Passive Income Via Real Estate Investing

There are two kinds of real estate investing: passive and active. Here, we are going to focus on those who earn a passive income via real estate investing.

When you become a passive investor, you become a limited partner in a deal. You provide private capital to an experienced, knowledgeable syndicator—like myself—who will use those funds to acquire and manage an apartment community.  

Gaining passive income through real estate is popular, in large part, because it is a low-risk approach. When you make these investments, you join an investment system that already exists, has been successful, and is run by a dependable syndicator with a proven track record. Just ensure that you understand the projected limited partner returns before investing, meaning the results are more certain. And, as long as the syndicator follows my Three Immutable Laws of Real Estate Investing, the project should exceed projected returns.

Partner with Experienced Syndicators

Passive income real estate investing can be risky because it requires you to place a lot of faith in your general partner. That person, along with his or her team, will be the one constructing the business plan.

This is why it is important to work with the right people. Since breaking into this industry, I have established myself as an investor you can trust. As I’ve gained control of more than $900,000,000 in real estate, I’ve helped people across the country gain the financial independence they seek through passive investing opportunities.

In this section of my blog, you will learn more about how to earn a passive income through real estate investing and how I seek passive investors for nearly all of my apartment deals. If you’re an accredited passive investor, please consider completing this form to potentially work with me.
Growing Overseas with Jennifer Bourdeau

Growing Overseas with Jennifer Bourdeau

For some professionals, the opportunity to relocate for a career is an exciting next step on their path to success. However, when Jennifer Bourdeau chose not to relocate for her career in the hotel industry, it led to an even more fulfilling adventure. She had always wanted to obtain an MBA degree, and with a reluctance to move for her job, she decided that the time to earn it was now.


Education Abroad

Accelerating her timeline, Jennifer Bourdeau started evaluating MBA programs, not only across the United States but across the globe. She enjoyed travel and realized that she might as well create an experience as she furthered her education. Jennifer landed on a year-long intensive MBA program located in Nice, France. Eleven years later, she remains based in the South of France where she is building her career and future.

“I decided to stay. I thought, ‘Okay. Let me give it a go. I will stay in France and try to find a job,’” Jennifer reflected. “I ultimately found a great job working in the travel industry, but in technology for travel.”


Financial Clarity

Jennifer Bourdeau was focused on building her professional acumen and career in France as a business consultant in product marketing, working with teams all across the globe. Throughout this period of growth, she sat down to examine her finances, which she was convinced weren’t enough.

“I took a look at my finances, and I realized that I had financial clarity. I thought, ‘Wow! I’m in a good position.’ Before that, I had always had this scarcity mindset. I didn’t have enough money. I needed to keep saving it,” Jennifer said. “I realized that I’m pretty comfortable right now and I can take some risks. And this aggressive saving that I had been doing had given me some options. One of the options was to say, ‘You know what? I’m going to take a break from the corporate world and try out something new.’”


Becoming a Full-Time Investor

At the end of June, Jennifer Bourdeau will be transitioning out of her corporate role and into a role that is solely focused on generating wealth and allowing her to make the most of her time: a full-time real estate investor.

Real estate was something that Jennifer dabbled in before leaving the United States. In 2007, she purchased a home that had significant equity in it. To ensure that she could continue owning it, unbeknownst to Jennifer, she started house hacking to pay the mortgage. Since then, her passion for real estate has only grown.

“When I moved to France, I became a passive landlord. I just rented the whole property with a property manager. I’ve done two new-build villas. We’ve also rented them seasonally. So that created quite a bit of income and a bit of work as well on our side to manage those rentals,” Jennifer shared. “I like active investing because it’s a direct reward and a direct reflection of my efforts. So every penny that is made, it’s because I did something well. Every penny that’s lost is because I did something wrong.”


Building a Team

Last year, Jennifer Bourdeau continued to diversify her real estate portfolio by investing in multifamily syndications. As she started in this new arena of investment, she realized that she needed to surround herself with individuals and operators who would help fill in the gaps in her real estate savvy.

“When I discovered passive investing, I had no team. I was so clueless. So I just consumed as much content as I could. I spent a really good amount of time upfront educating myself and learning who the players were in this space,” Jennifer said. “And from there, I started to create a little network. I discovered some investor groups. That is my team— these other investors.”


A Better Path to Success

Jennifer’s investor network is now more than one thousand people strong, with several hundred actively engaged in providing insight and best practices along the way.

“Now, my aim is more about creating wealth without creating a job. It’s been valuable to have insights and expertise and learning through sophisticated, experienced investors,” Jennifer reflected. “I just became disillusioned with this boomer’s dream where you go to college, you get a job, you buy a house, you get married, you stay dedicated to a company for so long, and then you retire at 65. I just realized there was a different way, a different path to get where I want.”



About the Author:

Leslie Chunta is a marketing consultant with nearly 15 years of experience in creating dynamic marketing programs and building brands for startups to enterprise organizations. She has worked agency- and client-side with high-growth companies that include Silicon Valley Bank, JPMorgan Chase, SailPoint, EMC, Spanning Cloud Apps, Ashcroft Capital, Netspend, and Universal Studios.


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Learn From These 6 Investing Mistakes

Learn From These 6 Investing Mistakes

While real estate investing can be incredibly lucrative, these investments come with the risk of moderate or even significant financial loss. Often, investing mistakes are tough lessons that come with a high price tag, but you don’t necessarily have to learn those lessons through your own experiences.

United Property Group Founder Dan Gorman has been investing in real estate for more than 22 years, and he has purchased more than $50 million in commercial real estate. Currently, he owns apartments, office space, and a few restaurants. While Gorman has enjoyed incredible success as an investor, he has also lost an extensive amount of money through mistakes with multifamily and commercial real estate. What can you learn from Dan Gorman?


1. Trusting Others With Skin in the Game

When Gorman reflects on some of his biggest financial losses and investing mistakes, he attributes them to not understanding the deals fully and relying on the advice of others. For example, many years ago, he was under contract to purchase a 120-unit apartment complex. The deal was complicated with financing involving bonds, low-income tax credits, and other unique sources of capital. Gorman admits that he did not understand the deal fully. He relied on the advice of others who told him it would be a profitable deal, but those individuals all stood to profit from the transaction. Gorman believes that they were advising him with their own agendas in mind.

Before closing, Gorman rightfully got cold feet. He tried to back out even though he stood to lose a large chunk of money at that stage in the transaction, but his attorney advised him that he could be sued for not following through. Ultimately, Gorman went through with the deal, and he lost a substantial amount of money for many years on end until he sold the property recently.


2. Failing to Understand the Transaction

Gorman recalls specifically asking his real estate attorney about one key aspect of the transaction, and his attorney could not explain that component of the transaction to him. In hindsight, Gorman realized that if an attorney who works with real estate transactions on a daily basis could not understand the structure, this should have been a red flag.

He warns others never to get involved with land contracts, lease options, bond financing, and other situations that are over their head. Take the time to understand all aspects of the transaction fully before committing to it.


3. Relying on Projections

This particular project was a rehabilitation project that involved putting $2.5 million into the property. The rents were below market value with a two-bedroom unit at the time renting for $650. The projection used by underwriting was $750 per month for these units. Gorman’s attorney advised him that the underwriting projections were too aggressive and that they may not be realistic.

Initially, Gorman saw dollar signs and ignored his attorney’s advice. However, he realized as the closing date approached that his attorney may have been right. This realization came too late because Gorman already had $250,000 of hard money invested in the deal. He has learned to use conservative, realistic projections that are based on actual market data.


4. Failing to Understand Contract Terminology

Ultimately, the 2008 real estate crisis led Gorman to go into default on the apartment complex. While he was not behind on payments, the lender backed out of the financing. The only option he realistically had was to file for bankruptcy. However, even though the multifamily property was owned in a protected entity, the bankruptcy triggered defaults in other investments that Gorman owned. Essentially, this one bad deal triggered the collapse of his investment portfolio.


5. Not Understanding the Tax Implications

In addition to dealing with the ramifications of bankruptcy and losing money on this 120-unit multifamily complex transaction, Dan Gorman was hit with a huge tax bill when he ultimately sold the property 15 years later. While he sold the property for exactly what he paid for it, he realized a net profit of $1.5 million. This was a surprise to him, and he states that he still does not fully understand how the calculation was made. Because of this net profit, however, he is now struggling to find a way to mitigate his tax liability with only a few months left in the tax year.


6. Overlooking Building Permits

This is not the only project that has provided Gorman with major life lessons. One of the more recent lessons that he has learned is tied to an office building that he rehabbed. He met with the building inspector and an official from the fire department to discuss his plans for the project, and they both told him to move forward with it. Through a miscommunication, Gorman believed that a permit was not required to do the work. Now, he is backtracking in an attempt to pull together all of the documents related to the permit. Unfortunately, this opened up a can of worms related to maximum occupancy, usage, and more. The project seemed fairly straightforward initially, but it has become overly complicated because he is dealing with the permit application process midstream.


Through his investing mistakes, Dan Gorman believes that residential real estate is easier to invest in than commercial real estate, but both require diligence. He is happy to discuss his investing mistakes with others in the hope that they may learn from them. At the same time, he acknowledges that he still has lessons to learn. Nonetheless, the mistakes that he has made have made him a more conservative, cautious investor.


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Steps to Stop Trading Your Time For Money with Kris Benson

Steps to Stop Trading Your Time For Money with Kris Benson

Kris Benson is like many other investors who are getting their feet wet with residential properties. He dreamed of generating enough passive income from a small empire of residential properties to pay the bills. However, on his journey toward making this dream a reality, he discovered a more efficient and effective way to make far more money through real estate investments.

Today, Kris Benson is the CIO for Reliant Investments, which is part of Reliant Real Estate Management. However, his incredible story began many years ago when he was a sales professional for a payroll processing company, ADP.


Growing Up on the Fast Track

Kris Benson did not intend to settle down with a wife and kids early in life. An unexpected pregnancy in his early 20s may not have been in the plans, but this was a pivotal moment in his life. This blessing in disguise actually caused Benson to put his nose to the grindstone very early on, and this ultimately took him on a path toward passive investing. In fact, if he has any regrets, it is that he did not start investing in passive income streams even earlier.

He initially worked for ADP, and he later transitioned to a sales job at Intuitive Surgical. Benson worked long hours and had the same thought that so many other people have. He wanted to stop trading his valuable time for money. The solution that he came up with was to build a solid stream of passive income. While Benson could have started a business, he understood that he was not creative enough to walk along that path. Investing in rental properties was the clear option.


Amassing a Small Empire of Duplexes

Benson’s initial investment goal was to slowly build a solid portfolio of two-unit residential properties. He figured that if he had 25 buildings that were producing $200 per unit per month, he and his wife could live a comfortable life without the need for a 9-to-5 job. After he had 22 units across 11 properties, however, he realized this plan was not going to work for him. Even with a great management team in place, he did not want to deal with the stressful hassles associated with residential tenants. He also did not want to endure the stress of purchasing many additional duplexes.

He and his wife decided to divest. They ultimately sold all but one of the buildings. The property that they continue to own is one that Benson’s brother currently lives in. At this point, Benson had capital available to invest, and he was looking for a more effective way to generate passive income.


Co-Developing an Apartment Complex

Benson made the move that many others make when they gain more experience and have more investment capital. He decided to invest in an apartment complex. While he does not recall where he heard the advice, he attributes this move to the idea that big deals and small deals require the same amount of effort and time. The difference is that you make less money on small deals. Essentially, Benson believed that the return on an apartment complex would be more aligned with his output.

He teamed up with a partner who he knew from his childhood. While his partner was a construction expert, Benson was the capital investor. The pair built a large apartment complex in four phases. Initially, the project required Benson to put out a $200,000 investment. However, a shortfall in planning required him to front another $270,000 after the first phase was complete. When only a quarter of the property was constructed, he was already committed for almost a half-million dollars. However, he says he never thought about not following through with the other three phases. They made up some of the initial phase’s overage on future phases, and Benson recouped the majority of his capital later through refinances.


Transitioning to Storage Investments

Finding additional multifamily investment opportunities was a challenge for Benson. Through his research, he decided to pursue self-storage properties. Specifically, the National Association of REIT Data indicated that self-storage properties had a 17% annual return for the 23-year period between 1994 and 2017. This is compared to a 13% annual return for apartment complexes during that same time period.

Kris Benson used a storage industry publication issued by MiniCo to research the top self-storage operators in the country. MiniCo’s publication listed the top 100 operators, and he personally reached out to the top 30 operators on the list to find investment opportunities. This was how he connected with Reliant Investments. Specifically, he met with Todd Allen, who is one of Reliant’s principal partners. Todd was responsible for finding investors, but he preferred to manage operations. With Benson’s strong background in sales, he was the perfect individual to join the team and head up the equity committee.

He proactively structured a deal with them that allowed him to earn equity in the properties for those he assembled investors for. This ultimately transitioned into an extensive amount of passive income for Benson and his wife. On top of that, Benson also joined the company officially as its CIO.


Reflecting on the Past

As he reflects on the past, Benson attributes his success to several pivotal points. While he was stressed by his duplexes, he does not regret starting his journey with them. Getting started is often one of the most difficult parts of real estate investments and investing in his duplexes got the wheels moving in the right direction. He also states that his most successful investment to date is the apartment complex. If he were to give advice to a new investor, that advice would be to educate yourself as much as possible. However, you also need to jump in at some point and be prepared to learn more along the way.


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Reasons You Should Rethink Saving for Retirement

Reasons You Should Rethink Saving for Retirement

Whether you’re hoping to become financially independent now or if you’re wanting financial independence when you’re ready to retire, the conventional methods to save for retirement will do little to get you there.

We spoke with Daniel Ameduri from Future Money Trends about his book, Don’t Save for Retirement. He gave us some of his best secrets for saving for the future and working your way to financial freedom. Daniel is out to disrupt the system and he was happy to share some of his best strategies with us.

Don’t Save for Retirement?

For most of us, when we were fresh out of college and entering our first jobs, we signed up for conventional savings plans like 401(k)s, mutual funds, and ETFs. We’re told that these plans are the best way to ensure our futures and make sure we’re taken care of in our senior years.

But these plans aren’t designed to bring wealth to the beneficiary and benefit those running the industry. There’s no way to get wealthy with these plans, nor is there a guarantee that you’ll even get enough money to live comfortably after you retire.

Daniel suggests taking your capital and investing in something that yields income. He thinks that investing in real estate is a much better way to build up savings for when you retire. You’ll create a passive income for yourself and be able to grow your wealth instead of waiting to see what you’ll get from funds that may or may not produce decent benefits.

Why Conventional Programs Are an Issue

People usually have a three-part plan: they have a 401(k) or equivalent from their job, their savings, and whatever they receive in social security. The average amount in a 401(k) is $58,000, which won’t last many people two years. Social security isn’t enough to cover the cost of living. Savings accounts aren’t worth much, as the interest rates are so low.

Simply put, these programs aren’t setting you up for a lot of comfort in the future.

Look at What the Wealthy Are Doing

One of Daniel’s best suggestions is to look towards the people who have the type of success you want to have. If you look to the middle class and emulate what they’re doing with their money, then you’ll stay in the middle class.

Instead, Daniel suggests looking to see what the wealthy are doing. When looking to the wealthy, he discovered that almost everyone with money was involved in some sort of real estate. That led him to get into investing.

Passive Income Is the Way to Go

Daniel has a slightly different opinion on passive income. He doesn’t suggest that people quit their jobs; instead, they should take the money they would be putting away for when they retire and invest it. The goal is to start with a small passive income with investments you can afford. Then keep putting your money back into it until you’re making enough to be financially free. From there, it’s up to you whether you want to quit your job and how you want to spend your money.

…But Passive Income Isn’t Always Passive

Some people will argue that property investment isn’t truly passive income. Active investing does involve some work on your part. You’ll spend time searching for properties, doing value-adds, and overseeing management.

Daniel feels that active investing is a small amount of work for what you get in return. Other types of investments that may feel more passive, such as stocks or REITs, won’t give you the same type of returns. The stock market is challenging, even for experts. REITs will give you some returns, but you’ll always be sharing with others.

If Others Can Do It, You Can, Too

Many people are reluctant to make bold moves, especially when it comes to their money. However, Daniel’s advice is to look around you and see how many people are finding success. If those people can do it, that means it’s possible. They don’t always have a special skill set — they are just determined to make their money work for them.

Find Someone Who’s Been Through It Before

Daniel is emphatic about working with people who are a few steps ahead of you, especially if you’re getting into an area where you’re not familiar. He tries to find someone who’s been through it at least once because he feels like he can learn from their experiences. Ideally, he likes to work with groups who were around during the 2008 crisis and survived.

Stick With What You Know

While many people will try to diversify and keep moving into new fields, Daniel suggests sticking with what you know. If you’ve found something that’s making you money, keep going with it. Become an expert and scale up from there. You stand to make a lot more money than dabbling in a lot of different types of investments.

Brutally Cut Your Spending

Daniel and his family didn’t have a lot of money when they first got started with their investments. They decided that building up a passive income was important to them, so they cut their spending as much as possible. You may have to forego luxuries like a new car or even expensive groceries for a while until you’ve grown your income.

Final Thoughts

Saving for when you retire is important, but it’s important that you’re making wise decisions with how you save. Conventional programs will only give you so much. If you’re aiming for comfort and true financial freedom when you retire, you should invest in properties and build up a passive income that will see you far into your senior years.


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Stop Using Projected Returns & Focus on This Instead

Stop Using Projected Returns & Focus on This Instead

There is a dirty secret that every passive investor should know about real estate syndications. And today, I’m going to share the truth.

Syndicators are wrong on projected returns 99.99% of the time.

It’s a guess at best. An educated, informed, well-intentioned… guess.

So stop using projected returns to make investing decisions.

You see, there are WAY too many factors impacting returns for us to provide an accurate projection. From rent growth to cap rates, there are numerous projections, and each assumption has an impact on returns. It’s hard enough to forecast next year’s projections, let alone the next five to 10 years! This is why you shouldn’t rely on projected returns to make investing decisions.

So instead of focusing on projected returns, focus on the fundamentals of the investment. In particular, there are four key areas to determine if an opportunity is actually a good investment.


The Four Keys for Passive Investing


The Market

When looking at markets, many people tend to focus on population growth. It’s an easy narrative. As more people move to an area, apartment demand increases, ultimately driving up rents. But in the words of ESPN’s Lee Corso, “Not so fast, my friend.”

Population is an important metric, but it is not the ONLY metric when looking at markets. You want to monitor employment growth and industry diversification as well. Other key metrics include rent growth and absorption rates. But these are just precursors to what you really want to know. Can you expect demand (and rents) to be higher in the future?

Population growth sheds some light at the macro level, but you’ll want to determine why demand will increase for the property you are targeting, opposed to somewhere else in the metro area. When selecting a submarket, pay attention to key drivers like proximity to interstates, nightlife, employment centers, and desirable schools.


The Operator

The person controlling the key aspects of the deal is one of the most critical things to consider when investing. You want an operator or sponsor who has the knowledge, capability, character, and consideration to effectively lead the deal. It helps to find someone who has a risk tolerance that aligns with your own, a clear vision for their projects, and a proven ability to get results.

You will depend on this person for their market knowledge and investment leadership so be sure it is someone you know, like, and trust.


The Asset

The tangible, physical property is certainly critical when investing. Older properties inherently require more maintenance. Lower-income properties typically encounter more wear and tear. Newer properties have fewer maintenance issues but often provide less cash flow. The age, condition, and upkeep of the building could mean the difference between a cash cow and a lemon in need of a little squeeze and some sugar.

The question is, do you prefer milk or lemonade?

It’s important to note that commercial acquisitions are actually business acquisitions. You are not just buying a physical structure, you’re buying a company. Because of this, you need to scrutinize the current performance and determine the upside potential.


The Business Plan

Speaking of potential, the business plan is the final area to explore when reviewing an investment opportunity. This plan should be well-constructed and deeply vetted, with a clear vision for execution. However, it should not be the only path to success. Even the best-laid plans can be forced to change, so it’s critical to work with an operator that has the ability, humility, and foresight to acknowledge that a change is needed and pivot accordingly.

Strong returns are driven by strong operators with a savvy business plan for a quality asset, in a good market. Not from OMs, spreadsheets, and pro formas. Stop focusing on projected returns and ensure you are investing with quality people and properties. When you do this, you are more likely to realize the returns you seek and mitigate some of the downside risks.



About the Author:

John Casmon has helped families invest passively in over $90 million worth of apartments. He is also the host of the #1 rated multifamily podcast, Target Market Insights: Multifamily + Marketing. Prior to multifamily, John was a marketing executive overseeing campaigns for Buick, Nike, Coors Light, and Mtn Dew:


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What Do Limited Partners Do for a Living?

What Do Limited Partners Do for a Living?

Those who qualify to invest in apartment syndications as limited partners are required to have a certain amount of money (net worth and liquidity) and investing experience.

But who are these people?

A common misconception is that only a “special” sort of person can passively invest in real estate. A savvy Wall Street broker, a billionaire tech giant, a hedge fund manager, and other such wealthy professionals. While these people absolutely do passively invest in real estate, thinking they are the only ones who invest cannot be further from the truth. In fact, as you will see if you keep reading, the most common passive investor is (probably) who you least expect. In fact, if I had to bet, I’d say that someone you know already passively invests in real estate.

Following are the types of people who most commonly passively invest in apartment syndication.


W2 employees

Arguably the most common passive apartment investor works a full-time W2 job. These are individuals who’ve reached a point in their careers where they have a high enough salary or made enough investment into stocks, IRA, 401(k), or other investments to meet the SEC’s accredited investor status.

I have met passive investors who work W2 jobs in nearly every industry. Examples include:

  • Physicians
  • Dentists
  • Technology sales
  • Engineers
  • Oil and gas executives (often engineers who’ve transitioned into management roles)
  • Commercial pilots
  • Fortune 500 executives
  • Attorneys
  • Professional athletes
  • Authors
  • Composers
  • Actuaries

People with high-paying W2 jobs decide to passively invest in apartment syndications because they work long hours and enjoy what they do, but they also want to beat the returns they are receiving on their other investments, like IRAs, 401(k)s, and the stock market.


Small business owners

These are self-employed individuals who’ve scaled a business to the point where the revenue generated or value of the company allows them to meet the SEC’s accredited investor requirements.

Examples of companies owned by small business owners who passively invest in apartment syndications include:

  • Landscaping companies
  • Architectural signage and lighting companies
  • Construction companies
  • Restaurants
  • Franchises
  • Health machinery companies
  • Grilling accessories companies
  • Office water cooler companies
  • Exposition companies
  • Technology companies
  • Voiceover actors
  • Golf cart supply companies

And the list goes on, because being self-employed, small business owners are heavily taxed. Therefore, they are attracted to passively investing in apartment syndications because they can get tax benefits. Also, they are busy running a small business that they are passionate about. They don’t have the time or the desire to go out and actively invest in real estate.



People who retire from a W2 job or who sell their small business also passively invest in apartment syndications. They have a lump sum of cash that they want to put to work while enjoying their retirement.


Professional full-time passive investors

These are individuals or groups who — using their own money, other people’s money, or both — operate a business that exclusively passively invests. They either exclusively passively invest with one or multiple GPs or they invest in a wide range of passive investment opportunities (apartment syndications, REITs, stocks, start-up businesses, etc.).

Examples of full-time passive investors include individuals who accumulated a high net worth and quit their W2 jobs to passively invest full-time or institutional investment firms like private equity companies or family offices.

A professional, full-time passive investor will choose to invest in apartment syndications because they can achieve higher and less risky returns compared to other passive investment opportunities and/or diversify their portfolio.


The GPs

It is common (and ideal) for the GPs to invest in their own deals. GPs will choose to invest in their own deals to create an alignment of interest with the LPs and to convey their confidence in the deal.


Real estate professionals

Individuals who invest in other types of real estate will passively invest in apartment syndications that generate enough income or have a large enough net worth from the active real estate business to meet the SEC accredited investor requirements.

Examples of real estate professionals who passively invest in apartment syndications include:

  • Fix-and-flippers
  • Buy-and-hold landlords
  • Short-term rentals
  • Developers
  • Commercial real estate investors (self-storage, mobile home parks, retail, medical, office, industrial, etc.)
  • Real estate agents
  • Commercial brokers
  • Mortgage brokers and lenders
  • Property management companies
  • GPs on other apartment syndications


If this type of individual is an active real estate investor, they will choose to passively invest in apartment syndications to diversify their investments, since they are usually focused on one asset class. For the non-real estate investors and real estate investors alike, since they work in the real estate industry full-time, they can qualify for the “Real Estate Professional” tax status. This allows them to use passive losses to offset the income generated from their active business.

Most likely, this person would choose to invest in apartment syndications to diversify their investments because they are usually exclusively investing in single-family homes or smaller multifamily properties. Additionally, the IRS has a designation called “Real Estate Professional” where passive losses can be used to offset non-passive income.


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How to Succeed as a Real Estate Investor While Working Full-Time

When you work in a high-earning job, you may wonder what the best use of your money is. You likely want to take measures to secure your and your family’s future and find ways to become less reliant on your day job.

We spoke with Peter Kim, who’s something of a triple threat, about how he manages working full-time, investing in real estate, and running a blog. He shared his best-ever tips with our audience to help them get started in the industry.

If you want to learn more about putting your money to work, balancing work and family life, and carving out space online, read on for some of Peter’s top advice.


How to Get Started in Real Estate Investing Even When You’re Busy

If you’re working a full-time, high-paying job, you’re likely busy for many hours each day. Throw in a family, especially one with small children, and you may feel like you have nothing left to give when it comes to starting a side business.

Peter’s advice is to prioritize. You obviously have to spend time on your primary job and family, but what do you do with the rest of your time? If you truly want to succeed in real estate, you may have to sacrifice your free time, especially in the early days.

Kim would often stay up for hours after his kids went to bed, sacrificing his free time and his sleep, to get his business off the ground. He worked his way into the industry and eventually his late nights paid off.


Transitioning From Being a Passive Investor to an Active Investor

Peter started with passive investing for a few reasons. First, he felt that he didn’t know commercial real estate well enough to do a lot of it on his own. He started with crowdfunding and syndication initially because it was less risky and was a good way for him to learn the ins and outs of commercial investing.

As someone with a high-earning job, it can be challenging to change your mindset to other types of earning. You’re used to actively putting in the hours at your job in exchange for money, but with real estate, you often do a lot of research and work upfront, but then you have to be patient while you wait to see results.

As he grew in confidence, he got into active investing. He started with a single-family home and then worked his way up to multifamily commercial properties. He does well as an active investor, but he didn’t stop passive investing either.

Peter’s strategy is to diversify his business. That way, if one of his investments isn’t doing as well, he has others to fall back on. Passive investing is also a good way to earn money without having to continually put in long hours. If you go through a busy time at your day job, you’ll still be earning through your passive investments.


What to Look for in a Syndicator

Peter puts a lot of emphasis on finding the right syndicator, especially when you’re just getting into commercial investing. Since the syndicator will be making decisions on your behalf and those decisions will affect your finances, you want to make sure you have someone who knows what they’re doing.

When vetting a syndicate, you want to first find candidates who’ve been in the game for a while and have some experience with the type of investments you want to do. Look into their track record. You want someone who is successful. Some failures are okay too; a lot of it comes down to how they navigate difficult situations.

The next thing to look for in a syndicator is who else has invested with them. If there’s someone you know and respect who also invests with that syndicator, then that’s a good indication that they’re good at their job. Finally, you want to meet with any potential syndicators. Even if they have a good reputation, you want to make sure that the two of you get along and that they understand your needs and concerns.


Don’t Wait — Just Jump in and Learn as You Go

When people decide to get into commercial investing (or any new business venture), they often spend a lot of time researching, going back and forth between passive or active investing, and basically just waiting around until they feel comfortable spending money.

The problem is, you’re never going to feel 100% confident about an investment, and if you wait around until you do, you’ll never invest. Peter’s advice is to do a little research, then dive in. You’ll be taking some risks, but you can learn as you go.


Blogging and Real Estate Investment

Peter started blogging as a way to give his friends advice about getting into commercial properties. He didn’t expect his blog to blow up the way it did, but once he saw the opportunity, he seized it. He discovered that his blog was another way to make money, and he’s used it to grow his income.

Although it takes up more of his time, Peter makes sure he’s consistent with his blog and posts often to keep his readers coming back. If you’re interested in starting a blog, you don’t have to be an expert. Peter said that when he started, he was by no means an expert on investment — he was just a few steps ahead of his readers, and thus able to offer advice.


Final Thoughts

If you’re in a high-earning field, you can make your money work for you so that you don’t always have to rely on your income from your job. It can be time-consuming, but if you’re willing to put in the work and sacrifice some of your free time, it can definitely pay off.


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5 Things to Expect After Investing in First Real Estate Syndication

5 Things to Expect After Investing in Your First Real Estate Syndication

You’ve selected a commercial real estate sponsor and invested in your first deal. Once the due diligence is completed and the deal is closed, what comes next?

Here are some insights into what a passive investor can expect after investing in their first deal.


1. Deal Updates

Nearly every syndicator will approach investor communication differently, but most will send some sort of deal update via email. The ideal frequency is every month, but some sponsors elect to send deal updates on a quarterly basis.

The first email will notify you of the closing. Ideally, the email is sent the day of closing and includes a FAQ-style guide that answers common questions, like:

  • When, how, and how much you are paid (first-time and ongoing)
  • Contact info of the point person
  • When you will receive deal updates, and what the updates will entail

Each syndicator’s deal update communication will also be different. Typically, important operational metrics are included, like occupancy rates, preleased occupancy rates, and collections rates. If these metrics are nowhere they are supposed to be (which depends on the investment strategy), then an explanation of the problem and the proposed solution should be communicated.

For value-add opportunities, updates on the number of renovated units and rent demand will be included. The important thing here is how the actual rent premiums compare to the projected rental premiums. If actuals are below projections, an explanation of the problem and the proposed solution should be communicated.

Other information a sponsor may include in a deal update email includes capital expenditure updates, market updates, and resident updates. They may also include details on other investment opportunities available.


2. Financial Reports

Another best practice for real estate syndicators is to provide actual financials on the investment. The most common financial report is a profit and loss statement, which breaks down all income and expense line items. This will promote transparency and allow you to see exactly how the investment generates money and where the money is going.

Quarterly financial reports are the most common frequency. However, more and more syndicators are using investor portals to manage their passive investors. If you are investing with such a syndicator, you may be able to access financial reports more frequently.


3. Distributions

At some point after closing, you will begin to receive distributions. The amount and frequency of the distributions will vary based on the syndicator and the investment strategy. For example, core or value-add investments may pay out distributions immediately while opportunistic and distressed investments may not pay out distributions for a few years. However, you should know the amount and frequency of distributions prior to closing, and the syndicator should adhere to those terms. If the amount or frequency of distributions does not align with what was originally communicated, the syndicator should provide an explanation in the deal update.

Eventually, once the investment is sold, you will receive your original investment plus any profits, when applicable.


4. Schedule K-1

The Schedule K-1 is the report the sponsor sends to you each year for your tax returns. Once a year, you should receive your personalized Schedule K-1 tax report. Oftentimes, sponsors will communicate the timing of the K-1 in the FAQ portion of the original closing email.


5. Educational Content

Many real estate syndicators create educational content for their passive investors. This could be in the form of an exclusive newsletter or webinar, a specific section on their website, an eBook, blogs, podcasts, and/or YouTube videos they post to their website, etc. The purpose of this content is to help you learn more about what you are investing in.


5 Things to Expect After Investing in Your First Real Estate Syndication

After you have invested in your first real estate syndication, expect to receive deal update emails and financial reports from the syndicator. Based on the timing outlined in the PPM, you will also begin to receive distributions.

Once a year, you will receive a Schedule K-1 report for your tax returns.

If you want to be proactive and learn more about what you are investing in, the syndicator may offer additional educational resources, either by sending out a newsletter or posting information to their website.

Bottom line: you can be as active or as passive as you want. You can do nothing except check your bank account each month, or you can read every deal update email and financial report. My advice is to be active in what you enjoy and passive in what you don’t enjoy.


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How to Generate Passive Income

How to Generate $120,000 in Passive Income Working One Hour per Week

Who doesn’t want to work less and make more money? We recently talked with Anton Ivanov, who spends just one hour each week managing his investment properties and makes $10,000 a month in passive income.

But Anton’s business wasn’t built overnight. Below, we’ll share his tips for passive investing in commercial properties.


Don’t Be Afraid to Start Small

Everyone gets into real estate investment wanting to make the big bucks, but it’s rarely possible to generate a huge income in the beginning unless you’re fortunate enough to have a lot of start-up capital.

Instead, think about starting small. Start with just one property and then invest in another once the first is doing well. Keep putting money back into investing and eventually you may see exponential growth.


House Hacking Can Be a Great Way to Get Started

One of the best ways to generate passive income with little money is through house hacking. House hacking involves buying a rental property and living in one of the units while renting out the others.

You’ll often be able to cover your housing costs and have more money left over to focus on growing your investments.


Start with Turnkey Properties

If you listen to any investment advice, you’ll often hear talk of value-add multifamily properties and how much money there is to be made there. However, you may want to start with turn-key properties, especially if you’re just getting started and have little to invest.

Turnkey properties allow you to start renting and generating an income quickly after purchase. Once you’ve made some money, then you can turn to value-add properties.


Move On to Value-Add Properties When You Have More Experience

Once you have experience working with multifamily properties and know an area well, it’s time to move on to value-add multifamily properties. You’ll have a good understanding of how the market works and which commercial properties will yield good results. You can significantly increase your income with these types of properties, but you’ll need some money going in.


Find the Right Properties

It kind of goes without saying that the properties you choose can make or break you. However, there are a few things you need to consider to help you find the right properties.

Obviously, you want to choose properties in an area where the rent is high enough for you to make a comfortable profit. You’ll also want to look in markets where the economy is doing well, and employment is up. These areas are likely to have lots of people looking to rent.

Try to find properties that are also in areas where the real estate is appreciating. If you decide to sell, you can get even more money, and if the property didn’t make as much as you’d hoped, at least you can make something off the sale.


Consider Looking Out of State

If your location isn’t a great place for real estate or rental properties, you may need to look out of state. Start researching to find cities that are medium-sized and going through a growth spurt. If you’re lucky, you can get in at just the right time.

You’ll want to stick to your criteria. Find a place where the rent is high or going up and where property values are on the rise.


Scope Out the Area

Once you’ve settled on an area, it’s a good idea to visit, especially when you’re not familiar with the neighborhoods. Things often look one way online and can look quite different in person.

Spend time riding around the neighborhoods and talking to locals. You’ll be able to get a sense of where the best areas are. You can also check out potential properties in person.


Network with Other Investors

One of the best moves you can make is to network with other investors, particularly those who are involved in the same type of investing as you and are located in the area where you’re looking to make a purchase.

It’s important to meet with investors in the property area because they’ll be able to give you some good advice about the areas and types of properties that do well. You may see other investors as competition, but you can be much more successful as allies.


Find Great Property Managers

To be more hands-off with your properties, it’s essential that you hire great property managers. These are the people who will be acting in your stead, so you want to make sure you get the right people.

You’ll want to start by meeting with different property managers to see who will be a good fit for what you want. It’s not enough to go on another’s word about a manager because what works for them may not work for you.

Once you’ve found a property manager, take the time to train them. Be clear about what you expect and make sure you both agree on everything before you hire them.


Hire a Great Team

Beyond property managers, you’ll also need others to help you. Meet with all contractors and anyone else who’ll work on your property. Make sure everyone is on board with your expectations. You’ll save yourself a lot of headaches if you’re clear up front.


Research and Take All the Variables into Account

You need to do your underwriting before making the final decision on a property. Do plenty of research and don’t just get your information from one source. You should check online records and reviews and talk to people with experience in the area. If you only go to one source for research, you run the risk of overestimating the potential of a property.

Don’t just look at cash flow and the real estate market when it comes to a property. There are other variables to consider, such as the cost of any renovations and maintenance. What’s the vacancy like? Make sure the profit’s worth it after all of the variables have been considered.


Build a Business That Can Run Without You

The key to passive investing is to build a business that can run without you. If you’ve trained your team well, they’ll know exactly what you’d want them to do in every situation. They’ll rarely need to contact you.

After spending some time getting everything established, you can cut down your work time to an hour or less per week. You’ll simply have to check in and manage a few things to keep it running smoothly.

Another secret to building a hands-off business is buying property out of town. You’ll be forced to train a team to put in charge of everything and you won’t be around to deal with every problem that arises. You’ll be forced to be more hands-off.


Final Thoughts

If you’re angling for a passive income, commercial investing is a great space to start. There’s always money in real estate and you can get a cash flow almost immediately if you choose the right properties. The keys are to start small, do your due diligence, and build a team you can trust.


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How to Achieve Financial Independence Through Passive Investing

How to Achieve Financial Independence Through Passive Investing

Passive investing is one of the best things you can do if you want to achieve financial independence and retire early (FIRE). In a podcast interview with an online blogger and radiologist, we looked at how passive investments helped him become financially stable following a horrible divorce. To protect his anonymity, we will refer to our guest as XRAYVSN.


He Lost Everything Before Rebuilding Again as a Passive Investor

Before his divorce, XRAYVSN was financially stable. He lost more than $1 million following the divorce, and his work as a radiologist was not enough to rebuild his nest egg. Commercial real estate and passive investments allowed him to regain the money he lost.

During his 2010 divorce, XRAYVSN spent $300,000 on just his legal counsel fees. By the time everything was done, his net worth was $800,000 in the red. At almost 40 years old, he was completely devastated. His life savings were gone, and he had nothing to look forward to.

Instead of giving up, he began deploying his income in intelligent ways. After a lot of research, he decided to use his earnings to generate passive income. Inspired by the White Coat Investor and Passive Income MD, he began investing in new income streams.


How He Achieved His FIRE Goals

Within the FIRE movement, there are different levels of independence. Lean FIRE is when you are able to cover your basic needs. Meanwhile, Fat FIRE is when you can take luxurious vacations and afford almost anything you want. At this point, XRAYVSN is between these two levels of financial independence.

There are a variety of ways that an accredited investor can make money, but XRAYVSN already had a day job. Because he spent so much time working as a physician, he did not want to get started with active investing. Soon, he began researching different real estate investments.

Unlike many FIRE fans, XRAYVSN already had some experience with real estate investing. Before the divorce happened, he had owned several condos. Unfortunately, managing the condos had taken up a significant portion of his time. He knew that he had no interest in becoming a landlord again.

Because of the way the Internal Revenue Service (IRS) taxes earned income, real estate investments were especially appealing. Real estate investments come with extra tax breaks. Each tax break saved XRAYVSN more money, which he could reinvest in real estate properties.


Real Estate Investment Trusts

He ultimately decided to use real estate investment trusts (REITs). If you do not want the hassle of being a landlord, a REIT is an excellent alternative. It is essentially a stock that is made up of real estate investments.

Basically, you start by investing your money in a REIT. Then, they invest your money in real estate properties. Each quarter, you are paid distributions based on the REIT’s earnings. While you get paid like a normal real estate investor, you do not have to do any of the work. Because REITs function like stocks, you can easily sell your shares if you need to.

Since REITs are essentially stocks, their value can fluctuate. If the stock market tanks, your investment can disappear along with it. As long as you do not plan on selling your shares in the near future, this is not a major issue.



RealtyShares and crowdfunding platforms allow normal investors to invest in major real estate properties. Before the Jumpstart Our Business Startups (JOBS) Act, wealthy households were the only people who could invest in certain properties. The JOBS Act made it possible for average investors to invest in these real estate properties.

With many crowdfunding platforms, you can get started with a minimum investment of just $5,000 to $10,000. These investments work by pooling funds from a variety of different investors. If you achieve a net worth of $1 million or more, then you can become an accredited investor. You can also achieve this status if you make $200,000 or more per year.


Securing a Syndicator

Accredited investing is designed for sophisticated investors. Once you achieve this status, the Securities and Exchange Commission (SEC) allows you to buy unregistered securities. The SEC assumes investors who reach the accredited level are sophisticated enough to understand the added risk that occurs when you buy unregistered securities.

XRAYVSN quickly attained accredited status, which meant he could get new opportunities through private syndicators. He reached out to these syndicators through their websites and arranged for interviews. Because of how they are designed, these investments typically require a lot more research than standard investments.

Private syndicators spend their time searching for investment ideas. When they find a good one, they send an email blast to their investors. Then, they will generally host a demonstration for investors. Most syndicators require a minimum investment of at least $50,000. These investments are also illiquid, so it is difficult to access your money after you have invested it.

Obviously, this means that you do not want to use these types of investments if you need your money right away. If you want to make a long-term investment, working with private syndicators is a good idea. People can also get started by learning about the program through Syndication School. Because there are good and bad syndicators, it is important to look for red flags before you start passive investing with them. If you are comfortable working with a certain kind of commercial real estate, you should find a private syndicator that works in that sector.

As you look at different syndicators, you should read reviews from people who have already invested with them. You should also look at their results. How do they compare to similar organizations?

Some syndicators like to inflate how much they earn, so watch out for this issue. If one apartment complex is twice as profitable as other complexes in the same area, you should be suspicious. The company needs to have a good explanation for why they are earning so much more money than everyone else. If they do not have a reasonable explanation, you should invest with someone else.


Forging Your Own Path to FIRE

In order to become financially independent, you need to look at your burn rate. This figure is the amount you end up spending on your lifestyle and living expenses each year. To retire early, you must be able to cover your burn rate each year. You need to make a passive income stream that can cover your burn rate. If passive investing brings in more money than your burn rate, then you can afford to live a more luxurious lifestyle.

Do not be discouraged if you cannot retire right away. Because of compound interest, your earnings will grow over time. In order to retire comfortably, you will need to save 25 times your annual expenses. This means that you will need $1.5 million in the bank if you need $60,000 a year.

XRAYVSN is working toward an even more conservative goal. Instead of pulling 4 percent out of his retirement savings each year, he plans on only using 3 to 3.5 percent. To achieve this goal, he is bringing in passive income through his blog, private syndicators, and commercial real estate.

As an accredited investor, he can access more investment types than the average investor. Despite his accredited status today, he originally started out with simple crowdfunding investments. Even if all you can do is start small, you can eventually work your way up to accredited investing and achieve your FIRE goals.


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When You Should NOT Passively Invest in Real Estate

Passive investing in commercial real estate can be a great investment strategy. But it is not for everyone. Many entrepreneurs elect to actively invest in commercial real estate instead and have made a lot of money in the process. They invest their own capital and/or raise capital from passive investors to buy, operate, and sell multifamily, self-storage, office, retail, etc.

There are major differences between being an active commercial real estate investor and passively investing with an active investor. Your personal investing goals and preferences will determine which is best suited for you.

In this blog post, I will provide four scenarios where passively investing in commercial real estate might not be the best option for you.


If you want control…

One of the biggest differences between active and passive investing is control. As a passive investor, you have no control over the investment. You can select who to invest with and what deals to invest in (unless you are investing in a fund, in which case you are automatically invested in any deal acquired by the fund). But once you’ve invested your capital with an operator into an opportunity, you have no control over any aspect of the business plan.

Therefore, if you want complete control over your investment, you should not passively invest in real estate. As an active investor, you decide which investment strategy to pursue, what type and level of renovations to perform, who to rent to, what rent to charge, when to refinance and sell, and everything else.  However, if you want complete control over your investment, you will need to know what you are doing. You must have the knowledge and an experienced team to ensure that the investment flourishes.


If you want the potential for higher returns…

You are exposed to much less risk as a passive investor. You are investing in a proven investment system run by an experienced commercial real estate operator who has successfully completed countless deals in the past. They use your capital to acquire and operate an investment and you receive a portion of the profits. Because passive investing is relatively hands-off and lower risk, the returns are typically lower.

Passive investing returns vary greatly based on the asset type, the operator’s business plan and experience level, the market, the state of the economy, etc. However, a great active commercial real estate operator will almost always receive a higher ROI than their passive investors.

Let’s say the commercial real estate operator acquires an investment and the compensation is structured such that passive investors receive 70% of the total profits and operators receive the remaining 30%. Even though the passive investors receive a higher overall portion of the profits, there are many more passive investors than operators, which means the 70% is spread between more individuals. The operators also likely collect other fees, like acquisition fees and asset management fees. Plus, the operators have much less than 30% equity in the deal. Because of these three factors, the overall return on investment is higher for operators than it is for passive investors. Depending on how much of their own capital they invest, their ROI can be well into the four figures (1,000%+ ROI).

Here is a very simplified example: The operators raised $3.8 million and invested $200,000 for a total investment of $4 million to acquire a $10 million apartment community. After 5 years, the apartment community is sold. The overall equity multiple was 2.0 to the passive investors, which means the total profit was $4 million to the investors. Let’s assume a 70/30 profit split. If 70% is $4,000,000, 30% is approximately $1.7 million. Since the operators invested $200,000 as passive investors too, they receive $200,000 of the $4 million in profits. Let’s also assume a 2% acquisition fee of the purchase price, which is $200,000. Between the return on their $200,000 investment as passive investors, 30% of the profits, and acquisition fee, they made $2,100,000 in five years. Based on a $200,000 investment, that is a 1,050% ROI (compared to the 200% ROI for the passive investors). And this is before accounting for other fees, like asset management fees, property management fees (if they have an in-house management company), disposition fees, etc.

The return on investment may be higher, but the return on time may not be. The operators invest a substantial amount of time acquiring, managing, and selling each investment opportunity whereas the passive investors are mostly hands-off.


If you aren’t an accredited investor (or don’t have a relationship with an operator)…

In order to invest in syndication deals, you must be an accredited investor. According to the SEC (Securities and Exchange Commission) definition of an accredited investor, in the context of a natural person, includes anyone who

  • earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR;
  • Has a net worth of over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).

There are other ways to qualify but these are the two most common ways an individual can qualify. The SEC does allow non-accredited sophisticated investors to invest in investment opportunities under the 506(b) exception. However, you must have a pre-existing, substantive relationship with the operator.

Therefore, if you are not an accredited investor or do not have a pre-existing, substantive relationship with an operator, you won’t be able to passively invest in commercial real estate deals.


If you enjoy being a business owner…

Operating a successful commercial real estate company is a full-time endeavor. Therefore, if you have a strong desire to create a commercial real estate business AND have the time to do so, you shouldn’t passively invest in commercial real estate. Or at least you shouldn’t only passively invest in real estate (here is a blog post about how passive investing can make you a better active investor).


When you should not passively invest in real estate

Passive investing isn’t the ideal investment strategy for everyone.

If you want complete control over and have the expertise to operate your investments, you shouldn’t passively invest.

If you are comfortable with more risks and want to potentially generate the highest return on your investment while also investing a lot of time into managing your investments, you shouldn’t passively invest.

If you are not an accredited investor or do not have a pre-existing, substantive relationship with a commercial real estate operator, you shouldn’t passively invest.

Bottom line: if you love the idea of operating a commercial real estate business on a full-time basis, you should not passively invest.

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What I Wish I Knew When I Started Investing in Real Estate

It was the kind of day that every working professional fears. The company I worked for, was going through a massive round of layoffs in anticipation of filing for bankruptcy. Supposedly my job was safe, but the blinking red light on my desk phone indicated that might not be the case. After about 15 seconds of imagining the worst, I took a deep breath and listened to the voicemail.

It was the end of 2008 and I was working for General Motors as we prepared to go into a structured bankruptcy. After listening to that voicemail a few thoughts went through my head, but the most important one was that I hated the feeling of unease and panic. I never wanted to be in the position again. After a few moments, I remembered a little purple book I had read years earlier, “Rich Dad, Poor Dad” by Robert Kiyosaki.

In the book, he talks about the importance of creating assets that generate income and the pitfalls of only having a salary. Those words rang true in that moment.

Real estate investing is one of the core philosophies in the book and I had been interested in investing for some time but decided to continue to wait as I wasn’t sure how long I would be in Detroit. A couple of years later I moved to Chicago and finally started investing in real estate.


Two things I wish I knew before I started investing.

1. You don’t have to wait and you are not limited to the market where you live.

What I wish I knew then is that I didn’t have to wait to invest and I wasn’t limited to buying in Detroit. I could invest in any city, especially those with strong fundamentals. I was familiar with strong Midwest markets like Indianapolis, Cincinnati, and Columbus, and bustling Southeast markets like Atlanta, Charlotte, and Orlando. Even better, I could invest passively through turnkey rentals or apartment syndications.

Since I was spending most of my time on my corporate career, this would have been an ideal way to begin investing, gain some experience, and remain focused on my priorities. It would have allowed me to ease into real estate and decide if and when I wanted to be more active.

However, the route we actually took led us to do everything on our own. In 2012, my wife and I bought a two-unit building and house-hacked it. That’s when you live in one unit and rent out the other units. This worked well and allowed us to save a significant portion of our paychecks. From there we bought a three-unit building, before eventually acquiring an eight-unit apartment property.

While we were adding to our portfolio, we also were growing our family. With full-time jobs, two young kids, and a 13-unit multifamily portfolio, we found ourselves getting pulled in opposing directions. Instead of generating a passive income to insulate me from a potential job loss, I had created a part-time job in real estate along with additional strain and stress on my family.

Reflecting on my situation, I thought back to the voicemail I received years earlier. It was from a colleague who was laid off during the structured bankruptcy. He was the type that kept his head down and did his job. He had been with the company for over 20 years and was a dedicated and loyal employee. But at that moment, he was bewildered and angry. He was dealing with some medical issues and had no idea how he would pay for his meds and treatments.

I felt empathy for his situation as I was always told to “get a good job” and work it until you retire. Working at the headquarters for General Motors certainly fit that description. And if you’ve been with a company of that magnitude for two decades, you expect to exit through retirement, not a layoff.

I understood those emotions, the sense of betrayal, being misled, and having nothing to show for the years of service and dedication. I was determined to go a different route so I went hard in the other direction and focused on building my real estate portfolio. Except, that portfolio turned into another job and came with a whole other set of challenges.


2. Passive investing in real estate IS an option.

I also wish I had known that passive real estate investing was an option for me. At the time, I thought real estate investing meant buying rentals or fixing and flipping properties. I had no idea that you could invest passively in larger properties and get all the benefits of real estate without the headaches of being a landlord.

More than anything, I wish the colleague that left me the voicemail had a portfolio of passive real estate investments that could hold him over in his time of need. It’s one of the reasons we partner with busy professionals to give them an easy option to create passive income. This provides a safety net in case of job loss and can serve as a bridge for a professional or career transition. And unlike other investments, commercial real estate provides a unique blend of cash flow, appreciation, and tax benefits for investors.

Whether you are seeking a safety net, a bridge, or a savings fortress, consider how passive apartment investing can help you reach your goals. In fact, you may wish that you knew about it sooner.


John Casmon has helped families invest passively in over $90 million worth of apartments. He is also the host of the #1 rated multifamily podcast, Target Market Insights: Multifamily + Marketing. Prior to multifamily, John was a marketing executive overseeing campaigns for Buick, Nike, Coors Light, and Mtn Dew:


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The Three Types of Commercial Real Estate Funds

When a sponsor is raising a private real estate fund, there are three types of funds that can be raised:

  • Closed-End Fund
  • Open-End Fund
  • Evergreen Fund


1. Closed-End Fund

The closed-end fund structure is the most common type of fund. In this structure, the sponsor will raise equity, typically for a fixed period of time or to a set amount. Once the capital is raised, no new equity is able to come into the Fund.

A closed-end fund has a set term on the life of the fund. With real estate, it is typical to be around 10 years but can vary greatly depending on the sponsor and investment thesis.

Additionally, with a closed-end fund, once the portfolio of assets is acquired, it is set. As assets are sold, the proceeds are not reinvested. Most funds will distribute the proceeds at the time of sale, but others may hold all or some of the proceeds back until the completion of the fund.

The benefits of the closed-end fund structure are a set timeline for the Fund and a fixed portfolio. While a closed-end fund is illiquid, like most private real estate offerings, it provides the closest synonym to a single asset offering, but with the diversity of a Fund, in that the returns for the Fund are reliant on the set portfolio of assets, once the fund is fully invested. Those returns are based on the full Net Asset Value of the assets within the Fund.


2. Open-End Fund

An open-end fund varies from a Closed-End Fund in that it has no limit on capital raised or set life of the fund. Capital can be raised and repaid throughout the fund, allowing investors liquidity without the need to liquidate the underlying real estate.

The open-end fund structure allows for investors who are seeking more liquidity. However, trade-offs can often exist, such as lower overall returns for investors, due to capital coming in and out of the Fund without an actual sale of assets.

The open-end fund, like a closed-end fund, will still distribute capital to the investors upon disposition of assets.

The largest benefit of an open-end fund is the liquidity it provides the investors. However, because liquidity within the Fund is not directly correlated to asset sales, there is a reliance on valuations not driven by the free market.


3. Evergreen Fund

An evergreen fund is very similar to an open-end fund. The primary difference with an evergreen fund is that the evergreen fund can reinvest capital available through the sale of assets into new assets.

The evergreen fund has the benefit of letting capital recycle within the fund upon the sale of assets. The downside to this is that the sponsor may choose to pursue assets that do not align with the investor’s personal thesis. There is the ability to pull out investments, like with the open-end funds, but the liquidation value may be below net asset value.


About the author:
Evan is the Investor Relations Manager for Ashcroft Capital.  As such, he spends his days working with investors to better understand their investment goals and background.  With over 13 years in real estate, he has seen all sides of real estate from acquisitions, to capital raising on the equity and debt side, to operations, and actively invests himself.  Please feel free to connect with Evan here.


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5 More Questions to Ask a Commercial Real Estate Operator Before Passively Investing

In a previous blog post, I outlined the top five questions to ask a commercial real estate syndicator or operator before passively investing. When you are passively investing in commercial real estate, you are placing a lot of trust in the active operator. To ensure your capital is in good hands, here are the top five questions to ask before investing:

  1. Are they responsible for acquiring and selling the investment and implementing the business plan, or do they play a smaller role? Also, is their compensation based on the performance of the deal?
  2. Ask about a time a deal went bad to gauge the experience level, truthfulness, and grit of the operator.
  3. What are their mission, vision, and values, and do they align with yours?
  4. Are they a vertically integrated company that invests in attracting new team members and in the professional development of current team members?
  5. Is their core business model operating commercial real estate?

In addition to these five questions, here are five more questions you should ask a commercial real estate operator before investing in one of their deals.

1. What is your investor communication plan?

As a passive investor, you have no control over the implementation of the business plan. However, one thing you can do (and want to do) is to monitor the performance of the investment. Therefore, you need to understand what type of information the operator discloses to investors, as well as how often they communicate.

In addition to asking them what information they provide to investors and how often this information is provided, ask for their last three investor communications. This will give you a much better understanding of their communication style. The most important thing you want to verify is that you can compare the actual performance of the property to the projections. This means the investor communications should at least include financial documents, like a profit and loss statement, occupancy rates, and rental premiums.

2. What is the performance of your portfolio?

One of the best ways to gauge future success is past success. Therefore, you want to determine the performance of their current holdings. Ideally, information on their portfolio is readily available in their marketing material, like a case studies section in their company presentation or in their investment summaries for new deals.

Focus less on the absolute performance of each deal and more on how the deal performed compared to projections because that will give you context. For example, a deal that resulted in a 10% CoC return but was projected to achieve a 15% CoC return was less successful than a deal that resulted in an 8% CoC return but was projected to achieve a 6% CoC return.

3. Obtain a reference and conduct a background check

Although this isn’t technically a question, make sure you speak with other passive investors who invest with the operator. You can ask the operator for a reference, but finding a reference on your own is more valuable because no one ever gives bad references.

Also, perform a background check on the operator. Utilize websites like the Better Business Bureau, Google Reviews, and the 506 Investor Group to find reviews on the company. Visit the company website to confirm that their values align with yours, too.

4. What types of insurance do you have?

If something bad happens to the operator’s business or to one of their deals, like a lawsuit or extensive damage to the property, you want to make sure they have insurance to cover those expenses. Otherwise, you may lose a portion or all your capital investment.

This starts with property insurance, which is a requirement if the operator is securing financing. However, not all insurance carriers are alike. Ideally, they are working with an A-rated insurance carrier.

From a compliance perspective, ask if they have errors and omissions (E&O) insurance through their securities attorney to cover potential SEC-related lawsuits.

5. How do you decide when to sell?

Since the operators have complete control over the business plan, they also have complete control over when to exit an investment. When they initially underwrite an opportunity, they assume a hold period. However, this doesn’t mean they are obligated to stick to that assumption. They may sell early, or they may elect to hold longer than projected.

As a passive investor, assuming you participate in the upside, the sale is usually when you make the most money. Whether you participate in the upside or not, the sale is usually when you get your money back. Therefore, understanding the operator’s decision-making process surrounding the exit is important.

Understand what would make them sell early. Hopefully, it is because the return is higher. But it is also possible that they will exit early for the opposite reason – because the returns are dropping and will continue to drop unless they exit now. To verify their response, see if they have exited an investment early in the past and how the actual returns compared to the projected returns.

5 Questions to Ask a Commercial Real Estate Operator Before Investing

How do they communicate the performance of the investment with the passive investors?

What is the performance of deals they have sold in the past, as well as the deals they currently hold?

(Not really a question, but) find passive investors who invest with the operator and ask about their experience with the operator. Also, perform a background investigation on the operator and their company.

What type of insurance do they have to cover large expenses if something goes wrong?

What would make them sell the deal early?



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6 Best Ways to Find Commercial Real Estate Syndicators

Since commercial real estate syndications are a more sophisticated investment strategy for a smaller portion of the population (i.e., accredited investors), it is more difficult to find sponsors compared to other passive investment opportunities. For example, go to your local bank and they will ask you if you are interested in high-yield savings accounts or CDs. Go to any financial website or speak with a financial advisor and you’ll learn about stock, bond, and mutual fund opportunities. REITs are even more widely discussed than syndications.

In this blog post, I will outline some of the best strategies for finding commercial real estate syndicators to passively invest with. The six ways to find commercial real estate syndicators below are based on Ryan Gibson’s, CIO and co-founder of Spartan Investment Group, presentation at this year’s Best Ever Conference.


1. Online

Did you know that there are websites dedicated to creating a database of syndicators who are raising money for commercial real estate opportunities? Two of the most popular websites are 506 Investor Group and FormDs. Both resources are different but serve the same purpose: to help accredited investors find commercial real estate syndicators.

506 Investor Group is a private and confidential group of passive investors who discuss, evaluate, and share due diligence on alternative investments, including commercial real estate syndications. One resource you can access without a membership is the Rate Sponsors page. View a list of sponsors, which includes what they invest in and their ratings and reviews from other members in the 506 Investor Group.

FormDs, on the other hand, is a free database of all SEC filings (called “Form Ds”) of startups, growing businesses, hedge funds, and private equity firms, which includes commercial real estate syndications. On FormDs, you can search by the sponsor or company name, or you can filter by type (i.e., commercial real estate) and location.

A simple approach is to use FormDs to find a group and 506 Investor Group to review the group before scheduling an introductory call.


2. Networking

Speaking with other high net worth individuals is another way to find commercial real estate syndicators. Someone in your circle of influence (friend, neighbor, work colleague, etc.) may be passively investing in commercial real estate without you even knowing.


3. Funds

Another way to find a commercial real estate syndicator is through a fund that invests with commercial real estate operators. Known as the “funds of fund” model, a group will pool together investments from accredited investors and invest in other types of funds, like a commercial real estate fund. So, rather than finding a commercial real estate syndicator yourself, you find a group that specializes in investing with other apartment syndicators.


4. Commercial real estate events

Meetup groups and conferences that focus on commercial real estate are great resources for finding commercial real estate syndicators. You will either meet commercial real estate syndicators directly, or you will meet people who passively invest with commercial real estate investors. Here’s a list of real estate investor meetups to get you started.


5. Commercial real estate projects

If you see a commercial real estate development or rehab project in your area, chances are it is a syndicated deal. You can find out who syndicated the project by looking up the property parcel on the local county auditor/appraiser site and determining who owns the asset. Most likely, it is owned by an entity, but you can go to either the SEC website or the Secretary of State website to look up the owner of the entity.


6. Referrals

Once you find one operator to passively invest with, they can be a great source for other syndicators. They likely know other operators who are syndicating projects, either in the same niche or different niche. After you are happy with their performance, reach out to them for a referral.

Referrals from other operators (or other passive investors) are the best way to find commercial real estate syndicators, because they are pre-qualified, in a sense. You still want to screen them (here is a blog with the most important questions to ask when qualifying a syndicator); however, they come with more legitimacy since they were referred to you by a trusted source.


Best Ways to Find Commercial Real Estate Syndicators

The best way to find pre-qualified commercial real estate syndicators is from referrals. In addition to referrals, use websites, like 506 Investment Group and FormDs, to find and review prospective syndicators. Network with other high net worth individuals in your network to learn who they are investing with. Work with funds who invest in commercial real estate funds. Attend commercial real estate meetup groups and conferences. Lastly, assume any new commercial real estate project in your area is a syndication deal and locate the group that manages the project.

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Welcome to the Accredited Investor Club

Picture a dimly lit room, full of some of the world’s wealthiest individuals, privately gathering to discuss the future of the world. Rockefeller. Morgan. Carnegie. All of the world’s biggest players are there, deciding which markets will succeed, which assets will thrive, and who will end up footing the bill.

For ages, many of the world’s “best deals” were available only to insiders or those “in the know” with special connections. If you did not have those special connections, you were not given an opportunity to learn about the best deals, even if you did happen to have large amounts of wealth. As a result, connections became even more important than capital, establishing a system that was inherently asymmetrical.

Essentially, this created a dichotomy of investors. One group of people who could access everything, including the best opportunities on Main Street, and another group who could not, who were instead relegated with the rest of the herd to the thralls of Wall Street and told that this is as good as it gets. Various regulations prevented everyday people from discovering these private, alternative investment opportunities, even if the sponsor of these particular deals wanted to tell everyone about them, as these sorts of communications were all categorized as illegal solicitations.

The combination of legal restrictions, deliberate exclusivity, and concentrated wealth created a world in which it became extremely difficult for many people, even wealthy people, to authentically have a seat at the table. To truly succeed and gain access to the world’s best deals, you would need to have a direct link to the smoky rooms themselves — otherwise, you wouldn’t have any way to learn about these deals until they appeared in the next day’s paper.

Recently, however, things began to change, and the tables finally began to turn.

The passage of the Jumpstart Our Businesses Act (the “JOBS Act”) in 2012 marked a major departure from the previous way of doing things. With the passage of the JOBS Act, many previously illegal actions became legitimized, including soliciting deals to the general public and crowdfunding certain ventures.

In a very short amount of time, the smoky backrooms of years past opened themselves to qualified investors. As long as an individual can qualify under certain income or net worth parameters, they can now learn about, explore, and invest in a once inaccessible, wide range of financial opportunities.


What is a Qualified Investor?

Today, the “qualified investor” is the J.P. Morgan or John D. Rockefeller of years past. To become a qualified investor, you do not need to be a billionaire, though in most cases you will still need to have a considerable amount of wealth or income. However, access to information is no longer limited, which has helped extend membership to the secret, exclusive club to several new members.

To be a qualified investor, the Securities and Exchange Commission (SEC) requires you to meet the definition of an accredited investor, meaning someone who:

  1. has a net worth of at least $1 million (excluding your primary residence) or
  2. an annual income of at least $200,000 ($300,000 if combined with a spouse) in each of the last two years, with a reasonable expectation that such income will continue for the current year.

With the passage of the JOBS Act, individuals who meet the criteria mentioned above can now legitimately participate in a range of new investment opportunities, such as crowdfunding, venture capital funds, private equity funds, real estate syndications, hedge funds, and more.

The modern accredited investor’s club is still exclusive, but it is one that is actively calling for qualified individuals to join. No longer do you need a special invite, instead, you just need enough income or net worth to finally play in the great game of wealth-building that others have been enjoying for years.

Wealthy individuals across the United States have been flocking to these new opportunities because, frankly, they are much better than traditional options. The S&P 500 Index has yielded an average historic return of about 10% per year. This is a standard benchmark against which many other investments are tested. If an investment opportunity can yield a greater rate of return — without exposure to more risk — then it will certainly be an investment worth considering.

In markets that are less saturated than the stock market, the possibility for strong returns remains much higher. For example, it is not unusual for real estate syndications to yield an average annualized return of 15-25% per year, which does not even take into account the tax benefits not afforded to stock investors.

Today’s Accredited Investors

Today, there are about 12 million accredited investors in the United States. In 1983, there were just above a million. The number of people who can participate in this exclusive club is indeed increasing, and while participation still requires wealth, it is clear that more people can legitimately shape their own economy than ever before.

For some investments, you may need to verify your accredited investor status by a third party, such as a CPA or an attorney, and in other investments, you may just need to self-certify. Furthermore, there are some private, alternative investment opportunities that you may participate in even if you aren’t accredited, but you will need to be “in the know” like in years past.


Seth Bradley is real estate entrepreneur and an expert at creating passive income while still working as a highly paid professional. He’s closed billions of dollars in real estate transactions as a real estate attorney, investor, and broker. He’s the managing partner of Law Capital Partners, a private equity firm focused on multifamily and opportunistic acquisitions. He’s a former big law attorney and is now the managing partner of his own firm, Bradley Law Limited, helping his clients with their real estate and asset protection needs. He’s also the host of the Passive Income Attorney Podcast, educating attorneys and other professionals on how to stop trading their time for money so that they can practice when they want to, not because they have to. Get started building a future full of freedom at Invest – Law Capital Partners


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Helpful vs. Hurtful

Lessons from Investment Markets of the Past

When I was a kid in the 1960s my parents weren’t broke, but we didn’t have a lot. Thankfully, we had enough. My Dad was an engineer at Boeing, and Mom was a bookkeeper. Lots of parents just like mine were trying to make it in the world. World War II and the Depression were far enough behind that the sting had faded; it was time to make their mark in the world. On Friday nights at [8:00], Louis Rukeyser was on TV for 30 minutes talking about the stock market with some of the world’s most influential Wall Street titans. If you are old enough to remember Rukeyser, you remember his show Wall Street Week in Review and the catchy tune with glam pictures of the New York Stock Exchange. Back then, Rukeyser was a big deal. There was no such thing as a TV clicker let alone the internet. Rukeyser, other TV media, and the newspaper were how people kept up with the world.

Times and markets have changed. While the methods of gathering investment information differ then vs. now – there is still a constant and that constant is: risk!


Learning from the 1970s market

Back in the ’70s, interest rates were a lot higher than they are now. During those years when I was setting the table and sitting next to Dad watching Wall Street Week, the Federal Funds rate was anywhere from 4% – 20%. If there was one aspect of the economy that characterized the 1970s, it was inflation. Persistent for most of the decade, it choked off much of the growth in our nation’s businesses. Paul Volker, then the chairman of the Federal Reserve, had to eventually take decisive action and raise the Fed Funds rate to near 20% to “slay the inflationary dragon”. Money tightened, interest rates spiked, and homeowners with adjustable-rate mortgages (ARMs) were jammed as their mortgage payments shot higher. Enter the recession as unemployment peaked above 10% due to restrictive Fed policy. Thankfully, it worked. From 1980-1983, inflation dropped from above 13% to under 4%.

During this time the stock market was in a horrible sideways bear market arguably caused by rising rates, and there was a point in 1982 where the stock market was priced the same that it had been in 1968. In that same era in downtown Seattle, there was a billboard on the side of the highway that read, “Will the last one out of Seattle please turn out the lights?” (think recession). With all this being said, if you were an investor in 1982, do you think you would have been excited to buy real estate or stocks at that time?

My best guess is that in rough economic conditions most of us would prefer to stay liquid. Bonus question what did you do with your stock portfolio in March/April 2020 with COVID? Buy, sell, or stay put? The answer to this last question tells you everything you need to know about your ability to buy low and sell high. That might sting a little. It does for me.

What is my point? When the Fed has literally had its thumb on the scale of the bond market for 12 years straight, knocking the natural cadence of our free markets onto its keister, there will be an equal and opposite reaction. Think Isaac Newton’s 3d law. Not to be overly dramatic, but it’s worth an internet search; it’s a thing! The “thing” of it is, we have yet to see the equal and opposite reaction. To get super granular here, the “action” began in 2008 when the Fed began flooding the bond market with liquidity. That liquidity injection has continued until this day and there will be a day of reckoning.


What will the reaction be?

What will the equal and opposite reaction be? I do not know. But let’s talk about that.

Rarely, if ever, investors are able to time the market with consistent success. What market? Any market. Stocks, bonds, oil, coffee, multifamily, syndicated second mortgage investments, or syndicated storage investments. Kahneman & Tversky, in 1979, nailed it with their Behavioral Economics study, Prospect Theory. In summary: when investing, the current environment subconsciously provides the framework for an expected outcome, and people generally have an aversion to losses. Why didn’t you and I both buy 200 shares of Amazon stock in March of 2020 when it was at $1,800 a share (vs. $3,000 today)? Because our perspective had been framed by the then current and volatile environment and we are loss averse. Now that the stock market has moved higher and is bumping its head on all-time highs, why have we been dragging our feet in selling some stock? We are, again, subconsciously framed by what we have experienced recently and wanting to squeeze a little more juice before dialing back our risk.

If COVID or some other life event has prompted you to evaluate risk and draft your own investment policy, I suggest three things. First, find the sum of your investments both liquid and illiquid less liabilities (home equity/debt not included) then multiply that number by your age with a decimal in front of it. If your number for example is 1,000,000 and you are age 50, the product is $500,000. That number represents the value of your investments you may want to have in conservative/stable investments such as bonds or bond surrogates. Could a syndicated multifamily investment be considered a stable investment? Yes!

Second, identify the annual cash flow you would like to have in retirement and divide that annualized number by 4, then multiply that number by 100. That’s your target net worth when you start playing full-time instead of working full-time. Your job is to grow your net worth to that number without taking excess risk (this is where you take a metric ton of salt and remind yourself what you paid for this advice)!

Third, you need the number from step one to equal the number in step two. Maybe you are 29, have been maxing your 401K at work, and have grown it to $800k. Are you really smart, or were you just fortunate with your timing? Now that the Fed has inflated nearly everything (remember your ego is the most expensive thing you will ever own) it’s a wonderful time to reassess. Investors should focus on making incrementally helpful decisions, not hurtful decisions. Do not make huge or impulsive decisions, ever. Because bonds pay almost nothing currently, consider substituting part of your bond portfolio with a syndicated real estate investment. Individual position sizes of 2-10% of your net worth make sense to me. But don’t take my word for it, ask a trusted friend what they are doing. When making syndicated investments, plan to hold at least seven different investments. The law of averages will help you here, but take your time (several years) as you build that portion of the portfolio.


Don’t try to adjust by making big decisions

I started this article by sharing about the investment environment when I was young. Interest rates near 20% and the stock markets P/E ratio was less than seven. Now 40-some years later we have a near opposite environment. The stock market’s P/E ratio is near 30, rivaling the years 2000 and 2008, and interest rates are near zero. As investors, a balanced perspective is often the most helpful. To that end, I suggest reading Ray Dalio on a regular basis. If you are off track from your ideal financial plan, don’t try to adjust by making big decisions. Emotionally we can all be overly hard on ourselves because our crystal ball may look more like a shaken snow globe in the hands of a five-year-old during the holidays. All-or-none bets are scary, bad, and pure luck when successful. My proposition is this: make incrementally helpful and small but strategic changes to your portfolio. Keep in mind the age-old rule of thumb, that your age with a percent sign behind it is your ideal allocation to fixed-income investments. I again volunteer that syndicated real estate assets may be bond surrogates. You may be off track from your target asset allocation. If so, start this spring. Identify what your ideal investment allocation is and make incrementally strategic decisions. Eventually, you can adjust your allocation to reflect your risk profile, and there is nothing wrong with simply saving more.


About Ted Greene: 

Ted Greene is part of the Investor Relations team at Spartan Investment Group.  Spartan syndicates self-storage assets for investment. Ted has 24 years of experience in the financial services industry as an investment advisor and Chief Compliance Officer. Ted can be found on LinkedIn at or


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The Top 5 Questions to Ask Before Investing

Top 5 Questions to Ask Before Passively Investing

Ryan Gibson, CIO and co-founder of Spartan Investment Group, was one of the featured speakers at this year’s Best Ever Conference. In his presentation, he provided tips to passive investors about the most important questions to ask before investing with a commercial real estate operator. In this blog post, we will outline Ryan’s top five questions.


1. Are you an operator or syndicator?

One of the first things you want to know is the role the company you are investing with plays. They are either the operator or a syndicator.

The operator is the group who acquires and sells the investment, as well as implements the business plan. They may also raise a portion or all the capital required to close on the investment.

The syndicator might not actually operate the investment (although, operator and syndicator are oftentimes interchangeable). The syndicator may be a co-GP or owner of a fund who raises capital to invest with other operators.

Whether you are investing directly with an operator or indirectly through a syndicator, you want to know whether their compensation is aligned with the success of the project. That is, is the operator’s or syndicator’s compensation tied to the investment’s cash flow and value? Or it is based on something else, like an asset management fee, percentage of equity raised, etc.? Or it is a combination of both?

Since your return as a passive investor is based on the cash flow and/or value, you want the operator’s or syndicator’s compensation to be based on those same two metrics as well.


2. Tell me about a deal gone bad?

This is Ryan’s favorite question. Most of the material you receive about an operator and their investments will be 100% positive. No operator is going to include a section in their company or deal material about a time they lost money on a deal or when a deal went sideways. However, Ryan believes you can learn a lot about an operator from hearing about how they managed a difficult situation. It helps you judge their grit.

Additionally, if an operator says, “We have never had a deal go bad,” it indicates low experience or that they are lying.


3. What are your mission, vision, and values?

Having a well-defined mission, vision, and set of values is what Spartan attributed to being named one of the fastest-growing companies by Inc. magazine. The operator’s mission, vision, and values will tell you who they are and why they do what they do. The first thing you want to determine is whether they’ve defined their company’s mission, vision, and values because this indicates a higher level of credibility and professionalism. Then, you want to determine if their mission, vision, and values align with yours.

You will also want to make sure they don’t have a “say-do” gap – that they actually act on their mission, vision, and values. So, ask for a recent example of how they’ve recently used their mission, vision, and/or values to make a business decision.


4. Who is on the team?

The structure of their team will impact the success of their investments. The best operators aren’t a “one-person show” where one or a few individuals are wearing all the hats. They should have a deep bench of executives, directors, managers, analysts, assistants, and associates.

It is also beneficial if they are vertically integrated. The more work performed within the company and the less worked outsourced to third-party vendors, the better. That means in-house property management, compliance, construction, investor relations, marketing, underwriting, accounting, etc.

Another good thing to know is how much of the profits generated by the operator and their company is reinvested into hiring new team members and providing growth opportunities for their current team members versus how much is going into their own pockets.


5. What is your core business model?

This question may seem odd. Of course, their core business model is buying and managing office buildings, developing and managing self-storage facilities, adding value to apartment communities, etc.

However, this is not always the case. Sometimes, they may be buying office buildings, for example, while working a full-time, W2 job. Or they are focused on one aspect of the overall business model, like finding deals or raising capital. Or the majority of their income is derived from selling education or coaching. The point is, just because someone is involved in commercial real estate doesn’t mean it is their core business model.

Ideally, you are investing with a group who are full-time operators. They have a fully integrated company that buys, manages, and sells commercial real estate. It is okay if they are involved in other industries, like education, coaching, passive investing, etc., but it should be secondary to their core business model.


5 Questions to Ask a Commercial Real Estate Company Before Investing

When you are passively investing in commercial real estate, you are placing a lot of trust in the active operator. To ensure your capital is in good hands, here are the top five questions to ask before investing.

Are they responsible for acquiring and selling the investment and implementing the business plan, or do they play a smaller role? Also, is their compensation based on the performance of the deal?

Ask about a time a deal went bad to gauge the experience level, truthfulness, and grit of the operator.

What are their mission, vision, and values, and do they align with yours?

Are they a vertically integrated company that invests in attracting new team members and in the professional development of current team members?

Is their core business model operating commercial real estate?

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Big-Picture Financial Strategies to Fuel Your Wealth-Building Machine

Big-Picture Financial Strategies To Fuel Your Wealth-Building Machine

The general consensus out there, and I think you and I would agree, is that school didn’t teach us bologna about managing personal finances. It’s been widely publicized that instead of learning physics and pre-calculus in high school, they should be learning how to balance a checkbook and spend within their means. 

It’s an institutional, generational problem that explains why our parents struggled to maintain middle-class status, not knowing any better than trading their time for money. Passive income wasn’t even on their radar, much less were concepts like infinite banking or syndications. 

Since you’re reading this post, I can tell you’re one of the lucky ones – the sole ostrich in the flock who daringly pulled his/her head out of the sand to seek a better solution. For that, I’m proud of you. Keep reading for the five big-picture concepts that have the power to catapult your financial situation to the next level. 

Personal Finance In Four Stages

One way of stepping back and seeing the big-picture cash flow journey is to break it down into “four pillars” as M.C. Laubscher from Cashflow Ninja calls it. He teaches cash creation, cash capture, cashflow creation, and cash control. 

In the first stage, Cash Creation, you pursue endeavors that create money. This includes getting a degree, finding a great job, creating connections with industry peers and seniority, starting your own business, finding a mentor, and hustling to make bonuses and get raises. You’ve got to earn an income to survive in this world, so this stage is critical to all the other stages. The funny/not funny story, though, is that this is where most people get stuck!

The next stage is called Cash Capture, and this is where you create a buffer between how much you bring home and how much you spend. This is where you’re continuously watching the budget and ensuring you’re saving a portion of your take-home income and hopefully increasing that percentage as quickly as possible. This “gap” between your income and your spending is where you seize the opportunity to capture cash and use it to fund your investments, purchases of appreciating assets, and your infinite banking strategy (I’ll explain this in a little bit.). 

Once you have emergency funds in place, generally have a grasp on your budget and savings, and are consistently capturing that gap, you move on to the cashflow creation stage. Now notice this is Cashflow Creation – very different from the first stage of working for cash. In this third stage, you learn how to use the money you’ve saved and the relationships you’ve nurtured to invest, generate additional cash flow, earn interest, and create income independent from your day job. 

Honestly, you’re probably in this third stage now, actively seeking investment opportunities and leveraging your earnings toward a diversified wealth-building machine inclusive of insurance policies, stocks, REITs, bonds, residential real estate, and appreciating assets like those found in real estate syndication opportunities

The final stage isn’t really a final stage at all (curveball!) but more of an ongoing life-long focus to protect and tailor your overall financial strategy in alignment with your goals. This Cash Control stage involves creating a will, pursuing estate planning, maintaining life and disability insurance policies, and ensuring your finances are set up for longevity. You didn’t learn this stuff in school, so it’s up to you to intentionally learn and refine your financial plan toward protecting your assets from creditors, taxes, and lawsuits and providing a legacy for your loved ones. 

I’m sure you’ve heard the phrase “making your money work hard for you” thrown around, and in a nutshell, focused action in each of these stages throughout your life will do precisely that!

Infinite Banking Strategy

This big-picture strategy also called “becoming your own bank” and “private family banking strategy” is where you use a whole life insurance policy to become your lender, borrower, and beneficiary all at once. This concept blew my mind when I first heard about it, so hang with me. 

Look at the typical bank. They accept people’s deposits in exchange for a “safe” place to store the cash promising minimal interest earnings. The bank loans that money out to others and earns a much steeper amount of interest off the loan. All along, if someone defaults, they are the beneficiaries via collateral, collections, etc. Why deposit your hard-earned cash into a bank for minimal interest and then borrow other money at a higher interest rate? It just doesn’t make sense! 

Here you flip the institution on its head, buck the system, and do your own thing. If you followed the four stages above, you captured cash and have significant savings ready to invest in creating passive cashflow. With this cash, you buy a dividend whole life insurance policy from a mutual insurance company. When written correctly, your policy will allow you to fully fund it quickly and borrow a large portion of that money from inside the policy within the first year. 

Now before your head spins, let me explain. When you fund the policy quickly, you become eligible for dividends and earnings inside the policy itself. When you borrow against your policy at a low rate, you’re still earning interest on the full value, AND you get to reinvest that borrowed money into a real estate syndication. 

Boom! You’ve taken $1 and invested it into two places at the same time, AND now you have an insurance policy too! There are many other details to this, which I’ll save you from right now, but just know this is one tax-advantaged option for creating a wealth-building machine.

Buy Your Time Back

Another wealth-building machine that’s often overlooked is your ability to recapture your most valuable resource – time. When you start out, your focus is to create cash, and it’s highly likely one might spend 40-60 hours a week doing so. 

That’s not a sustainable life/happiness model, though, right? At some point, you want to have captured enough cash and begun to invest in lucrative deals so that you could reduce the amount of time you have to put in and instead spend it doing things you enjoy.

This is where you buy your time back. Maybe that means hiring an assistant to keep you organized and run little errands for you, or perhaps that means hiring household services like laundry, a maid, and a landscaper. In all areas of life, I encourage you to explore the activities you do, their worth, whether you like doing them, and how much of your time and energy they take. When you conclude that specific actions are not worth your time or energy, hire them out and, in exchange, use your time to learn about and pursue the next level of wealth-generation. 

Another way you can fast-track your wealth-building machine is to intentionally surround yourself with people who inspire you. Find connections ten steps ahead of you, who are doing things you wish you could be doing, and then find ways to infuse their lives with value. Use your knowledge and expertise to support them and further develop a positive rapport with them. 

You’ve probably heard the quote by Jim Rohn, “You are the average of the five people you spend the most time with.” Well, recent research shows that who you are is even affected by your friends’ friends and those friends’ friends! This emphasizes how imperative it is to seek masterminds, mentors, and relationships with those you admire. 

When you surround yourself with these valuable connections and adequately nurture the relationship by infusing support into their lives, they will inadvertently share advice and higher-level concepts, giving you the “in” and accelerating your wealth-building journey with fewer mistakes. 

Continuously Break Parkinson’s Law

Finally, the greatest, most valuable high-level advice I can provide is that you have to break Parkinson’s Law over and over again. Parkinson’s Law is the concept that the more income you have, the more you spend. 

You and I conceptually know that you have none to save or invest if you spend everything you make. However, this is the conundrum that most people find themselves in. Each raise or bonus allows them to afford something they’ve been eying and craving for a while, and eventually, they look back and wonder why it feels as if they can never get ahead. 

You, my friend, are ahead of the curve, though, and with the four cash stages, buying your time back, and infinite banking knowledge, you are destined to succeed. You’re keenly aware of how to thrive in that Cash Capture step and ensure your expenses are much less than your income. 

But that’s not enough! You have to continually refocus and reevaluate your cash capture strategies to ensure you always have more and more to invest, fueling your wealth-building machine. With each raise, cashflow check, and bonus, you have to remain conscious of the temptation to spend more and break that cycle again. 


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Scaling a Commercial Real Estate Investing Business with a Full-Time W2 Job

Scaling a Commercial Real Estate Investing Business with a Full-Time W2 Job

Our parents influence us in so many ways. In Brock Mogensen’s case, his Dad inspired a passion for real estate and active investing. Brock’s father owned two duplexes, and the money those properties brought in was a big help to the family.

These days, Brock is at Smart Asset Capital, which is based in Milwaukee. Its portfolio of commercial properties includes 18,000 square feet of office space, 20,000 square feet of retail space, and an apartment complex with 89 units. Those numbers are even more impressive when you consider that Brock has only been in real estate for two years.

Moreover, Brock has built up his real estate holdings while working a full-time W2 job. If you’ve ever thought that a regular job would leave you no time for active investing, Brock’s story should convince you otherwise.

Entering the Real Estate Market

When Brock was a college freshman, he came up with a simple plan: He’d save his money to buy a duplex as soon as he could. And that purchase would launch a side career as an active investor in real estate.

About two years ago, Brock accomplished his initial objective. He bought a duplex by house hacking it. Typically, a house hack is when you buy a multifamily home via a mortgage. You move into one of its residences and rent out the other units. With the rent money you collect, you pay off the mortgage until you own the place.

Once Brock owned this residential complex, he began to realize how many real estate options were available to him: wholesaling, flipping, syndication, and more. Ultimately, he chose syndication, which involves collecting funds from a group of investors to buy properties.

Once Brock decided on syndication, the real work began. He took courses and attended real estate events. He read books and listened to podcasts. Altogether, he spent about six or seven months consuming information about real estate and commercial investing.

After that, Brock felt confident about his chances in the real estate industry. He believed he had the analytical abilities and the knowledge to succeed.

Finding Partners

The next step was networking. Through the Bigger Pockets online community, Brock met a real estate professional he enjoyed talking to. They went out for coffee a few times. Despite their different backgrounds, the two had similar goals for the future. In fact, they could sum up their real estate plans in five words: “We want to go big.”

Not long after, a broker brought a deal for an 89-unit duplex to the attention of Brock and his partner. However, they realized it was too big for them given their relative inexperience. Brock also felt the price was too high.

Soon after that, Brock met his partner’s friend, a businessman with a large real estate portfolio and a management team in place. The three joined forces, and they decided to start a new company. Smart Asset Capital was born.

The First Deal

About four months later, Brock found that 89-unit duplex on the online real estate marketplace LoopNet. By this point, the owner wanted to sell it as quickly as he could, and Brock’s team made an offer. His group eventually bought it for $3.55 million, which was a real discount.

However, Brock’s second partner, the one with the largest portfolio, had doubts about this duplex at first. He thought the group didn’t have enough cash on hand to make it worthwhile. He also felt that, since Brock already owned a duplex, they should diversify and pursue a different type of building. But Brock was adamant in supporting this deal, and he finally persuaded his partner.

To finance this duplex, Smart Asset Capital raised $830,000 in private equity, which mostly came from Brock’s partners’ network of investors. Given his lack of industry connections then, Brock personally raised less than $100,000. Some of that money came from friends of his family.

The Smart Asset Capital principals soon closed the deal, and the 89-unit duplex was theirs. They then planned to make multifamily residences their core business.

In recent months, however, Brock and his partners learned about two outstanding properties that were on the market: one complex with 20,000 square feet of retail space and one with 18,000 square feet of office space. Thus, the Smart Asset Capital leaders changed course somewhat; they decided to close on those commercial properties.

As a result, the company now has different groups of assets. And its founding partners will continue to bid whenever a promising commercial investment opportunity comes along, regardless of its asset class.

The Secrets of a Thriving Partnership

At this point, you might be wondering what accounts for the success of the Smart Asset Capital partnership. Brock feels that, above everything else, one aspect is key: These three individuals balance each other extremely well.

Specifically, Brock brought his analytical abilities and talents for underwriting and reporting to the firm. For their part, his two partners have sales backgrounds and extensive industry connections; their investor databases contain long lists of names.

Brock feels that it’s vital for every businessperson to collaborate with people who have different strengths and different weaknesses. That way, the resulting group won’t be deficient in any area, and it will be powerful in many.

Indeed, on any given workday, all three Smart Asset Capital founders are able to focus on their strong points. Brock works largely on underwriting, investor relations, and asset management. His partners, meanwhile, concentrate on sales.

At the same time, these roles aren’t completely separate from each other. Brock gets involved in selling from time to time, and his partners help with the reporting tasks and asset management.

Not to mention, this partnership is equitable. The three men split their profits evenly; everyone gets 33.3 percent.

A Week in the Life of Brock Mogensen

Asset management is definitely complex, but Brock has an organized weekly schedule to handle it.

During the day on Sunday, Brock reviews his notes from the prior week and creates an agenda for the workweek ahead.

On Monday morning, Brock analyzes the company’s key performance indicators (KPIs). They include statistics such as tenant turnover rates, operating expenses, and revenue growth numbers.

Brock’s virtual assistant, a full-time employee, compiles the weekly KPI report and sends it to all the partners. At one time, Brock created this report himself, taking an hour out of his schedule every Monday morning to do so.

Then, on Monday night, the Smart Asset Capital founders hold a group call with their property manager. They rely on Brock’s agenda for their discussion points.

Throughout the week, Brock continually checks out the company’s account on AppFolio, a leading property management software program. That way, he can keep track of the KPIs and make sure nothing seems out of the ordinary. In addition, he takes copious notes, some of which he’ll later turn into questions for the property manager or discuss in meetings.

In fact, Brock feels that analyzing real-time data is the most important part of real estate investing. Incorporating this data into models effectively and accurately allows for effective management and planning.

Running a Real Estate Company as a Part-Time Gig

Many people are surprised to learn that, while managing a real estate company and overseeing its properties, Brock works a full-time marketing job. But Brock is used to juggling a packed schedule. When he closed his first deal, he was in an MBA program and taking three classes.

Will Brock ever leave his marketing career to become a full-time real estate investor? He still isn’t sure. He likes having two income streams. If, however, the real estate cash flow hits a certain target someday, he says he’ll certainly consider leaving the other job.

Also worth noting, although he has a steady income as a W2 employee, Brock keeps large reserves of cash in the bank. That way, he has enough funds on hand to keep his real estate business going in the event of an economic disaster or a period of financial uncertainty.

Brock says that many people with W2 positions hold themselves back, believing they don’t have time for business ventures on the side. Or a W2 employee might simply use that job as an excuse to not be an active investor. Perhaps that person is a little afraid to get started.

Do you have a full-time job? Are you looking to become an active investor in real estate during your spare time? If so, Brock recommends that you take the two initial steps he took. First, choose a specific aspect of real estate investing and really study it, just as Brock studied underwriting. Next, find partners to collaborate with, people who are authorities in areas where you lack expertise.


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How to Manage Your Apartment Property Manager

As the asset manager of an apartment investment, one of your main responsibilities is to oversee the property management company.

Here is a blog post where we outline all the GP’s duties after the acquisition.

This blog post will address five frequently asked questions about interacting with and managing the property management company after you’ve acquired a deal and assumed your position as the asset manager.

For all of the FAQs, your property management company may or may not be onboard (for example, they may not send you every report that you ask for), which means you must set expectations with them BEFORE finding a deal. You need to ask the right questions based on the FAQs below when conducting property management interviews.

1 – How often do I interact with the property management company?

You should have monthly performance calls with your property management company at minimum. During the stabilization period (i.e., when you are performing renovations), the calls should be on a weekly basis. Once the asset is stabilized, you can continue the weekly calls, change to monthly calls, or have calls on an as-needed basis.

The weekly performance calls should include you and the onsite manager at a minimum, and ideally the regional manager as well.

During the calls, you will review property reports and key metrics (more on these two things below).

2 – What reports should I expect from my property management company?

You will get what you ask for. If you ask for nothing, you will likely receive nothing or just the bare minimum.

The reports you want to receive on a weekly basis are:

  • Box score: summary of leasing activity, including the number of move-ins and move-outs and unit occupancy status (vacant-leased, vacant-not leased, vacant-ready, notice-leased, notice-not leased, model, down, other use)
  • Occupancy: physical occupancy (percentage of total units occupied) and economic occupancy (rate of paying tenants)
  • Occupancy forecast: the projected occupancy based on future occupancy status (i.e., units that are occupied, units with expiring leases that are leased, and vacant units that are leased)
  • Delinquency report: list of resident delinquent (i.e., past due) amounts
  • Leasing reports: summary of leasing activity (traffic information, leasing information, concession information, marketing information, projection information)
  • Accounts payable: summary of money owed to vendors (including to the management company)
  • Cash on hand: the asset’s liquidity

The reports you want to receive on a monthly basis in addition to the weekly reports above are:

  • Income and expense statements: detailed monthly report with all income and expense line items, as well as the dollar and percent variance compare to the budget
  • Deposits: summary of security deposit information (balance, forfeits, returned checks, refunded)
  • General ledger: summary of all financial transactions
  • Balance sheet: summary of assets, liabilities, and capital
  • Trial balance: summary of all debits and credits
  • Rent roll: summary of all unit information (occupancy status, market rent, current rent, move in, lease start and end, other fees, deposit)
  • Expiration reports: summary of expiring leases
  • Maintenance reports: summary of maintenance issues and costs

Again, make sure you set reporting expectations with your management company BEFORE you have a deal.

3 – How do I obtain these reports?

The simplest way to obtain these reports to is to ask your management company to create custom reports using their management software and have them sent to your email on a weekly/monthly basis.

Another option is to ask for access to their management software so that you can have real-time access to these reports.

If your management company doesn’t use a software or if you don’t like the look of their reports, you can create your own custom spreadsheet and ask your management company to update it on a weekly/monthly basis. Click here to download a free Weekly Performance Review tracker.

4 – What metrics should I focus on the most?

The most important metric to track is the cash flow relative to the projections you presented to your investors. Track the forecasted vs. actuals on the income and expense report, focus on the line items with the greatest variance, and create a strategy to bring those line items back on track during your weekly performance calls.

For the value-add business plan, the number of units renovated relative to your forecasted timeline and the rental premiums demanded are important during the first 12 to 24 months because both will have a large impact on your cash flow.

Additionally, certain metrics, like leasing metrics, capital expenditure costs, and total income, may vary from your projections during the value-add portion of your business plan. For example, the total income may be lower than forecasted after owning the asset for 3 months due to a higher number of move-outs than anticipated. Or, you spent a larger percentage of your capital expenditure budget in the first three months because you are ahead of schedule. So, the key metric during the value-add portion of the business plan is the forecasted vs. actual rent premiums for renovated units.

Other metrics to track that may be the cause of a high income and/or expense variance are the turnover rate, economic occupancy, average days to lease, revenue growth, traffic, evictions, leasing ratio and other metrics from the reports outlined above.

Again, the best strategy is to track the variance on the income and expense reports, strategize with your management company to identify the cause by reviewing the other reports and come up with a solution if needed.

5 – What other things do the best asset managers do?

First, look at your property management company as a partner and screen them accordingly. Are they someone you want to work with for a long-time? Does their track record speak for itself? What are the tenants saying about them? How professional are they when speaking with a potential tenant (you can role play as a potential tenant to find out)? Are they willing to change if needed? Do the employees like working at the company? Are they engaged on social media?

Next, the best asset managers always look ahead. You should evaluate the market, evaluate the competition to compare your property to, track and maximize income growth and expense decline, and ensure tenant satisfaction by checking reviews, social media, and hosting community events.

Also, even though the property management company is your partner, you should watch them like a hawk. Most people focus on the front-end activities, like finding deals, sourcing capital, whether they need to form an LLC, etc. Fewer people focus on the back-end activities, like asset management, which take years and decades to do. So much of the asset’s success and your company’s ability to scale is dependent on your property staff and property management company, so you have to watch them like your career depends on it, because it does. If things don’t work out, don’t be afraid to part ways.

Lastly, visit the property at least once a month in-person. If you invest out-of-state, a great strategy is to ask someone local to mount a GoPro on their vehicle and drive the property on your behalf.

How to Manage Your Apartment Property Manager

Set up frequent phone calls with your property management company, starting with weekly calls.

Request the proper weekly and monthly reports to see how well or poorly the property management company is implementing your business plan. Track the most relevant KPIs, like cash flow variance, number of units renovated, rent premiums, etc.

Properly screen the property management company upfront and continuously evaluate their performance.

Visit the property in person to make sure the reports match reality.


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How a Passive Apartment Investor Interprets a Schedule K-1 Tax Report


Apartment syndications remain an appealing investment for passive investors due to the myriad of tax benefits—the foremost being depreciation.

Fixed asset items (a long-term tangible piece of property or equipment that is used in operations to generate income and is not expected to be consumed or converted into cash within a year) at an apartment community reduce in value over time due to usage and normal wear and tear.  Depreciation is the amount that can be deducted from income each year to reflect this reduction in value.  The IRS classifies each depreciable item according to the number of years of its useful life.  It is over this period that the fixed asset can be fully depreciated.

A cost segregation study identifies building assets that can be depreciated at an accelerated rate using a shorter depreciation life.  These assets are the interior and exterior components of a building in addition to its structure. They may be part of newly constructed buildings or existing buildings that have been purchased or renovated.  Approximately 20% to 40% of these components can be depreciated at a much faster rate than the building structure itself.  A cost segregation study dissects the purchase/construction price of a property that would normally be depreciated over 27 ½ years—and identifies all property-related costs that can be depreciated over 5, 7, and 15 years.

If the expense of the construction, purchase or renovation was in a previous year, favorable IRS rulings allow taxpayers to complete a cost segregation study on a past acquisition or improvement and take the current year’s deduction for the resulting accelerated depreciation not claimed in prior years.

You can learn more about how depreciation is calculated, as well as the other tax factors when passively investing in apartment syndications, by clicking here.

Each year, the general partner’s accountant creates a Schedule K-1 for the limited partners for each apartment syndicate deal. The passive investors file the K-1 with their tax returns to report their share of the investment’s profits, losses, deductions and credits to the IRS, including any depreciation expense that was passed through to them.

Click here for a sample Schedule K-1.

There are three boxes on the K-1 that passive investors care about the most.

Box 2. Net rental real estate income (loss). This is the net of revenues less expenses, including depreciation expense passed through to the LPs. For most operating properties, the resulting loss is primarily due to accelerated deprecation. On the example K-1, the depreciation deduction passed through to the Limited Partner is $50,507, thereby resulting in an overall loss (negative taxable income).

Box 19. Distributions. This is the amount of equity that was returned to the limited partner. On the example K-1, the limited partner received $1,400 in cash distributions from their preferred return of distribution and profits.

Just because the LP realizes a loss on paper does not mean the property isn’t performing well.  The loss is generally from the accelerated depreciation, not from loss of income or capital.

Section L. Partner’s capital account analysis. On the sample K-1, the ending capital account is $48,093. However, this lower amount doesn’t reflect the capital balance that the limited partner’s preferred return is based on. The $48,094 is a tax basis, not a capital account balance. Thus, this limited partner wouldn’t receive a lowered preferred return distribution based on a capital balance of $48,094. From the operator’s perspective, depreciation doesn’t reduce the passive investor’s capital account balance.

The capital balance is technically reduced by the distribution amount above the preferred return (i.e., the distribution from the profit split), which is a portion of the $1,400 in the “withdrawals & distributions” box. However, operator’s deals are structured in a way so that the LPs continue to receive a preferred return based on their original equity investment amount, with the difference made up at sale.

The majority of the other accounting items on the K-1 are reported on and flow through to your Qualified Business Income worksheet.  The net effect of these items will be unique to each investor based on their specific situation and other holdings.

If you want to learn more about each of the individual sections and boxes, click here to review IRS instructions for the Schedule K-1.

To better understand your own tax implications on any investment, it is important to consult a professional who has an understanding of your overall finances so that they may give full tax advice.  Therefore, always speak with a CPA or financial advisor before making an investment decision.

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What Financial Reports to Send to Passive Apartment Investors

After closing on an apartment syndication deal, one of the responsibilities of the general partners (GP) is to provide the limited partners with ongoing updates on the investment.

Here is a blog post where we outline all the GP’s duties after acquisition.

One aspect of this passive investor communication is providing financial reports on the asset. Not all general partners provide financials to limited partners. However, when they do, there is an increase in trust between the GPs and LPs, which is the number one reason why passive investors chose to invest with one operator over another.

The purpose of this blog post is to outline the process of providing your investors with deal updates by sending them financial reports.

What Financial Reports to Send to Passive Investors

The reason to send passive investors financial reports, aside from increasing transparency and trust, is so that they know what is going on with the investment. The information provided in monthly or quarterly recap emails is a good start, but a spreadsheet with hundreds of data points paints a more detailed picture of the asset’s operations.

Ultimately, how often you send financial reports and the types of financial reports you send is up to you and the preferences of your investors.

The two most relevant financial reports to send to passive investors are the rent roll and the T-12.

A rent roll is a document or spreadsheet containing detailed information on each of the units at the apartment community, along with a variety of data tables with summarized income. The rent roll provides passive investors with a current snapshot of the investment’s revenue.

A T-12 is a document or spreadsheet containing detailed information about the revenue and expenses of the apartment community over the last 12 months. Also referred to as a trailing 12-month profit and loss statement, the T-12 provides passive investors with current and historical revenue and expenses.

A best practice is to send financials at least once a quarter.

How to Obtain Financial Reports

The first step in the process starts before you even have a deal. Most likely, the financial reports will be generated by your property management company. When interviewing property management companies, make sure you set expectations. First, ask them what type of property management software they use and if it can generate custom financial reports. Ideally, they provide you with a sample rent roll and T-12. If they do, how detailed are the reports? Is the T-12 broken down into specific line items? Does the rent roll list out all of the important metrics?

Here are examples of how detailed a rent roll and T-12 should be.

Assuming they generate the right reports, the next question to ask is “will you send me financial reports upon request” and “what is the lead time?” In doing so, you will know if they are willing to send you financial reports and how quickly (or slowly) you can expect to receive them.

How to Send Financial Reports to Passive Investors

One approach is to include links to download the financials in the monthly or quarterly recap emails.

Create a Dropbox folder for each of your properties. Each quarter, upload PDF versions of the rent roll and T-12 to the property’s respective Dropbox folder and include the links in the recap email. For example, include a sentence like, “Also, you can download the quarterly financials (current rent roll and profit and loss statement) by clicking here,” and the wording “clicking here” is hyperlinked to the financial reports.

Another more advanced and efficient option is to upload the financials to an investor portal. Rather than linking to the financials in your recap emails, you can direct the passive investors to the portal.

Before sending the financial reports, make sure that your resident’s and investor’s personal information is removed. Sometimes, the investor distributions will be included at the bottom of the T-12. Only include the line items above the net operating income. Also, make sure you remove the variance column from the T-12. Your property management company’s software may include a column that has the difference between the actuals and the project (i.e., the variance). To avoid confusion, remove the variance column and only send to investors upon request. Consider removing the names of residents for the rent roll too.

How to Handle Passive Investors’ Questions About Financials

Like any questions received from investors, if you know the answer, reply in a timely fashion. If you don’t know the answer, reach out to your property management company.

The most common question you will receive from investors will be about how the T-12 actuals compare to the projections you provided in the PPM. If you are not hitting your projections, speak with your property management company to determine why there is a variance and what is being done to solve the issue. The best responses to investor’s questions include a diagnosis of the issue as well as the solution which should already be implemented.


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How to Provide Best-In-Class Customer Service to Your Multifamily Residents

Multifamily investing offers the opportunity to profit tremendously when you sell your property, and a well-managed property will also throw off regular income throughout your ownership period. As a commercial real estate investor, you have devoted a tremendous amount of time, energy and money into the purchase of a great property. You want to do what it takes to optimize your return on investment, but successful commercial real estate investing involves more than buying and maintaining properties. Your tenants are the lifeblood of your investment, and they should receive just as much care and attention as property upkeep and number crunching.

Get to Know Your Tenants as People

While your multifamily property is a financial investment to you, it is the place that your tenants call home. Each of your tenants has unique factors to consider related to their lifestyle, finances, interests and goals, and these are often entwined with their living experience in vital ways. When you get to know your tenants as people rather than as names on a lease, you can offer them a higher level of customer service. In the process, you may decrease turnover and improve online reviews. These factors directly feed into a healthy bottom line. How can you serve your property’s residents as customers rather than solely as tenants?

Be More Than a Rent Collector

Your property’s residents will be more likely to renew a lease and to recommend your property to their friends and family members when they feel valued and respected. In many cases, the relationship between a tenant and a landlord is purely financial, and it is entirely dictated by the terms of the lease. You must abide by the terms of the lease, and you must ensure that rents are collected in a timely manner. However, your relationship with your residents should extend beyond the monthly rent collection process. For example, you can send tenants birthday cards or call to check on their unit’s condition periodically. Small gestures like these can go a long way toward developing a positive relationship with your tenants.

Be Proactive

The top brands today stay on top of their customers’ needs, and they anticipate behavior when possible. Your multifamily property is a business, and your tenants are your customers. With this in mind, you need to nurture relationships and proactively anticipate your customers’ needs. For example, reach out to your tenants a few months before their lease expires to give them renewal options. Implement a loyalty program that rewards renewals, transfers and referrals. A high turnover rate at your multifamily property can dramatically erode profits, so creating a reward system that encourages renewals can be cost-effective for your business. At the same time, the benefits of the reward system likely will be appreciated by your customers.

Support Your Residents’ Goals

While some residents may move out of an apartment building that is poorly managed, others will vacate for reasons that are not related to property management at all. For example, they may need a larger space or may be ready to purchase a home. When your tenants decide to vacate, avoid creating stressful and unnecessary roadblocks. Consider collecting moving boxes and other materials from new tenants and offering these to tenants who are vacating as part of your service. Offer to do a walk-through before the tenants vacate so that they can recoup as much of their deposit as possible. You should support your tenants just as much when they are vacating as you did when they were moving in.

Approach Rent Increases Transparently

For the majority of your tenants, their monthly rental payment may be their largest expense. An unexpected increase can create immediate stress and anxiety, and this may be followed by a kneejerk reaction to look for a new and more affordable place to live. From your perspective, maintaining rents at market rates is essential in order to optimize profitability. How can you maintain market rents while also retaining happy tenants? Create a small report for your tenants that shows current market rents in the area. This report should substantiate the rental increase at the time of renewal. If you launch a rewards program for loyal residents, consider outlining any savings that they may enjoy by renewing their lease. This type of detailed and customized report could actually help your tenants to feel positive about renewing their lease at a higher rate.

Be Readily Available

Tenants commonly reach out to their landlord or property manager because they have a complaint or a repair issue that requires prompt attention. In many cases, tenants are provided a single phone number to call for assistance, and landlords may let those calls go to voicemail to screen them for urgency. To tenants, the inability to quickly and easily reach you when they need assistance with their home can be stressful. More than that, it could create the impression that your tenants are a bother to you. To counter this, offer multiple communication channels. In addition to a phone number for verbal communication, offer text communication, an email and a website. Make a point to always answer the phone when a tenant calls and to respond to all other methods of communication promptly.

Cross-Sell with Your Other Properties

Do you own more than one multifamily property? The apartment that a tenant lives in today may no longer meet their needs, but one of your other properties could be a better fit. If you have provided excellent customer service to the tenant throughout his or her residency period, the tenant may be happy to consider relocating to one of your other properties as long as the property meets their current needs. Likewise, consider extending the rewards for your referral program to all of your properties. These practices will help you to maintain higher occupancy rates overall, and the increased options can bolster customer satisfaction.

Ask for Reviews

Your existing tenants will directly impact your bottom line from multifamily investing long after they move out. This is because potential tenants often read online reviews from past tenants to learn about important factors like property management responsiveness, rent increases, property maintenance and more. Because unhappy tenants may be more likely to post reviews than tenants who have loved living in your property, soliciting feedback from satisfied tenants is essential. Consider asking tenants to leave reviews at different stages in their experience. For example, you may ask for feedback about the move-in process after they get settled. You may also ask tenants to leave comments when they renew a lease or after they move out. In addition, use feedback from negative reviews to make improvements.

As is the case with other types of businesses, you will not be able to please all of your tenants at all times. However, because success from multifamily investing is intricately linked to tenant satisfaction, it is essential that you develop a sound customer service policy that touches your tenants throughout their experience. Properly managing tenant relationships may require more time and energy than you initially anticipated. Consider hiring a reputable property management firm if you are challenged in this or other critical areas of commercial real estate investing.

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Recognizing the Risks in Real Estate

In my previous blog, I outlined the 5 main risk classes of real estate. In this follow-up blog, I want to outline some scenarios where those risks materialize.


Because Core assets are newly built assets in strong markets, these exhibit the least risk. However, when we look at where the returns are truly derived, we can find that there is risk. Core assets draw a bulk of their return from cash flow. So, the risk materializes from impacts to that cash flow.

Back in the financial crisis of 2009-2011, Core assets were hit particularly hard as companies and people started cutting expenses. In the multifamily space, there was a lot of uncertainty about employment at all levels of an organization. Because of this, the high earners that would typically live in the nicer apartments began looking for ways to cut living costs and moved into cheaper, Class B properties.

With the onset of COVID, a different scenario happened with the complete upheaval of the professional workforce moving to work from home, sometimes indefinitely. As a result, Core multifamily projects are experiencing higher vacancy rates and reduced rental rates as city center residents move to the suburbs for more affordable, larger units.

Core Plus:

Similar to Core, Core Plus asset returns are primarily driven by cash flow. Therefore, the same examples listed above still hold true. Although, these assets present a couple unique risks as well. Core Plus can either be a newly built property in a Class B area, or a Class B property in an A or B area.

When talking about Class B areas, by way of comparison, your rents will be lower than new construction in a Class A area. Your tenant base will likely have a lower income than in Class A areas, and therefore likely have a slightly higher risk of layoffs or impacts to earnings.

Beyond the slight increase in tenant risk relative to the typical Core asset, you often have an older asset. While these assets are remodeled with most deferred maintenance addressed by the prior owner, there is additional capital expenditures relative to new construction. The maintenance costs with the Core Pluss asset are higher than Core, and there is the increased chance of large ticket repairs.

Value Add:

Value Add assets generate their returns from both cash flow and appreciation. The same risks that effect cash flow outlined above can occur with Value Add assets as well. Similar to Core Plus, since these assets are dated, they tend to be lower rent options and therefore may see a higher-risk tenant base.

Value Add assets tend to require a reasonably significant amount of capital to be spent to renovate the property. Therefore, construction costs become a risk. Whether this be timeline or cost, both can affect the returns of the asset. A real-world example of this is the current situation with COVID, which is causing a significant increase on construction material costs. While the Value Add operator is typically not doing major construction relative to redevelopment or new development, these cost overruns can still impact investor returns.

Often times, a significant portion of the overall return of the asset comes from appreciation, which carries its own risks. Markets can shift dramatically over an operator’s hold period, meaning the asset cannot be sold at a favorable price. Often in multifamily syndications, approximately half of the overall return to the investors comes from profit at sale. Market shifts effecting the long-term value of the asset can create significant volatility in the overall returns.


Opportunistic deals or Redevelopment deals create the most risk of any existing class. Since these assets often are cash flow negative through significant vacancy and require significant capital to bring back to leasable, the risks are immeasurable. From unexpected construction costs to longer lease up timelines, there are many moving parts and little to no revenue to offset these potential issues.

Real world examples of these risks include the current increase of all construction materials. Geopolitical issues have been known to effect steel and drywall costs dramatically in a short amount of time. Other renovation risks and cost overruns happen all the time simply by opening up walls and realizing major systems are not to code.

Real risk, also, comes with the overall timeline of an opportunistic investment, specifically as it related to changing tastes of your tenant base. While changes in taste tend to evolve over time, the COVID pandemic has proven that sometimes demand can shift quickly. The longer you have an asset with little to no income, the more pronounced the effects of those shifts can be. Examples of changing tastes range from location preferences to amenities on the property to paint colors.


The riskiest of all asset classes is development. Again, the same risks are true for Development compared to Opportunistic assets. However, there are some risks that Opportunistic assets won’t encounter; primarily, entitlements.
Entitlements, in general, are all of the sign offs and approvals you need. If you want to change the use of a plot of land, you either need it rezoned or a variance. If you want to put 200 apartment units in an area, you need approval from the sewage department to confirm the sewer system can handle the additional demand, or from the school district to determine if all the new residents will have space in classrooms. You need approval from neighborhood councils, that your design fits into the look and feel of the neighborhood.

At the end of the day, all of the approvals needed to put a new building up create significant risk, as not receiving a single approval can stop a development in its track. While seasoned developers will not acquire a property until they are reasonably confident all approvals can be obtained, if the approvals are not obtained, it can dramatically affect the value of the property, as future developers may be less inclined to even pursue the property knowing the prior developer was not able to obtain the necessary approvals.

As outlined, here and in my prior blog, all investments come with risk. Our job, as investors, is to pursue investments where we feel the risks associated are worth the reward.

About the author:
Evan is the Investor Relations Consultant for Ashcroft Capital. As such, he spends his days working with investors to better understand their investment goals and background. With over 13 years in real estate, he has seen all sides of real estate from acquisitions, to capital raising on the equity and debt side, to operations, and actively invests himself. Please feel free to connect with Evan here.

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How to Grow Your Business Using TikTok

How Antonio Cucciniello Found Success Marketing On TikTok

The social media sphere is a hotspot for entertainment, community, and collaboration. Best of all, these platforms offer opportunities to expand your reach, market yourself, and promote your business. Antonio Cucciniello, a real estate investor, is proof that present-day websites and modern applications are practical advertising tools. TikTok, specifically, has allowed Cucciniello to gain new clients and investors.

Much like any functioning member of society, Cucciniello is no stranger to social media. For years, Cucciniello posted videos to YouTube. After four years and 500 videos, he only amassed 300 subscribers. Meanwhile, his Instagram following was lagging, which proved detrimental to his active and commercial real estate investing efforts. Eventually, Cucciniello discovered the power of TikTok.

In the hopes of advancing his career, Cucciniello hopped on the bandwagon. He got his first taste of social media success after publishing a TikTok video. Within one day, Cucciniello’s TikTok post received 52 views, and he gained 150 followers by the end of the week. Before long, Cucciniello went viral, earning 130,000 views on a video that poked fun at terrible tenants. Since his partial claim to fame, Cucciniello’s devised a sound strategy on how to market on TikTok.

In his experience, Cucciniello’s found that instructional videos typically gain the most traction. Whether you’re discussing how to scale a business or change a tire, Cucciniello maintains that audiences love to learn. He then goes live to talk more in-depth about the content. To increase consumer engagement, he welcomes questions. According to Cucciniello, being controversial is one surefire way to go viral. However, he usually sticks to humor, dancing, and general amusement to appeal to audiences.

Cucciniello is far from the first to unlock TikTok’s marketing potential. In fact, many are gravitating to this platform in an effort to gain more exposure. As a result, industry experts are providing insight on how to scale a business on TikTok. By heeding the following advice, you can reap the benefits of TikTok’s massive following and ever-expanding platform.

How To Market On TikTok

Know What You’re Working With

Arming yourself with pertinent information is a crucial first step. After all, to get the most out of the platform you’re using, it’s critical to learn, analyze, and monitor it. For instance, watch videos that are circulating the platform, note similarities between them, and develop ways to apply this knowledge to your specific content.

Don’t Overthink It

While it’s important to be deliberate in your approach, don’t give entertainment the back seat. In other words, infuse some fun into your content. Even if you’re talking about active real estate investing, you can find ways to inject lightheartedness into your videos. In essence, if you find a happy medium between informative and entertaining, you’re bound to reel in a wide audience.

Work With Other Influencers

On TikTok, there’s strength in numbers. Find someone who’s on your same playing field, and collaborate. Studies show that traditional marketing doesn’t interest Generation Z. With that said, you have to think outside the box. By partnering with other influencers, you can subliminally market your platforms while giving viewers the engaging content they desperately desire. Not only will you be able to reach a dynamic viewership, but you’ll also start making beneficial connections.

Look Into TikTok Advertising

As a powerhouse in the social media realm, TikTok’s introduced unique campaign strategies to its platform. Native content, brand takeovers, hashtag challenges, and branded lenses are the marketing resources they’ve created. Each offers its own perks, so you’ll need to gauge which option is best for your business. No matter what you decide, TikTok’s taken a calculated approach to ensure that your marketing methods breed some results.

Stay True To Yourself

Above all else, don’t attempt to be someone you’re not. While it’s prudent to emulate a person’s recipe for success, recycling someone else’s content won’t prove effective. Instead, highlight the qualities and strengths that set you apart. Most importantly, don’t shy away from topics that interest you. Even if you think that commercial real estate investing won’t attract viewers, you’d be surprised how many niche communities there are on TikTok. Simply put, don’t stray too far from your roots, and you’ll inevitably succeed.

Using the above story and advice as inspiration, you can effortlessly grow your business on TikTok. Whether you’re into active real estate investing or tree shaping, there’s a place for all on TikTok’s inclusive platform. Build your brand with confidence and ease when you start your TikTok journey today.

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