How do you prepare yourself to take all this money from WALL STREET somewhere that you've been taught your whole life is safe, to invest in a real estate syndication on 123 MAIN ST?
1) Educate yourself about the asset class that you are committed to investing in. This is important because as you know, all investments are susceptible to risks. In a real estate syndication, most risks are outlined in the Private Placement Memorandum (PPM). The PPM must be read by all investors. Additionally, an investor needs to have a good understanding of the Sponsor, the Market, and the Deal.
2) Know your investment capacity. It takes some time for a lot of us to save enough money to invest in a real estate syndication. Sometimes these savings are just enough for a rainy day. In syndication, capital is not liquid and is expected to be invested for a few years. If this capital is all you have for a rainy day, syndication may not be for you.
3) Invest your capital gradually over a period of time and in different markets. This helps you to mitigate your risks.
4) Have emergency reserves. As you work to replace your active income with your passive income, you may be relying on your active income to maintain your lifestyle. These reserves will be crucial in weathering the unknowns these days.
Awesome points. We always forget that how important reserves are
Great points! It is very important for all investors in a syndication to get the proper understanding of how the model works (for the protection of both the LP and the GP).
It is important that a potential LP be adequately liquid so that they are not putting themselves in a bad place financially if they choose to invest into a deal.
If an investor is new to to investing in syndications, a great idea is for them to ease into the investing by starting out with a reasonable investment and increasing it as their confidence grows.
It is always a good idea for anyone to have a cash reserves for a rainy day. Investing is very important if passive income is the goal, however being prepared for life's unexpected situations is not something to ignore.
Thanks for the value!