Could there be *anything* better than reaching true-blue financial freedom, not working until the age of 80 (or selling your soul to a sketch company), packing a bunch of money in a low-return savings account, or feeling constantly stressed required?
Heck, no. There is truly, truly nothing better than that. 🙂
But, like, reaching that financial freedom is HARD. After all, if you pay attention to the advice that other blogs, finance bros, or your parents tell you…
You’re going to end up with a few (not-so-great) stocks, a retirement account that requires a loooot of time input on your part, and a retirement lifestyle that’s not quite as dreamy as you want.
Unless you know how to do it. AKA, which is with us. 😉
Enter: apartment investing and apartment syndication, the #1 best method there are for reaching true financial freedom and boosting your passive income streams to live the life you want to live.
As apartment investors, our job is to help people just like you understand the business, get involved as passive investors, and get rich — that’s it.
We’ve both seen the incredible benefits of apartment syndication and apartment investing firsthand, 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, ever do for yourself.
So, wondering how on earth apartment syndication and apartment investing works (or, what it even IS)? We’ve got you covered with our version of a fun class ✏️ 〰️ Apartment Investing & Apartment Syndication 101.
(And, because we all know the value of a lil’ preview, here’s what you’ll find in this post):
- What Is Apartment Syndication?
- How Does Apartment Syndication Work?
- 506(C) vs. 506 (B) Offerings in Apartment Syndication
- Financial Benefits of Apartment Syndication
- Drawbacks of Apartment Syndication
- 3 Steps to Get Started on Apartment Syndication
- Is Apartment Syndication Right for You?
- Why Do You Need the Kitti Sisters?
First up… What is Apartment Syndication?
Apartment syndication is when you pool your money with other investors to purchase an investment property, under an apartment syndication sponsor. It’s essentially like you’re joining forces with other investors to purchase an apartment — and that’s actually all *you* have to do.
See, with apartment syndication, the investors themselves really just have one job: to invest their 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.
So, to answer your question… how does apartment syndication work?
Okay, we’re going to get really nitty-gritty here. Are you ready⁉️
In the apartment syndication and apartment investing world, there are two main roles that have to be filled: the general partner (GP)/syndicator/sponsor, and the investor/limited partner.
The general partner 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 general partner is also responsible for procuring passive investors. (AKA, people like you. Wink, wink. 😉)
The general partner always has skin in the game in the property purchase itself, and they’re in charge of… a LOT.
- 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
- Keeping passive investors informed through regular updates
Now, let’s chat about passive investors, also called limited partners. This is where you’ll fit into the puzzle. Passive investors in an apartment syndication deal aren’t involved with property management or property procurement or anything like that. Your only job would be to invest your money and let it work on your behalf. ✨
It’s why apartment investing is such a good choice for high-level entrepreneurs — your general partner handles all of the boring stuff, and you just get rich. 🤓
506(C) vs. 506(B) Offerings in Syndication (i.e., the Legal Mumbo Jumbo)
Like with any kind of investment, apartment syndication, and apartment investing both go hand in hand with quite a few legal requirements — and it’s key to have an understanding of those if you’re going to start investing.
See, Regulation D of the Securities Act regulates how, exactly, real estate investors can actually go about raising capital.
There are two different rules under this: 506(B) and 506(C).
We’ll start with 506(B) because, you know, alphabetical order.
In 506(B) syndications, real estate investors and developers can raise an unlimited amount of money from an unlimited number of accredited investors (+ 35 non-accredited investors) without needing to file with the people at the Securities and Exchange Commission (SEC) in advance.
But, they’re not allowed to solicit investors — they have to have established relationships with those investors before.
That brings us to 506(C).
In 506(C) syndications, those same issuers can actually broadly solicit investors and advertise an offering (as long as the purchasers are all accredited investors).
The only kicker is that the issuer has to take reasonable steps to verify accreditation (and a few other conditions, which you can find here).
In both types of syndications, the limited partners/passive investors (AKA, you!) get the best side of the deal!
The passive investors who choose to put their money into apartment syndications get percentages of the profit at designated payout points, and those are often quarterly. Plus, as a passive investor, you’re also an equity partner.
Win, win. ?
Let’s Talk About the Financial Benefits of Apartment Syndication…
The financial benefits of apartment syndication are huge — and we’re not just saying that. See, apartment syndications allow 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 more around 2.5%. 🤓
With apartment syndication, though, investors’ potential return is closer to 14% and above, annualized. It’s simple: 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 2019 and in 27 months we were able to get our passive investors a 2.85x multiples, 58% IRR*. 💥 KABOOM. There is no other kind of investing that consistently gets you returns like that. ✨
Apartment syndication is also just… not that risky. Is it a little risky? Yes. But it’s the best risk-adjusted investment.
When the housing bubble popped in ‘08, single-family home loan delinquency rates hit 4%. However, multifamily loans were peaking at just 0.4% — i.e., it’s a great way to recession-proof your $$$.
Wealth creation and wealth preservation
In itself, apartment syndication allows you to hedge against inflation. As inflation increases, so does property value. It’s why apartment syndication can be so incredibly helpful in growing wealth.
Plus, apartment investing has historically done really well compared to things like stocks or cryptocurrency. People always need a place to live — and that won’t change. It’s a no-brainer.
And the best part? Apartment investing has extraordinary tax benefits
Due to what is known as “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. We just purchased the property in May of 2021 and got our cost segregation study done by a third-party engineering firm.
Instead of 94% 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.
Tax benefits, BABY! 🤩
Plus, you’re investing passively… and benefitting the whole way.
Real estate is confusing, you know? Apartment investing has a steep learning curve in itself, and joining an apartment syndication lets you have access to truly expert knowledge. Plus, you can then leverage them to help you make more money.
While some forms of apartment investing are super time-consuming, apartment syndications allow you to create a stream of passive income.
You actually get to take the backseat, reap the benefits, and get rich in the meantime. By investing with an experienced sponsor and choosing your investment amount, you can trust in your investment and then roll in the returns.
And, one more… you don’t go into debt!
Now, debt isn’t a bad thing when you’re growing wealth (in most ways). However, when you’re investing in apartment syndication, it’s not your debt!
You get the benefit of all of the leverage, without the downside of being the one on the line for the debt — and everyone prefers that. ☺️
The Drawbacks of Apartment Syndication
Just like with anything, there are some drawbacks to apartment syndication — but we’d like to think that the benefits far outweigh them.
There are a few things we always want to make sure people know. 〰️ First, apartment syndication has a lack of liquidity and control (which you’ll want to understand). Plus, it can be sensitive to the market cycle.
Lack of liquidity
When you invest in apartment syndication, your initial investment will be frozen from you for what is typically a 5 year hold period — definitely something to consider!
However, you’re also getting monthly cash flow, consistent compounding returns, and a high chance that your syndication will refinance before the end of the term.
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.
This is why apartment investing is so perfect for high-level entrepreneurs 👌, but also something to think about if you want a more hands-on approach.
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.
(Psst… when investing in real estate, you’ll want to stay away from the West Coast and New England, which is a bit more sensitive to market cycles. That’s why we tend to invest in the more stable south.)
(Related: These 3 Drawbacks Are Holding You Back)
3 Steps to Get Started in Apartment Syndication
Alright, you ready to get started? Our site itself is packed with resources 📁 but there are 3 main tips we recommend to everyone ready to jump into the apartment syndication waters, from defining the details of your deal and finding the right team to choosing your Freedom Metric and funding the deal itself 〰️
Apartment Syndication Step #1: Define your investment goals
To get started in apartment syndication super effectively, you’re going to want to make sure you know the goals you want to meet. When you know and understand your goals, you can choose apartment investments that help get you there!
So, start writing your goals down! Do you want to double your income? Maybe you want to create a freer life for you or your family. Heck, maybe you want to start a side hustle! Or, you might just want to get rich!
It’s up to you! Just know what you want, and then establish your Freedom Metric.
If you’ve been following along, we bet you’ve already established your Freedom Metric — and if not, that’s okay!
It’s pretty quick. To find your Freedom Metric, you need to find the number that you’ll need to bring in each month to cover your entire cost of living. From your mortgage and your savings all the way to daycare and car payments, include it all — and then add a little to it.
When you can make up that number (AKA, your freedom metric) passively each month, you have reached financial freedom. 😍
Apartment Syndication Step #2: Decide on the investment details
You’ll want to decide what, exactly, you want to invest in. What’s the investment type? What’s the investment location? How about the the asset class? Do you want to invest in a class C apartment complex or in a class B neighborhood? Do your research here.
First up, choose your investment market
You need to choose a location for your investment — and when getting involved in apartment investing, you may want to consider investing in a landlord-friendly state (like Texas, ? Arizona, Georgia, or Florida).
Then, find your investment team
This step is the most important, crucial one in your entire investment process — because if you don’t find 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 really get to trust, and it’s a team that truly has the expertise you need.
Make sure you know the numbers
You need to understand specific numbers before ever investing 〰️ the purchase price, gross potential rent, economic vacancy, other income, net income, operating expenses, net operating income, CAP rate, and future value.
Do not invest without knowing these — because they’re key to helping you make the right decisions.
Do your due diligence: is your underwriting right?
Analyze the absolute heck out of your deal — every single detail and every single level! You need to be able to plug in numbers and verify the calculation done by the sponsorship team.
Apartment Syndication Step #3: Decide how you’ll fund the investment
Finally, you’ll need to organize your finances and fund your investment accordingly. Decide whether it’s through cash in the bank, from your retirement accounts, or something else — and make the necessary arrangements to fund your investment.
Is Apartment Syndication Right for You?
Okay, so you’ve learned a LOT about all things apartment syndication at this point, huh⁉️
(Adding value. It’s what we ❤️ love to do!)
But, you’re probably still wondering… is apartment syndication right for me?! 🤔
Here’s the thing 〰️ probably yes!
See, apartment syndication has a long history of providing investors with big profit opportunities and relatively small investment requirements. Plus, it’s totally PASSIVE — which means you have equity and income, no construction, management, or dealing with tenants included.
Now, if you’re ready to start investing with *that* strategy (hellllooo), come hang out with us. You can join the waiting list for The Kitti Club here 〰️ an investor club built for extraordinary people ready to take back control of their time (and pay virtually zero in taxes). 🤩🤩
(Related: Apartment Syndication (And If It’s Right For You))
Why Do You Need The Kitti Sisters on Your Side? (AKA, the Apartment Syndication Experts)
At The Kitti Sisters, our mission is simple 〰️ we are the solution for giving you PEACE. We know the whole 2 AM night sweats/stressing about retirement feeling well, and we want to make sure that no one else *ever* ever feels that. See, no one wants to worry about money. ✨
They don’t want to worry about putting their kids through college, about becoming a burden to their families when they’re old, about being able to retire.
That’s why apartment syndication and apartment investing are so, so powerful — because working with investment experts can be your answer to every single worry and anxiety about money that you have.
At The Kitti Sisters, we’re not about chasing deals — or losing money (yours OR ours, okay?). As economic experts and experienced investors, we walk both sides of the investment table as both general partners and limited partners. 🤓 We obsessively vet deals and analyze each step of them, and we have a proven track record of full-cycle deals that give our investors opportunities to return their investments in 5 years or less.
Our investment mission at The Kitti Sisters
See, there are a lot of things we believe in over here at The Kitti Sisters. We believe in the velocity of money 💸, we believe that smartly invested money can completely transform lives, and we believe that we can help you reach financial freedom and goals you weren’t even aware of.
Our process is to completely reduce your work time and maximize your profits, and we want to build wonderful, lifelong relationships with you, too.
Here’s the thing 〰️ investing is a long and hairy process, and it can be incredibly tricky to understand by yourself. When you invest with us, you’re investing with a team that knows what they’re doing…. so you don’t have to! With a pulse on economic trends, a dedication to getting you the best deal, and a true commitment to each and every one of our investors, we’re not your average investor team ?— we’re a lot better!
When you invest with us, you can trust that you’re doing so with a team who’s staying up-to-date on everything from property management to law changes… so you can simply sit back, invest, and reap the rewards as you deserve.
(Related: Why You Need the “Small, But Mighty” Kitti Sisters on Your Team)
So, there you have it! The ultimate primer on all things apartment investing and apartment syndication, telling you all you need to know about getting involved in apartment syndication. And, if you’re ready to get started, we’d absolutely love to have you in our private investor group, The Kitti Club.
You can join the waitlist for our investment club here, and we’ll be in touch to discuss specifics soon. If you want a little insight on strategy, we’re here for that, too. You can book a call with us by clicking here.
*Past performance doesn’t guarantee future performance 🙂
GET ME ON THE KITTI FREEDOM CLUB
Rate, Review & Follow!
“I love Cashflow Multipliers.” ◀️ If that sounds like you, please consider >> rating and reviewing our show! This helps us support more people — just like you — move toward the financial futures that they desire. Click here to let us know what you loved most about the episode!
Also, if you haven’t done so already, follow the podcast. We’re sharing the best tips, tricks, and secrets in owning your own time so achieving financial freedom early and permanently becomes easier. Follow now!