You purchased your single-family rentals for the right reasons you wanted to earn passive income and build wealth as you look ahead to the future to retirement, but as many other landlords have come to discover owning single family rentals is far from passive and building wealth seems like a long road ahead buying one property at a time.
Cash Flow is Weak & Vacancies are Expensive
Passive income for a landlord of a single-family home is practically non-existent, if you’re using a property manager to save your time and your sanity, your cash flow is significantly decreased and after mortgage payments, maintenance costs and admin fees, most landlord’s ROI is net 4%-6%.
A replacement of an AC unit and that $300 per month of cash flow that pays your car payment disappears for the next 12-18 months. Turnover of a tenant not only costs you paint, carpet and clean up but 2-3 months without rent payments while you seek that qualified tenant can be detrimental to your ROI.
Hard to Scale
Building wealth with a residential rental portfolio is lot of work; in this very competitive environment with a lack of inventory it will take a long time to get where you develop economies of scale.
Prices of affordable homes are at an all-time high and you can’t afford to just buy retail homes from your local realtor, you will want to find the best deals to achieve the highest ROI.
Marketing for those deals not only takes time and it pretty much a business in itself it will cost you more money to market to find those great deals.
Lastly, lending criteria is tighter and getting qualified for a loan to leverage your capital is much more difficult with all the uncertainty in this new Covid world we currently reside.
Investing Passively into Commercial Syndications
One of the only ways to truly have your money work for you passively in real estate is by investing in a real estate syndication.
Real Estate Syndication is the phrase used to describe the concept of pooling the resources of and bringing together several different real estate investors in order to do a large commercial deal
One of the most common and easiest ways to get into commercial real estate is by connecting with a syndicator, sponsor or operator, also called the general partner (GP).
The GP is responsible for finding the investment opportunities, underwriting the deal, organizing the financing, implementing the value-add business plan, managing the asset, and selling the property.
The Limited Partners (LPs) provide the capital to purchase the property, they are in a completely passive position and do not participate in the management of the asset.
The limited partners hold an equity position in the asset, so they receive all the benefits of owning commercial real estate without any of the day to day management stress and headaches.
Leverage Experience & Knowledge
The General Partners will have the knowledge, experience and team to be able to identify the best assets to invest in and have the road map to handle any issues or setback that may arise.
Your investment will be safe in their hands knowing it is being professionally managed as you receive updates on the status of the investment on a monthly or quarterly basis.
Forced Appreciation & Tax Advantages
The attraction of commercial real estate is how these cash flowing assets are valued and how you are able to force the appreciation of a property’s value. Unlike single family homes that are valued based on comparable property sales in the area, commercial properties are based on the income after expenses, its Net Operating Income (NOI).
The NOI produced is direct reflection of the owners and management ability to increase rents and reduce expenses.
As Operators we diligently work to identify and source off market undervalued properties that are not being properly managed, have deferred maintenance, or need a complete overhaul.
We then purchase and immediately repair or renovate as needed to bring the property into a position to command market rents and implement a standard operating procedure for management.
One of the most desired benefits of owning real estate is the ability to depreciate the asset not only against the passive income you receive from the cash flow but potentially offsetting your ordinary income as well.
Economies of Scale
Buying larger commercial assets not only allows us the benefits of lower management costs and lower renovation cost than single family houses, its allows you allocate your investor dollars into real estate quicker than buying one house at a time.
You are able to deploy $50,000 to $500,000 or more secured by valuable cash flowing real estate. You can diversify into different asset classes such as self-storage, mobile home parks, and industrial warehouses, all of which are the thriving in today’s economy.
Passive Is Better
If you tired of dealing with tenants and toilet, tired of viewing home after home just to lose out after a call for highest and best offer, tired of having to find a different market to buy in to get your desired ROI, I invite you to learn how to invest passively in syndications, learn about our current syndications and how to get involved in future opportunities.
If you’d like to get to know us better, join our Investor Key Club and once you sign up, you can schedule a 1:1 Investor’s Strategy Session.