#218: The 9 Most FAQs I Receive From Prospective LPs Regarding Passively Investing in Real Estate
Feb 9, 2024
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The podcast discusses the FAQ regarding passive investing in real estate syndications, including eligibility requirements, investing with retirement accounts, expected returns, downside risks, distribution schedules, liquidity concerns, syndications vs REITs, deal structures, and the investment process.
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Quick takeaways
Investing in real estate syndications is open to anyone, regardless of whether they are accredited investors.
Investing in syndications with retirement funds is possible if you have a self-directed IRA or other self-directed retirement account.
Deep dives
Investing in Real Estate Syndications
Investing in real estate syndications is open to anyone, regardless of whether they are accredited investors. However, the type of offering will determine the requirements for investment. Reg D506B offerings can accept up to 35 non-accredited investors, while Reg D506C offerings can only accept accredited investors. The investment minimums for most syndications are around $25,000 to $50,000, and it is advisable for non-accredited investors to hold off on investing until they have sufficient liquidity.
Investing with Retirement Funds
Investing in syndications with retirement funds is possible if you have a self-directed IRA or other self-directed retirement account. This method allows you to invest in private real estate transactions and syndications, offering the benefit of investing without needing immediate access to the funds. Various custodians can help convert retirement accounts into self-directed accounts, allowing for investment in real estate syndications.
Returns and Risks of Syndication Investments
The return on investment in syndications varies depending on factors such as market, deal, and structure. Cash-on-cash returns typically range from 5% to 10%, while internal rate of returns (IRRs) range from 10% to 20%. Equity multiple, which measures total distributions relative to the original investment, can range from 1.5 to 2 or higher. Meanwhile, the downside risk for limited partners in syndications is generally limited to their original investment, as they are not personally liable for the debt or legal recourse of the project.
Are you looking to dive into the world of passive investing in real estate syndications but have a ton of questions? Well, you're in luck! Our latest episode of the Multifamily Wealth Podcast is a treasure trove of insights just for you.
In this special solo episode, I tackle the nine most frequently asked questions by prospective investors and LPs (Limited Partners). Whether you're a seasoned active investor or a curious LP, this episode is packed with valuable information to help you navigate the complex landscape of real estate syndications.
Here's a sneak peek of what you'll discover:
Who Can Invest in Real Estate Syndications? - Uncover the nuances of who can get involved and the types of offerings available
Investing with Retirement Accounts - Learn how to leverage self-directed IRAs for investing in private real estate transactions
Expected Returns on Investment - Get a grasp on the typical ROI ranges for cash on cash returns, IRRs, and equity multiples
Understanding Downside Risks - Find out how your investment is protected as an LP
Distribution Schedules and Methods - Discover how and when you can expect to receive your returns
Liquidity Concerns - Address the common concern of how to access your money when needed
Syndications vs. REITs - Learn the key differences between these two investment vehicles
Deal Structures Explained - Gain clarity on the legal and economic frameworks of syndication deals
The Investment Process - Walk through the steps from commitment to closing
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