Anyone building a portfolio passive multi-families investments?

Question

Looking for people who have found success in passive multi-family investment. Why did you start? What mistakes have redirected your path forward? Where you ever active and turned passive? Looking for active investors to share their stories.

Todd Dexheimer · Answer

We have a lot of completely passive investors. A few have quit their jobs and are just investing in syndications full-time, but most have their own business or job and are investing in our syndications.

Most of our investors started investing because they're too busy to buy and manage their own properties, but we have a lot that also got tired of being a landlord and/or realized they could make similar returns without the headache.

Make sure you know your goals and find sponsors that you align with. Don't chase the shiny return, but instead focus on the fundamentals.

If you have specific questions, please ask.

Evan Polaski · Answer

I will offer the story of someone that found NOT success in passive multi-family.

Ultimately, passive investing is ideal for those that already have very high net worths and/or plan to maintain their high incomes for quite some time.

My "not success" is based on many factors. Buying at peak (my 21 and 22 investments are likely complete losses), buying on floating rate loans, misalignment of sponsor (acq fee resulted in about a 5x+ return to sponsor day one.  Put another way: $2mm co-invest into fund yielded about $12mm in acq fees for sponsor).

I know my experiences are very limited in the universe of all passive investment opportunities, so take with a grain of salt.  And all of these issues were disclosed up front, so I take responsibility for not being more prudent in my diligence.  The sponsor had a great track record prior to that, and held in very high regard in the community.  They got greedy when capital was flowing, and I got greedy thinking the COVID boom would only die off slightly.

Jeremy Horton · Answer

What do you mean by active vs passive?

Active as in managing the property? Rehabbing the property and managing subs? Actively finding deals or using a 3rd party marketing/acquisitions team?

Passive as in managing the property or passive as in syndication?

Evan Polaski · Answer

@Garret Rumbea, to be fair the money I am likely losing also underwrote conservatively, at the time.  It just wasn't conservative enough.  And while they underwrote conservatively, they didn't structure the deal conservatively, in hind sight.

They have a pref in their deals.  They have tiered waterfalls, so I keep more if they only perform marginally better than a pref.  But at the end of the day, the biggest alignment will come from having real money in the deal.

I understand the point of an acquisition fee.  But I no longer invest in groups that the acq fee takes out all of their co-investment.  There will always be a misalignment of interest, but using a deal I am currently working on as an example:Purchase Price: $6.8mmAcq Fee: 2%GP Co-invest: $390,000GP Co-invest net of fee: $254,000

So if the deal starts going sideways, I still have $254k to fight for.  But if I didn't have any money left in deal, and it starts going sideways, my only fight is for the carried interest, which can be profitable, but the further a deal slips, the less I have to fight for.  So, again, a sponsor needs to have real skin in the game, not the illusion of skin in the game.  And we can discuss reputational damage all day, but I can't take that to the bank.

Garret Rumbea · Answer

Ah got ya. You're saying if the acq fee offsets or exceeds the sponsor's own capital investment there's no real incentive left to protect the downside (besides their reputation). Totally get that. Agree with what you said about structure being just as important as underwriting. Yeah, numbers don't matter if the sponsor can walk away whole while LPs take the loss.

Garret Rumbea · Answer

Hey Lindsey good to meet you. Currently I'm on the active side with the goal to eventually be fully passive. Happy to connect if you'd like to chat some more

William Thompson · Answer

Great question — I’ve seen both sides of that journey through my clients. Many start active (flips, small multis) and move into passive multifamily to reclaim time and reduce management headaches. The biggest mistake I see? Jumping into syndications without fully understanding the tax side — especially how depreciation, K-1s, and exit strategies affect your after-tax return. Once that’s dialed in, passive investing can be a real wealth accelerator.

What kind of multifamily opportunities are you currently looking into — syndications, funds, or direct LP deals?

Lindsey Jellig · Answer

Hi @Jeremy Horton exactly. Passive as in syndication or even less time spent with the property via investing in a platform like

https://www.mogul.club/

Basit Siddiqi · Answer

Real estate is never really passive.

You will either put the time upfront - such as analyzing the market, speaking with contractors, speaking with proprety management companies, etc.I think real estate can provide a better return than other investments(such as stocks, bonds, etc) and as such the extra time you are putting in should generate in a better return.

Garret Rumbea · Answer

Thanks for sharing. Really valuable perspective. A lot of investors got caught in that same storm with floating rate debt and aggressive assumptions. No one could've predicted how fast rates jumped, but it's a good reminder of how critical sponsor diligence and conservative underwriting are. My team and I typically structure deals with a pref and keep our acq fees enough to cover the upfront work but not so high that it misaligns incentives.

Anyone building a portfolio passive multi-families investments?

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