, the limited partners receive an equity share in the syndication along with cash flow distribution and profits.

Benefits of Passively Investing In Multifamily Syndications

You can grow your wealth without sacrificing your time.

The strengths and benefits of multifamily apartment investing are numerous, especially in comparison to stocks, bonds, and CD’s. In coming writings, I'll go into more detail on the historical superiority of multifamily investments, the below-average risk and above-average returns, and the cash flow (passive income) it produces. Tax free cash flow! The new tax law of 2017 has made it that your investment in multifamily can give you a tax free return on your passive income. Not only can it give you tax free cash flow on your multifamily investment, it can also reduce or eliminate taxes on your other passive investments as well. If you or your spouse are a real estate professional, your multifamily investment even has the potential of eliminating your personal income taxes altogether! These tax benefits associated with multifamily can truly accelerate your journey to wealth.

The strength of multifamily investment over the stock market is in large part due to the incredible power that real estate provides to the investor by way of Leverage and Principal Paydown. By leveraging, or using borrowed capital through a loan to purchase the multifamily apartment, you are able to buy more with less money which raises the return of investment. At the same time, through principal paydown, the rental income from the property pays all the debt service on the loan, thus increasing the equity. How great to have people give you money to purchase a property you want while other people pay your mortgage!

Passively investing in multifamily syndications allows you additional benefits of leverage. As a limited partner, you have the leverage of access to large investment opportunities without a large capital investment. You have the leverage of the financial strength of the syndication group to successfully acquire multifamily properties, and you have the leverage of the general partners’ time and experience to manage the asset while maintaining your own time.

Multifamily syndication allows you, as the passive investor, ownership interest in a property without having to be a hands-on landlord. No finding tenants, no fixing plumbing, no repairing broken appliances, no collecting rent, no eviction notices. Once you fund the opportunity, all you have to do is relax and collect payments in the form of quarterly or monthly cash flow distributions and a lump sum payout at refinancing or sale of the property.

Become A Limited Partner

By teaming with a multifamily partnership, you can earn a tax free passive income through passively investing. You can hold ownership in a tangible, physical asset not directly correlated to the stock market with a typically larger return on investment and all with less direct personal risk.

Time is a commodity. That’s why we say, “spending time” or “time spent.” Keep your time while building your passive income streams and, ultimately, your wealth.