Why You Shouldn’t Passively Invest in A Syndication

Maybe Real Estate Syndications Are Not For You.

It’s either happened to you or someone you know. It’s a slow afternoon at the office and you’re searching for tickets to go on your next trip. You see a steal of a deal, an unbelievably deep discount, we’re talking crazy amazing savings. If you’re lucky you booked it, if not you may have put it off until later, refreshed the page and – poof- it’s already gone.

Have you ever stumbled on a deal or opportunity that seemed just too good to be true? That’s how many people feel when they first hear about all the benefits of passively investing in real estate syndications. Not wanting to miss out on this great opportunity they are quick to jump in. Investing in a real estate syndication is likely a bigger commitment than that trip you were planning. So, to prevent any buyer’s remorse, here are 5 reasons passively investing in a real estate syndication may not be right for you- at least right now.

You have no idea what a syndication is

If you’ve made it this far and you’re still scratching your head asking what a syndication is chances are you’re not ready to invest in one. Syndications are team/ partnership-based investments where active investors partner with passive investors to purchase an apartment community or other income producing real estate.

The passive investors invest capital while the active investors (sponsors) do the hands-on work to make the investment successful. Both groups share in the profits generated from the investment. This partnership has specific requirements and expectations of all involved. Not understanding this ahead of time can lead to dissatisfaction on the part of the passive investor. It’s in your best interest to educate yourself on these requirements and expectations before investing in your first deal.