All Forum Posts by: Jim Pfeifer

I think the first decision you need to think about is whether you want to be passive or active.  From your post and subsequent comments, it seems that you want to be a passive investor.  This makes sense as I imagine even with a reduced schedule as a doctor, you probably have limited time to devote to real estate investing.  

I started as an active investor and I was not very good at it, I was fortunate to be rescued by the market which is not something that is possible these days.  I think to be effective as an active investor you need to have some kind of advantage over others in the market - rehab skills, market knowledge, time - something to give you an edge.  If you don't have any of that, you will likely generate better return investing passively - but it's critical to understand what it means to be passive.  As part of my journey, I bought turnkey single family homes thinking it was passive.  It was not - I had to find and evaluate the properties, find lenders, close the deals and then manage a property manage.  It was definitely not passive.

I started my true passive investing journey when I found real estate syndications.  It is still not completely passive - you need to vet the operator, analyze the deal and market - all before you invest.  But after you send the wire - you are completely passive.  You will collect reports and distributions (hopefully), but there is nothing else for you to do.  I found that the returns matched or exceeded my active real estate investments.  

There are downsides to syndication investing - these are long term investments that are completely out of your control and provide no liquidity. That said, it's ideal for busy professionals and if you do it right, you won't pay taxes on your gains.

I would recommend you join a Community of passive investors - this was a game changer for me as I was able to learn from others, collaborate and find quality operators.

Good luck!

Lots of great replies here!  I have invested with all three of the operators you mentioned, though for me, it's too early to tell the true result.  I think all three are high quality operators based on my experience with them thus far.

One of the important points that many people miss when they first learn about syndications, as @Matt A. mentioned is liquidly.  Syndications are long-term, illiquid investments that are completely out of your control.  The operator is the most important part of the evaluation when you are deciding on an investment, but you also need to think about when you will need your capital back - this is something that new investors often forget as they are excited to get going into investing in syndications.

The best way I have found to find quality operators and get educated about syndications is to join a Community.  BP is fantastic, but it really is more focused on active real estate and there are quite a few quality Communities who focus exclusively on syndication investments.  These are great places to go to learn and meet like-minded investors.

Good luck!

@Jake S.

I am a big fan of Vyzer.  It finally allowed me to ditch the web of Excel spreadsheets I was using to track everything.  They are super responsive to feedback - I sent them pages of notes and they have made all of the change requests I made.  Once I got everything uploaded, the process of adding new investments or distributions is incredibly easy - much easier than Excel!!

This is a great topic, with some awesome responses!  

The main thing I would add is that when I started my passive syndication journey my plan was to spend the first 3-5 years investing with as many (qualified) operators at their minimums.  My thinking was these are long-term, illiquid investments completely out of my control and the only way to really know if an operator is worth re-investing with is to put money with them in the first place and complete the cycle with them.  My plan was after this first 5 year cycle, I would know which operators I like the best and I would eliminate all but the top 2-3 operators in each asset class and I would invest above the minimums with these operators.

The recent difficulties that many operators are having has changed my opinion on these.  There are a couple high quality operators who had a great track record, were highly recommended by my Community and were very experienced - but they ran into serious trouble when interest rates spiked.  I don't really have a problem with the fact that interest rates caused some of their issues - that happened to a lot of operators and I understood their strategies with adjustable rate debt going in - the problem with these operators is they didn't properly execute their business plans.  No amount of investing experience with these operators would have exposed these flaws - they were new errors and they hadn't made them before.  This was a big problem for me as these operators met all of the conditions that I look for - track record, experience, highly regarded - and still had problems.

This made me change my thinking - I will continue to diversify by operator and deal and I will probably scale up as my wealth grows - but I don't think I will concentrate on just a few quality operators.  I think I will always diversify among multiple operators.

Quote from @Carlos Ptriawan:

Quote from @Jim Pfeifer:

Quote from @Carlos Ptriawan:

while S&P is performing way better, single home appreciation is doing good, so they're quite resilient even during recession. However multifamily/hotels/mall/office asset class are extremely volative and too much rate-sensitive.

It's no longer even about particular syndicator, basically some of your asset class can't survive interest rate.

For average Joe and Mary, best advice is just to simply put money into SPY/SGOV or direct SF home ownership. It's wayyyyy safer.

The biggest question to all GP is this : can all you GP guys survive if Fed does't change their rate or only reducing by a bit ? 

i am worried about you.

I am not a GP, I am a full time passive investor. Yes, most CRE asset classes are down but that doesn't make me want to run to the stock market or active real estate. Most of my investments are still cash flowing - the asset price went down, but I still receive cash flow. This is one of the biggest reasons I don't invest in the stock market - when you buy a stock or SPY, you are speculating. You are buying an asset and hoping you can hold it long enough to sell to someone else for more than you bought it. There is no, or very little, current benefit - there is no cash flow. With RE (active or passive), you invest in a real asset that provides (usually) a current benefit in the form of cash flow. When you sell, you will likely get appreciation - but that is not the main purpose of your investment.

Direct SF ownership might be safer - also, it might not be safer.   It depends on the market, the location and the type of single family home.  This is the same for any asset class - it depends on many factors.  You can share charts of the overall market in the U.S. but that doesn't tell you much about an asset in Cleveland or Dallas.  Real estate is local.

have not heard about dividend ?

REIT can generate cash flow and investor can always averaging down even when the NAV goes down. The position can also always be hedged so investor doesn't really lost a value while we receive the cash flow.

 I have heard about dividends!  I prefer my cash flow to be just a bit better than that.

I am happy investing in syndications and you are happy investing in SPY and SF active rentals.  I think that's fantastic - my main reason for posting is just to remind people that there are plenty of different ways to make money in (and outside of) real estate.  People should do what they are comfortable with and be careful when people use words like "don't", "shouldn't" or "can't" in such a broad context.  

Honestly, I have no idea if you can make money in the stock market or with SF rentals right now - because I am not doing it.  I can tell  you, that you can make money as a passive investor in real estate syndications - I know that because I am doing it.  It is definitely not as easy as it was a couple years ago and we have difficult times ahead - but that doesn't mean I think it's a good idea for everyone to stop investing passively and run to SPY or single family homes.  

Quote from @Carlos Ptriawan:

while S&P is performing way better, single home appreciation is doing good, so they're quite resilient even during recession. However multifamily/hotels/mall/office asset class are extremely volative and too much rate-sensitive.

It's no longer even about particular syndicator, basically some of your asset class can't survive interest rate.

For average Joe and Mary, best advice is just to simply put money into SPY/SGOV or direct SF home ownership. It's wayyyyy safer.

The biggest question to all GP is this : can all you GP guys survive if Fed does't change their rate or only reducing by a bit ? 

i am worried about you.

I am not a GP, I am a full time passive investor. Yes, most CRE asset classes are down but that doesn't make me want to run to the stock market or active real estate. Most of my investments are still cash flowing - the asset price went down, but I still receive cash flow. This is one of the biggest reasons I don't invest in the stock market - when you buy a stock or SPY, you are speculating. You are buying an asset and hoping you can hold it long enough to sell to someone else for more than you bought it. There is no, or very little, current benefit - there is no cash flow. With RE (active or passive), you invest in a real asset that provides (usually) a current benefit in the form of cash flow. When you sell, you will likely get appreciation - but that is not the main purpose of your investment.

Direct SF ownership might be safer - also, it might not be safer.   It depends on the market, the location and the type of single family home.  This is the same for any asset class - it depends on many factors.  You can share charts of the overall market in the U.S. but that doesn't tell you much about an asset in Cleveland or Dallas.  Real estate is local.

That is an interesting, but very narrow perspective.  There is certainly "dumb money" in passive investing just as there is "dumb money" in active investing.  It is possible to be successful in either - it depends on your skillset, your goals, your time and many other factors.  I have been both an active and a passive investor and I have better results in passive investing - even through this difficult market.

The key, in my opinion, to any kind of investing is to understand the type of investing you are doing, the goals you have and the current state of the market.  Some strategies and asset classes are better in different market conditions - but difficult times doesn't mean you have to abandon an entire method of investing!  Now is the time to be cautious and even more thoughtful in your investment choices, but there are still plenty of compelling reasons to stay the course as a passive investor! 

Quote from @Storme Whitby-Grubb:

Quote from @Jim Pfeifer:

I think it's important to really figure out how much time and effort you want to, and can afford to, put into being an active investor.  That is what you will be if you are buying properties - hiring a property manager does not make it passive.  At all.  I used to own multiple single family and multifamily properties and had property managers for all of them.  It was not passive - I was the asset manager and I had to deal with lenders, insurance, title companies and most of all the property managers.  I went through a number of PM's in every market I bought properties in and it was a constant time suck.  If you have a full time job AND travel a lot - will you have the time to devote to an active portfolio?  

You stated you want to be passive and have the RE income replace your W2 income - you don't have to invest actively to achieve this goal.  You can be a passive investor in real estate syndications.  You would effectively hire asset managers to manage the properties for you.  All of the work for you is up front - you need to vet the operator, analyze the market, evaluate the deal and then send the wire.  After that - you have nothing else to do but hopefully collect distributions and read reports.  There is quite a bit of upfront education you will need, but that's no different from active investing - you will definitely have much less to do after your investment.

In my experience as an active investor, unless you have a solid advantage - market knowledge, skills with a hammer - you won't beat the returns of passive real estate syndications where you have a professional asset manager handling your investment.  This is their full time job and if you choose quality operators you will have quality results.  You can absolutely use this strategy to replace your W2 income and it can happen faster than you think and without all of the hassles of actively owning real estate!

 Hopefully this doesn’t come across as hijacking this thread :) I’m in a similar boat as OP, and have lately been thinking syndication is the way to go. I’m on a few lists for accredited investors but the initial investment is usually very high (100k +). Can you recommend any syndicate funds or lists you like or follow? Thanks! 

This is a difficult question to answer as I don't have any information about your goals or strategy, which makes recommendations difficult - especially on a public forum.  There are plenty of operators, in many different asset classes, that have minimums of less than $100,000.  I also use a company called Tribevest to invest with groups which effectively lowers our minimums and increases diversification opportunities.  I also strongly believe that to maximize your success you should consider joining a Community that deals more exclusively with syndication investments.  BP is great for active investors, but it doesn't adequately address the needs of passive syndication investors in my opinion. Feel free to DM me if you want to continue the conversation!

I am a full time passive investor in real estate syndications.  I used to invest in active real estate.  It really depends on your goals, expertise and skillset to determine which might be best for you.

When I was an active investor, I wasn't a great asset manager - my properties never cash flowed as projected.  I was fortunate that the market saved me as the properties appreciated but it was not at all passive.  I think to be successful as a passive investor you need some sort of advantage - market knowledge, asset class knowledge or property management skills.  I didn't have any of those.

When I switched to passive investing, I was concerned that my returns would suffer.  They didn't.  I now hire asset managers to take full control of the properties - it takes a lot of upfront due diligence on the operator, market and deal, but after that there is nothing to do but read reports and collect distributions.  You need to be comfortable giving up control - these are long-term, illiquid investments completely outside of your control.  

You can be truly passive as a syndication investor - the key I think it to spend just as much time and effort on your due diligence as you do when you are buying an individual property.  

I have done both - I started as an active investor.  I wasn't good at being an asset manager and my properties never cash-flowed as I expected.  I made money because the market went up during those years.  I changed to passive investing and now I hire an asset manager to manage the property.  My job is to find and vet operators and analyze deals - after that, I just collect (hopefully) distributions and read reports as they come in.

There are benefits to both, but I think you need some sort of competitive advantage to be an active investor - specific market knowledge, ability to swing a hammer, ability to find and rehab properties - something that gives you an edge over the competition.  If you don't have that advantage, your returns might still be OK but you won't be able to beat the returns of a passive investor.  When I made the change to fully passive, I thought the performance would be lower.  It hasn't been - I believe that's because I am hiring asset managers who are full time real estate professionals who focus on an asset class in a specific market.  There is no way I could compete with them even if I was a full time real estate investor and I certainly couldn't replicate the diversification I get by being a passive investor in multiple asset classes and markets.

I am certain, and this Forum confirms it, that many people can be successful as active real estate investors - but being active isn't required to earn quality returns and achieve financial freedom as a real estate investor.

My advice - figure out your strengths and capitalize on them!