If you've ever thought about passive real estate investing but felt held back by preconceived notions, this podcast episode is a must-listen. Jim Pfeifer addresses some of the most common myths and objections that prevent people from investing in real estate syndications. Did you think you needed a lot of money or experience to get started? Jim provides strategies for how average investors can meet minimum investment requirements through creative means like investment groups.

Here are some power takeaways from today’s conversation:

• Why people have never heard of real estate syndications
• Do you need a lot of money or experience to get started?
• Minimum investment requirements
• Where to find syndication deals or sponsors
• Real estate syndications and taxes
• Investing in alternative assets

Episode Highlights:

[02:54] Reason #1: They've never heard of investing in real estate syndications.

• Most financial advisors are not licensed to offer or receive payment for syndicated real estate deals, which is why they tend to discourage their clients from pursuing such investments. Instead, they prefer traditional investment options that allow them to earn commissions. The mainstream media and advertising industry heavily promote stock market and Wall Street investments, leaving real estate syndications with limited exposure.
• [05:31] Reason #2: They think you need a lot of money or experience to get started. 

Many people think you need a lot of money or experience to invest in real estate syndications because deals typically have high minimum investment requirements, often in the tens of thousands of dollars range. However, Jim explains there are now more accessible options available like investment groups through platforms like Tribevest that allow investors to pool their money together and get involved in deals for as little as $5,000 or $10,000 to lower the barrier to entry.

[07:23] Reason #3: They don't think they have enough money to meet minimum investment requirements. 

Deals commonly have minimums of $25,000, $50,000, or even $100,000. However, Jim notes that by saving up smaller amounts over time, such as $100 per month, or allocating a portion of annual 401k contributions, investors can eventually meet minimums after a year or so. 

[10:51] Reason #4: They don't know where to find syndication deals or sponsors. 

Many people don't know where to find syndication deals and sponsors because this type of investing isn't widely promoted or advertised. However, Jim explains that communities like Left Field Investors have curated lists of sponsor partners on their websites to help connect investors with opportunities. Podcasts, meetups, and educational resources within these groups can also help people learn about and be introduced to reputable sponsors in their areas.

[13:30] Reason #5: They're worried it will complicate their taxes. 

While Jim acknowledges that syndicated deals do require filing a K-1 tax form, he notes that a small amount of additional complexity is worthwhile due to the significant tax savings these investments can provide. With help from a tax professional, the higher costs are usually more than offset by lower tax burdens according to Jim.

[16:55] Reason #6: They don't feel comfortable putting a large sum of money into an alternative investment.

Jim advises that becoming part of an active community is very helpful for gaining confidence. Connecting with others who have successful experience investing in syndicated deals alleviates fears and provides social proof that these opportunities can be good additions to an overall portfolio.

Resources Mentioned:

Avoiding Rookie Errors as a Left Field Investor: 20 Lessons Learned From 14 Years of Passive Investing in Private Syndications by Steve Suh

https://www.leftfieldinvestors.com/6-reasons-why-everyone-is-not-investing-in-real-estate-syndications/

Advertising Partners:

Tribevest

Rise48

Vyzer

Looking for an investment strategy that offers steady cash flow and potential long-term growth? Real estate syndications might just be the answer! In this episode, Jim Pfiefer talks about his blog, “Cash Flow is King: The Benefits of Real Estate Syndications.” The episode dives deeper into some of the key benefits, particularly the powerful tax savings from depreciation and the impact of leverage on returns. He also discusses why cash flow is such a crucial consideration for investments, unlike just speculating in the stock market.

Here are some power takeaways from today’s conversation:

• Three ways to generate cash flow
• The six main benefits of real estate syndication
• How real estate syndications can be a powerful retirement strategy

Episode Highlights:

[02:27] 3 Ways to Generate Cash Flow

1. Stock market - For dividend-paying stocks, it provides liquidity and a way to get some yield on cash investments. However, dividends are typically small and it is still considered more of a speculation since the main return comes from selling at a higher price later.
2. REITs - As a company that owns income-generating real estate, REITs pay higher dividends than typical stocks. However, returns are still exposed to market volatility and you don't get the same tax benefits of direct real estate investing.
3. Real estate syndications - These provide significant cash flow from rental income operations. When combined with leverage, depreciation benefits, and appreciation potential, syndications can produce higher long-term returns than the other options. 

[05:40] The Benefits of Real Estate Syndications

1. Depreciation - Syndications allow large depreciation deductions to be claimed on tax returns in the first year, providing significant tax benefits.
2. Market appreciation - Over time, real estate assets in the syndication generally increase in value as markets appreciate. This provides additional returns beyond cash flow.
3. Tax benefits through depreciation - As mentioned, depreciation allows offsetting other income and reducing taxes. This was highlighted as one of the most powerful benefits.
4. Leverage - Investors can gain exposure to large assets while only putting up a fraction of the capital due to leverage. However, leverage comes with risk so careful analysis is needed.
5. Principal pay down - Over the holding period, the loan principal will be paid down gradually with cash flows, increasing equity stake in the property.
6. Cash flow from operations - Well-run syndications produce steady cash distributions to investors from rental income and appreciation over time.

[12:24] Building Wealth with Real Estate Syndications: A Powerful Retirement Strategy

When it comes to retirement planning, many financial advisors suggest a 4% withdrawal rate to ensure that your savings last throughout your lifetime. However, this approach often leaves retirees with a fixed income and little room for growth. But what if there was a way to generate more income while also preserving and growing your wealth? Real estate syndications offer a compelling alternative. With a million dollars invested in real estate syndications, you can expect annual cash distributions of around 7%. And the best part is, thanks to tax benefits like depreciation and cost segregation, you may not have to pay taxes on these distributions. This means you could potentially take home $60,000 a year, double the amount from the traditional 4% withdrawal strategy. Plus, as real estate typically appreciates over time, your million-dollar asset will likely increase in value, providing even more cash flow. This approach not only combats inflation but also offers the potential for a more comfortable and fulfilling retirement. So why settle for 30-30-30 when you could enjoy 60-70-80 grand in retirement?

Resources Mentioned:

Tribevest

Vyzer

https://www.leftfieldinvestors.com/cash-flow-is-king-benefits-of-real-estate-syndications/

When it comes to passive real estate investing, learning from the mistakes of others can save you time, money, and frustration. By avoiding common rookie errors, you can increase your chances of success in passive investing and syndication.

In this episode, Steve Suh shares valuable lessons he has learned from over 14 years of passive real estate syndication investing. In this podcast, he discusses some of the mistakes he made early on and key things all passive investors should focus on, such as networking, vetting sponsors and operators, and paying attention to capital stacks and debt structures. Steve also introduces his upcoming ebook, Avoiding Rookie Errors as a Left Field Investor: 20 Lessons Learned from 14 Years of Passive Investing in Private Syndications, which goes into further detail on each lesson. 

This is a must-listen for both new and experienced passive real estate investors!

Here are some power takeaways from today’s conversation:

• Learning from people’s mistakes
• The importance of networking
• The operator is the keystone of every syndication

Episode Highlights:

[06:53] Network, Network, Network

Steve's insights emphasize the importance of networking in money management and investing. Through virtual networking sessions and forums, he has gained valuable knowledge from others, allowing him to connect with like-minded individuals and explore diverse investment opportunities. Steve highlights the value of private forums, where he can interact with fellow investors and access a wealth of information, enabling informed decision-making and reducing the need for trial and error. Networking is especially crucial in passive investing, helping investors distinguish between good and bad syndicators. Steve's positive experience at the 2022 Meetup in the Left Field further highlights the energy and collaborative environment that networking creates. In summary, Steve's insights underscore how networking empowers individuals to learn, access valuable information, and connect with professionals in the field, ultimately enhancing their chances of success in passive investing.

[12:16] The Operator is a Keystone of Every Syndication

Steve compares the operator to a central principle or part on which all else depends, similar to a keystone in an archway. The operator is the one who runs the show in terms of the asset, such as the placement and management of ATMs. While there may be capital raisers and syndicators involved, it is the operator who handles the day-to-day operations. Steve emphasizes the importance of thoroughly vetting not only the sponsor but also the property management team. Understanding who is actually running the show and speaking directly with the operator or property manager ensures that investors are not deceived by just the sponsor or syndicator's claims. By delving into the granular details and gathering feedback from other sponsors, investors can make informed decisions about the operator's capabilities and performance.

[15:32] Pay Attention to the Capital Stack and the Debt Structure

Steve acknowledges the challenges faced by syndicators due to rising interest rates, particularly with bridge debt. Many syndicators got caught up in value-add deals with variable rate loans, leading to capital calls and foreclosed apartment complexes. This is usually due to complacency and not fully considering the potential impact of rising interest rates. Therefore, Steve emphasizes the need to carefully assess the debt structure and its potential vulnerability to interest rate fluctuations to mitigate risks in future investments.

Resources Mentioned:

Tribevest

Link to Steve’s blog: https://www.leftfieldinvestors.com/13-lessons-learned-from-13-years-of-private-syndication-investing/

Link to Steve’s book on Amazon:

https://www.amazon.com/dp/B0CHXDX1H8/ref=sr_1_1?crid=1J0JHS9ASO5P1&keywords=Avoiding+Rookie+Errors+as+a+Left+Field+Investor&qid=1694553827&sprefix=avoiding+rookie+errors+as+a+left+field+investor%2Caps%2C132&sr=8-1