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Do This Before Your First Passive Investment


How to prepare for your first passive investment

Multifamily apartment syndications provide a true opportunity to earn passive income. If you’ve just recently heard all the benefits you may be itching to do your first deal. How are you preparing? Here are five steps you should take before you join a real estate syndication project.



Find your why and set a goal

Investment goals are important because they help you to filter through investment opportunities. Your “why” is your motivation for taking action. If you know why you are investing it makes it easier to set these goals. For instance, your “why” may be investing for capital preservation, building a retirement nest egg or saving for your newborn’s college tuition.





Each of these reasons will change what is a good deal for you because they affect your risk tolerance, your time to return and your type of return. Someone wanting to preserve capital would choose a lower risk opportunity. With lower risk there is usually a lower return. This lower return may be too low for someone [building a retirement nest egg.] Type of return refers to whether you would need cashflow, tax write-offs or if you would be happy with just a large lump sum payday once the investment matures. Timing of return is how long you can wait to get your first distribution. Is 1 year too long or can you hang on for a decade?

Once you know your why, you can set a goal. Let’s use the “why” of saving for college tuition. The goal should be a specific measurable outcome with a deadline. For instance: I want to save $200,000 by my daughter’s 18th birthday.



Decide where you will source your funds

Once you have decided on your goal you will have to source your funds. Most multifamily apartment syndications start with a minimum investment amount of $50,000. Will you be investing this amount through your retirement account, savings account, using equity in your home or one of the [many other sources of capital]?


Depending on where you source your funds will affect how soon you can benefit from them, the tax advantages and potentially your net return on investment. This is unique for every investor. You should consult with someone who can advise you. Someone who has a full understanding of your financial circumstances, your CPA.






Talk to your CPA

One of the many advantages of investing in multifamily apartment syndications is the tax advantage. Taxes are unique to each person. To maximize this advantage, you should consult your CPA early. This should be someone who understands your entire financial picture, someone you trust enough to share your goals with.


Depending on the timing of your investment, the way you source your funds, and what other investments you already have you may completely negate all the tax benefits you can get from real estate investing. Reach out early and keep your CPA updated whenever there will be a large financial event. CPAs can also help if you need to document your accreditation status in order to participate in certain opportunities.



Get to know your sponsors

Multifamily apartment syndications are a team sport. While you may not know every member on your team you should know the captains. In syndication world the captains are the sponsors aka general partners or active members on the team. The sponsors call the shots and strategic plays that make the investment successful.


Because so much of the deal’s success depends on the sponsors, you’re more often investing in the sponsor than the deal itself. Take the time to get to know your sponsors, meet with them, research their backgrounds, track records, ask for referrals, whatever you need to feel comfortable and confident about your decision to invest with them.

This process can take time so the earlier you start the stronger the relationship will be by the time you first invest.





Understand the investment strategy/ rationale

How does a syndicated deal work? It’s not just important to be confident in the sponsor. You should also have a general idea of the investment strategy and rationale for the deal you’re investing in. This is going to affect deal risk levels, your type of return and time to return. Not understanding the deal may cause dissatisfaction because you’re not getting what you expected even if the deal is going as planned.


Investing is exciting and taking action is what we are all about. To make sure you get the best experience possible, keep these steps in mind before you take on your first deal.


The 5 steps you should take before passive investing in real estate are:

  1. Find your why and set a goal.

  2. Decide where you will source your funds.

  3. Talk to your CPA.

  4. Get to know your sponsors.

  5. Understand the investment strategy/ rationale.


If you are interested in investing in real estate or would like to learn more about Investup visit our contact page or schedule a call.