All Forum Posts by: Jim Pfeifer

If you are just starting out, I would recommend reading "The Hands Off Investor" by @Brian Burke.  It's a great introduction to this type of investing and gives you in-depth strategies for finding quality operators.

I would also recommend joining a Community that specializes in real estate syndications.  These are long term, illiquid investments that are completely out of your control.  The most important part is finding the right operator as they will manage the entire deal for you and the other investors.  A Community can be a huge benefit in finding those partners, as well as providing you with like-minded people who are looking to do the same thing as you.

Good luck!!

I think the first question is do you want to be an active or a passive investor? I used to own a portfolio of SFH and small MF properties and was an active investor. I wasn't a great asset manager and had trouble dealing with the property managers and just didn't like all that came with active investing - not to mention, I thought I was "passive" because I hired property managers. It took a lot of time and energy and the payoff in cash flow wasn't great. My timing was good and all of the assets appreciated but that was not due to anything I did - everything went up back then!

I transitioned to true passive investing by investing in real estate syndications.  There is a lot of upfront work vetting operators and analyzing deals, but once you send the wire, there is nothing for you to do but (hopefully) collect reports and distributions.  I sold all of my active properties and used the Lazy 1031 strategy to defer/avoid paying taxes on all of my gains.  I was able to change my real estate portfolio from active to passive without paying taxes.  

Currently, I am a full time passive investor and my cash flow and returns are much better than when I was doing it myself.  Just like I don't write my own legal documents or prepare my own tax returns - I leave the managing of my assets to professionals!

@J Scott Thank you so much for your kind words, I can't think of a better endorsement than that!!

 @Heather Manning I was looking to leverage the expertise of others and to help new people get into passive investing, so I started a Mastermind/dinner club in Columbus Ohio.  We were going to meet every month and talk passive investing and we planned our first meeting for March 18, 2020.  That was the week Ohio shut down for the pandemic so we never met.  We went on Zoom and because everyone was sitting at home with nothing to do, we got some high profile guests early on.  Our group grew as the demand for this type of knowledge -then and now - is immense!  Our Community grew to almost 1300 members - all focused on building wealth through passively investing in (mostly) real estate syndications.  

There are quite a few Communities out there.  It is important to find one where the culture fits your personality.  Ideally, you want to find a comfortable place to interact and network with other like-minded people.  I don't want to cross the line into self-promotion, so if you have questions about our Community please DM me!

I used to be a turnkey SFH investor and I thought I was a passive investor. It is not a passive activity, so be sure you understand that as you begin your journey! I spent a lot of time, money and effort managing the property manager and the whole process. It was a job. In my experience, you not only need to focus on the operator who is doing the rehab on the house - but just as important is how (or who) the property management is done. I went through multiple property managers and it was a constant struggle. A few years ago, I sold all of my active properties and found true passive investing.

Now, I am a full time passive investor in real estate syndications.  I hire an asset manager - they deal with renovations, adding value, managing the PM and everything else.  All of my effort and due diligence is on the front end - vetting the operator and analyzing the deal.  After I send the wire, I receive reports and distributions.

The proof is in the results - my syndication investments cash flow much better than my turnkey properties ever did.  The appreciation has also been equal or better on the backend.  Why?  Because I am hiring a professional to manage the asset.

I think you can beat syndication returns as an active investor - if you have a competitive advantage: you know a market better than others, you can manage the property better than others or you can do the rehab better - whatever it is, you need something that sets you apart.  If you don't have an advantage, you will just be an owner of turnkey properties and, in my experience, you will struggle compared to active investors and syndication investors.

To be clear - there are people who have success with turnkey SFH, but in my day job I talk to real estate investors all day and most that have invested in turnkey properties seem to have similar experiences as I had.

For LP's - definitely The Hand's Off Investor by @Brian Burke!

You have gotten a lot of advice here - I think the best place to start, as several have said, is how active or passive do you want to be?  Do you have a full time W2?  If you do, I can tell you from my experience, that active real estate investing is absolutely another full time job.  Even if you buy turnkey properties and call it passive - it isn't!  If you want to take on a full time job and you want to be actively involved in all aspects of managing the assets - then buying real estate would be the way to go.  BP has plenty of resources to help you with this.

If you don't want a full time job and you want to be truly passive, I would recommend passively investing in real estate syndications.  You will effectively find operators to invest with - they will buy the asset, manage it and send you distribution and reports.  Most of your efforts are up-front in vetting the operator and analyzing the deal.  This has its own challenges and I would recommend you find a specialty Community focused on helping LP investors learn how to become an effective passive investor.  These are long term, illiquid investments that are completely out of your control so getting so help from other Community members in vetting operators and analyzing deals will be critical to your success.

Good luck!

I was in a similar situation a few years ago and I decided to sell all of my active properties.  I now invest passively in real estate syndications.  You do NOT need to be accredited to invest in private syndications, though you will certainly work harder to find non-accredited deals - they are out there.

My main recommendations when people are getting into passive real estate syndications Are:

1. Read The Hand's Off Investor by @Brian Burke - it is by far the best introduction to syndications I have found and it also digs deep into analysis - of deals, markets and sponsors.  This should be required reading for passive investors!

2. Join a Community.  Real estate syndications are long-term, illiquid investments that are completely out of your control.  Finding quality operators is the most important part of syndication investing and it is very difficult to find them on your own AND be confident that they are quality asset managers.  When I started, I listened to podcasts to find sponsors and then called them up and talked to them for 30 minutes.  Then they would send a deal and I would have to decide if I was going to wire them $50,000 from just one short conversation.  That was scary and it didn't always work out.  Once I joined a Community, everything changed.  Now, I don't invest with a new sponsor unless they are recommended to me by someone in my Community who I know, like and trust and that person has invested with the sponsor.  I still do significant due diligence, but I am starting several steps ahead because trust transfers.

3. Check out this Masterclass on RE syndications - it takes you from what is passive investing all the way through how to vet an operator and analyze a deal.

Good luck!

If you invest passively in real estate syndications, you can use the Lazy 1031 strategy and have the bonus depreciation from your new investments offset the gains on your sales.  I did that a few years ago when I sold all of my active properties.  Much less hassle than the standard 1031 Exchange.

Absolutely agree with Jack and @Craig Lessler.  My CPA calls it the Lazy 1031 - I did it to defer all of the taxes from a sale of all of my multifamily properties a few years ago.  I was planning to go full time into passive syndication investing, so it worked with what I was planning to do anyway.  It will allow you to invest passively, defer your taxes, and  diversify your portfolio by market, operator and asset class.  You mentioned you are not familiar with syndications - join a Community!  It's absolutely the best way to find quality partners.