Rental Properties Or Real Estate Syndications – Finding The Best Fit For You

Blog Highlights:

• Single-Family and Small Multifamily Rentals Are Labor Intensive
• How Passive Real Estate Investments Are Different
• Finding The Best Real Estate Investment Fit For You

If you have experience owning rental properties you know the headaches and time commitments that come with being a landlord. You never know when unexpected issues or expenses will arise.  

I first got into real estate investing as a way to create passive income. I was working in the corporate world at the time and knew I wanted more independence and working for someone was not going to provide that. I was overworked and had no job security. 

In 2007, I bought my first investment property, a single family home. I continued steadily buying properties, eventually embracing the freedom to leave my corporate job for good. Fortunately, I discovered real estate syndications would allow me to scale consistently without having to take on the role of landlord.

Investing in residential real estate can feel like a never ending process. You’re responsible for finding the property, supplying the funding, handling all renovations, interviewing tenants and even acting as the maintenance crew. 

Unfortunately, when you’re in this cycle, there’s no end in sight. You have to repeat the draining process every time a tenant’s lease is up. Scaling becomes difficult because the varied nature of the properties and tenants don’t allow for solid systems to be in place. Even though you’re earning income as a landlord, you’re far from the independent lifestyle you’d imagined. 

Single-Family and Small Multifamily Rentals Are Labor Intensive

There are some advantages to investing in small multifamily rentals versus single-family homes. With a small multifamily property, if one tenant moves out, the other units’ tenants are still there to help cover the mortgage. Also common sense tells us it’s much easier to manage one property with multiple tenants than to manage multiple properties with only one tenant. 

While hiring a property management team does lessen the day-to-day load of bookkeeping, decision making and maintenance, you as the landlord, are still ultimately responsible for all the costs incurred. 

When managing rental properties, you may suddenly find yourself more weighed down with stress and to-do lists than ever before. What was intended to create an independent lifestyle, has become quite the opposite.

How Passive Real Estate Investments Are Different

If dealing with the stress of landlordship isn’t a comforting thought, you aren’t alone. Luckily, there are opportunities to invest in commercial real estate that are entirely passive. These investment deals are professionally managed and operated from the beginning to the end. Consider real estate syndications your rescue from the unexpected stress and expense of being a landlord. 

An article in Forbes reports that once investors begin to understand passive commercial real estate investments, they quickly choose syndications over owning rental properties. Here are why the reasons why:

1. Minimal Time Investment

Real estate syndications are truly passive investments. As the passive investor in a syndication deal, you simply put your capital in, collect your returns each month during the holding period then receive profits upon the sale of the property. 

There’s no landlord stress. In a syndication deal, the sponsor team and the property management team handle all the day-to-day operations, as well as any unexpected expenses.

2. Increased Diversification Opportunities

Real estate syndication sponsor teams have experience in various markets and asset classes. Partnering with a sponsor with boots-on-the-ground knowledge gives you limitless opportunities to invest in markets where you don’t have personal expertise. Relying on an experienced sponsor gives you the ability to quickly and easily scale your portfolio, while also mitigating risk. 

3. Attractive Tax Benefits

Real estate syndications give you pass-through tax benefits, similar to rental properties you personally own. Essentially, you receive tax-free passive income throughout the holding period of the deal, by writing off most of the quarterly payouts. 

As always, be sure to check with your own CPA to see if your personal situation will require you to pay taxes on the appreciation income you earn upon the sale of the property.

4. Limited Liability

A huge benefit to investing in a real estate syndication is that your liability is limited to your investment amount. For example if you invest $100,000, you’re only at risk to lose that $100,000. If something goes wrong during the life of the deal, you won’t be held responsible for the entire value of the property, nor would any of your other assets be at risk. 

5. Opportunity To Make An Impact

Rental properties allow you to make a difference in the lives of families, a few at a time. The wonderful part of investing with real syndications is the opportunity to impact hundreds of families and entire communities. 

Real estate syndications create cleaner, safer, improved communities. The positive impact on the environment isn’t something that can be achieved through investing in the stock market or mutual funds.

Finding The Best Real Estate Investment Fit For You

When trying to determine if active or passive real estate investing is right for you, it’s wise to consider your financial goals, as well as your lifestyle. 

Some property owners thrive on the day-to-day management of small rental properties. While for other people the daily operations are a time-consuming, draining process. Owning small rentals gives you irreplaceable experience, but it’s not a prerequisite for commercial real estate syndications. 

I found that when I partnered with quality operators and a syndication team, I was able to achieve the independence I wanted in my life, and this decision allowed me the freedom to travel and work when and how I want. 

Whether you choose to be an active or passive investor, investing in real estate is a great way to diversify your portfolio and mitigate risk. You’re letting your money work for you while also positively impacting families and communities in the process. 

If you’re interested in hearing more about the tax-advantaged cash flow gained from truly passive real estate investments, I’d love to talk with you! 

Be sure to join the Stryker Investment Club so you can have exclusive access to the numbers and details on past syndications I’ve done, plus a chance to get in on the next one.