Why I love being a Passive Investor in Syndications (30% IRR!!)
I haven't bought a standalone rental since 2015. Since 2017, I started investing exclusively passively in real estate syndications - in over 15 opportunities at the moment.
So far, the two than have fully exited have returned a 32% and 25% IRRs NET, respectively! I couldn't be more pleased.
This type of investing would highly recommend for those folks who don't want to be on the phone with lenders, property managers, insurance companies, trying to upload 100 documents to the lender, etc.
Recently, I sold a rental property and did a 1031 exchange. I have already spent a good 6-8 hours on the phone trying to coordinate with the seller, lender, appraisals, 1031 company, PM, inspection, etc. and I don't EVEN OWN THE PROPERTIES YET.
Single family rentals are not scalable. Even if you hire a PM you have to constantly coordinate all of this, and next thing you know, every month you are hearing about doing this repair or not, tree branches, sewer system, and evicting tenants. A PM will eat 60% of your cash flow to save 50% of your time, at best.
I had a great conversation with the CEO of a Property Management company in the NE, who himself has invested in dozens of rentals, and wanted him to sell me on the idea of owning rental properties instead of investing in syndications. Wasn't sold, and it wasn't even close.
You have to baby that investment for 30 years. I don't see the value proposition there from a ROTI (Return on Time Invested).
By that time, a passive investor in syndications who achieved a 15% CAGR on his money is a multi-millionaire many times over, without the lender calling him every year for an update on the insurance or HOA companies ;) I enjoy the freedom of living anywhere in the world, not having to track pieces of mail related to my rental properties.
Private Equity is where its at.