Is It Possible To Be A COMPLETELY PASSIVE Investor?

Question

How To Be A COMPLETELY Passive Investor

Possibly the most beneficial reason to consider investing in real estate syndications is that you have the ability to be a passive investor. In most investments like these, the investor is completely removed from the asset, the management, or the operational perspective of the investment.

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Here are the 4 main things to understand that I can think so that you have the ability to become a completely passive investor:

A. Fund trust in sponsor to handle all aspects of the deal performance

B. Upfront homework on the deal and projections

C. Passive investor is completeley removed from the asset management and sent bi-weekly or monthly emails on the property financials/updates

D. Good outside communication with the deal sponsor

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Do you think there should be other things to consider before trusting a apartment syndication? Is trust in the sponsor is important in order to invest in a apartment sydnication?

Jay Hinrichs · Answer

bi weekly or monthly reporting I don't think Is feasible or necessary for syndicators..  A great sponsor will save the day if you have won go Wonky..  a poor sponsor can take a great project and create a poor project.

Jay Hinrichs · Answer

that's a good Run Mike.. was pretty tough going through 08 to 2012 without getting bruised I know I did.. but here were are living to fight another day.. of course we do high volume smaller transactions so your going to have a loser in there.. right now I am sitting at a little over 1700 transactions the last 7 years.. of which 1600 or so we made our projected returns the others we might have come short or just got a capital back and a some we lost money on.. But the positives out weight the negatives for us.. but any lender with high volume like our company will do about the same.. NO one is perfect on our side of the table.. all you have to do is follow the crowdfunders.. some of those investors are sitting on 20 to 40% of portfolios not working..

Michael Ealy · Answer

I agree with @Jay Hinrichs

The sponsor track record and character is probably THE most important factor. They can make a mediocre project good and a good one, great.

If push comes to shove - worst case scenario - a good sponsor will even fund the project losses out of his pocket just to make the investors "whole".

Fortunately, I didn't have to do that as I am very selective with my projects and conservative with my undewriting, and I am blessed with a great partner and an awesome team. And so far, since raising investor capital in 2006, none of my investors have lost their capital with me.

Travis Watts · Answer

@Lennon Lee Absolutely! I have been 100% passive for the past several years via real estate syndications. 14+ and counting...Instead of managing tenants and property managers, I now spend time vetting out syndicators, always looking for track record, references, monthly reporting, the ability to see financials upon request and the ability to tour the property. Best of luck. DM anytime

Michael Ealy · Answer

Those are awesome numbers Jay.

Even though I have not lost investor capital, I have a few projects that did not pan out as I expected, but fortunately, I got my investors' money back on those deals. No one has a 100% success rate, not even Warren Buffett :)

And yeah, I agree with your assessment. Lately, I am seeing some apartment syndication deals that will lose money for their investors.

Jay Hinrichs · Answer

well for us we are not in one deal so if one tanks a little its made up with others.. so no one has just one deal.. But like I said in our sand box 100% success at our volume is not really possible  stuff comes up its just does.. market shifts a little..  something wrong with the asset that you could not forsee.. Like right now I have two title insurance claims I am going to get paid but they don't pay interest  :)  so technically they did not lose but they did not hit proforma.. and of course we have our Whales  were one deal makes up for 10 that did not work.. its all good.. just a difference business than what MF syndicators do that's all..

Is It Possible To Be A COMPLETELY PASSIVE Investor?

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