005:  The Quickstart Guide to Apartment Investing & Apartment Syndication

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Finding and securing financial freedom is tough. Maybe you’ve been in this game for a while and have been looking at the advice from other financial blogs, finance bro Tik Toks, or listening to ol’ reliable, your parents.

Worst case scenario, you’re going to end up with a few (not-so-great) stocks, a retirement account that requires a lot of time and input on your part, and worse, a retirement lifestyle that doesn’t match the dream in your head. Your yacht sailing out of the Caribbean needs to be fueled with some dollar bills behind it.

Apartment investing and apartment syndication is the #1 best method there is for reaching true financial freedom and boosting your passive income streams to live the life you deserve. 💫

As apartment investors, our job is to help people just like you in three easy steps 🔽

First, understand the business, second, get involved as investors, and lastly, our favorite part (and we think yours too) watch that money roll in — that’s it. We’ve both seen our lives drastically change for the better because of apartment syndication and apartment investing, and we’re here to get you up to speed on every single detail, because investing with us may just be the best thing you ever do for yourself.

Just when you thought your school days were behind you, we’re here to pull back in with our class at Kitti College. Yes we made this up, no it’s not real (yet?!). So, this is where school starts because if you’re here listening and wondering how on earth apartment syndication and apartment investing works (or, what it even is) We’ve got you covered with our class, Apartment Investing & Apartment Syndication 101.

When it comes to apartment syndication, we typically see two types of people.

Those who are brand new to apartment syndication and never heard of such a term.

Or others who have dipped their toe into the apartment syndication waters but haven’t taken the plunge. 

Whether you are brand new or ready to deep dive and explore what apartment syndication is, this episode is for you. Don’t worry, no pop quizzes but maybe a group project.

The question on everyone’s lips: WTF Is Apartment Syndication?

Apartment syndication is when you pool your money with other investors to purchase an investment property, under an apartment syndication sponsor. If you’ve ever seen the Avengers it’s essentially just like that. You’re joining forces with other investors to purchase an apartment — and that’s all *you* have to do. No fate of humanity on your hands here, although we would not mind meeting Loki.

See, with apartment syndication, the investors themselves really just have one job, wanna take a stab at what it is? You guessed it, to invest money. In apartment syndication, you’re not signing up to be a landlord or a property manager, and you don’t need to worry about broken dishwashers or rowdy tenants. That kind of work is left up to your apartment syndication sponsors, also called the general partners or syndicators. 

Okay, Talk Apartment Syndication To Me

In the apartment syndication and apartment investing world, there are two main roles that have to be filled: the general partner AKA the GP or syndicator or sponsor, and then there’s the investor/limited partner.  😎😎

The syndicator can be one person, but it’s usually a company comprised of apartment investors that have high-level real estate experience and education. The syndicator’s job is to scout out investment opportunities, find apartment properties, and conduct market research. 

The apartment syndicator is also responsible for procuring investors. (AKA, financially independent people like you. Wink, wink.)

The syndicator also doesn’t put as much capital into the property purchase itself, but they’re in charge of plenty on their own. They think of things like:

Finding the property, securing the property through contracts, creating a business plan, raising capital with trusted apartment investors, managing the asset, making sure property managers implement the business plan accordingly, and keeping passive investors informed through regular updates.

Now about passive investors, also called limited partners. However, let’s be clear there’s nothing limiting about your abilities to make money. This is where you’ll shine. Passive investors in an apartment syndication deal aren’t involved with property management or property procurement or anything in that regard— your only job would be to invest your money and let it work for you for a change. It’s why apartment investing is such a good choice for high-level entrepreneurs — your syndicator handles all of the boring paper shufflings and you’ll be debating whether it’ll be Ibiza or Aruba this summer. Our vote? Aruba. But we’ll get into that in a sec.

So a little bit about our story, we started out as passive investors, investing in a few passive deals to learn the ropes and all the while getting paid to do so. Yep, getting paid to learn. Is that basically the opposite of student debt?

Financial Friends with Benefits 

We know it’s a little controversial but size really does matter, and in this case, the financial benefits of apartment syndication are huge. See, apartment syndication allows passive investors to invest in assets that they couldn’t access by themselves (like, uh, apartment buildings). This also means that apartment investing usually ends up being more profitable because you’re working with a team of specialized professionals.

Plus, the return on investment in apartment syndication is way better than with other types of investments.

For instance, the average stock market return for the last 15 years has been around 7.04%. Apply fees, taxes, and inflation, and it’s closer to 2.5%. With apartment syndication though, investors routinely return closer to 10% above, compounded. Compounding refers to generating earnings from previous earnings. Simply stated: passive investors receive above-average returns. 😘😘

Curious how this works⁉️

Let’s take one of our apartments in Phoenix, AZ as an example. We purchased this 76-unit property in August 2018 and were in escrow to close it by November 2021 — meaning that our investors got over a 100% return in just 15 months. 100%! There is no other kind of investing that consistently gets you returns when you go all in. But wait! There’s more!

It’s a risk-adjusted investment, wealth creation, and wealth preservation. 

In itself, apartment syndication allows you to hedge against inflation. Currently, inflation rates are at an all-time high (yes, your daily coffee purchase has increased) but that doesn’t mean you need to start investing more to make more. 

Apartment investing has extraordinary tax benefits. Due to what we call “bonus depreciation,” your investment income is taxed at a much lower rate than other investments. And, you might even be able to show off a taxable loss that can be used to offset the rest. It’s pretty incredible.

Let’s take a property we have in Fort Worth, Texas to explain this concept. We just purchased the property in May of 2021 and got our cost segregation study done by a third-party engineering firm. Instead of 95% projected bonus depreciation, we are getting a 112% bonus depreciation.  What this means to our passive investors who invested $100K in this deal, they are getting back a $112K K1 paper loss, meaning in the eyes of the IRS, they actually lost money and that $112K can be used to offset their passive income gain.

It’s truly passive!

Keep Your Kidneys 

You don’t need to sign on a loan, or any collateral needed from passive investors. AKA, you won’t be selling any kidneys to start the deal.

When you’re investing in apartment syndication, it’s not your debt! You get the benefit of leverage, without the downside of being the one on the line to pay back the debt.

Look, we’re not ones to just give you all the good stuff. There’s always going to be a bit of a reality check when it comes to your finances. That’s why we promise you transparency when it comes to apartment syndication investment.

• Lack of liquidity. The investment period is typically 3-5 years
• Lack of control. As a truly passive investor, you won’t have a ton of control over day-to-day decisions, as those day-to-day decisions will be taken care of mostly by the general partner/syndicator.
• Sensitive to market cycle. Real estate (like anything else) can be affected by market cycles — but apartment buildings historically perform better than other real estate types, making it a more risk-adjusted investment. 

This process might sound complicated. We know how daunting money talk and contracts and inflation can seem, especially when you’re first starting. That’s why you’re here to learn the process and know it can truly be as easy as 1, 2, 3. 

First, establish Your Freedom Metric. You’ve definitely heard us talk about this one before. It is the monthly passive income that you want to hit. The amount that will allow you breathing room, the number that will make you feel refreshed and not anxious every morning. PSSST we even have a free tool to determine what that magic number is for you.

Second, squad up. ☺️☺️This is the most important, crucial one in your entire investment process — because if you don’t have the right team, you may not get the fantastic returns you’re expecting. The right expert team is one that you really get to know and trust, and it’s a team that has the expertise you need and your skillset will fit in with theirs.

Thirdly, find your investment market aka secure your sweet spot. You really have to do your due diligence when it comes to where you’ll invest and compare what states have what laws and if they’ll work for you. For example, a landlord is required in places like Texas, Phoenix, Georgia vs states that don’t require them, non-landlord states like California and New York. 

Do your homework! Yep, we’re still your professors in this 101 class. You need to be able to plug in numbers and verify the calculation done by the sponsorship team.  So you can invest confidently. Yes, there is some math involved but don’t let that scare you. You know more than you realize, and at the end of the day, we’re just trying to get that addition and multiplication into your bank account.

Fund the Deal. This is the “deal or no deal” moment. You’ll have to bring in the cash to begin the investment. Decide where that’s coming from, whether it’s through cash in the bank, from your retirement accounts, or something else.

Why The Kitti Sisters?

Other than the fact that we are #squadgoals, for us, our mission is simple: we are the solution for giving you peace. We know all too well about that 2 am night sweats feeling. How will you retire? Are you making enough to support your kids’ future? How do you stop living paycheck to paycheck? That’s why we are so passionate about this work. We want to make sure that no one else ever feels that. No one wants to worry about money. We already have enough gray hair and live in one of the most anxiety-inducing times as a society. 

We’re not here chasing deal after deal. We’re here because we desire to establish lifelong trustworthy relationships. The business we’re in already feels so transactional, we just want to support people and bring their dreams to life, witness their financial freedom and celebrate successes. Together.

Thank you so much for tuning into this episode! We are thrilled you are here, and no we are not going to leave you hanging. As always, we have a free resource for you: The Ultimate Guide to Passive Income which is linked below. And don’t forget to join the Kitti Freedom Club, a passive investor club for ordinary people like you.

 

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