Summary: Real estate investing can be a great side hustle, but are you really getting the most out of your money? Today we’re sharing how to kick your investments up with apartment syndication – to grow the life-changing kind of wealth of your dreams!
Real estate investing has different layers to it…kind of like a wedding cake. 🍰
Can you picture it?
You’ve got the base, a big layer at the bottom, followed by smaller and smaller layers to the top. For this analogy, let’s say all the tiers are different flavors. The biggest layer might be chocolate or vanilla – delicious, but on the simpler side to appeal to more people.
That top layer is going to be the MOST decadent (which in our minds is definitely red velvet).
We think of real estate investing in the same way. That bottom tier is the more common, simple way of investing, like buying a single house or rental property. You can make money by investing, have a cool side hustle with little effort, and dip your toes into the investment world.
The bottom layer of cake is totally tasty.
Buttt if you find yourself wanting more excitement, bigger opportunities, and higher returns, you may be ready to step it up!
Enter: apartment syndication. 😍😍
For us, apartment syndication is like that perfect, delicious, red velvet, top tier of the cake.
Is it the right choice for everyone? Probably not. BUT for those wanting to get the most out of their investments, apartment syndication could be the key to creating the kind of wealth that changes lives.
Okay. We could talk about cake all day…but let’s get into how apartment syndication can help you step up your investments.
Here’s what’s in store today:
- NO. 1 Use leverage to hedge against inflation.
- NO. 2 Bigger can be better…purchase more units.
- NO. 3 Own smaller pieces to bigger portfolios.
3 ways apartment syndication can step up your real estate investing.
When you’re starting out, investing in real estate properties can be daunting. That’s why so many people start with owning one single property, to see how it goes. And honestly? We think that’s awesome!
By owning a property, you get paid monthly rent by the tenant. Over time, the loan amount decreases, while the property value goes up. You’ve just created positive cash flow and added to your income.
But once you get a taste for growing your wealth, you might wonder if there’s a strategy to do it faster and more effectively. Aaaand like we already mentioned…there totally is.
Apartment syndication has lots of benefits that set it apart from single property investments. Today we’ll focus on the 3 biggest stand-out step ups (as we like to call them).
NO. 1 Use leverage to hedge against inflation
Think about that one property we discussed a moment ago. If you go at it from the most conservative approach possible, you might purchase your property in all cash. While that’s a fairly safe choice with minimal risk, it’s not the best way to multiply your wealth.
The issue is your investment is not liquid and offers you no leverage whatsoever.
Why is that an issue?
Well, leverage is the best way to protect yourself from rising inflation. You see, purchasing your property with a loan allows you to create the good kind of debt. It magnifies the property value quicker than if you pay all cash up front.
NO. 2 Bigger can be better…purchase more units
Next up, let’s talk about property size. It really is a numbers game. You see, purchasing one property offers one stream of monthly income. Butttt what happens when you purchase an apartment building with lots of units?
👉 You open up lots of streams of monthly income.
That’s more money coming your way every single month! Bigger can actually be better in this case. And what we mean by bigger, is apartment buildings with 65 or more units.
Of course, smaller apartment buildings are great too. We’re just showing you how to truly get the MOST out of your apartment investments. So, size matters when you’re trying to increase your possible returns.
NO. 3 Own smaller pieces to bigger portfolios
Our final way to step up with syndication is by sharing the load. You see, purchasing those bigger apartment complexes can be a huuuuge investment if you try to take it on alone.
But we’re talking about getting all the benefits of the big apartments, without carrying all the weight yourself. Investing alongside others will give you portfolio diversification and get you into big, lucrative deals.
Sure, you own a smaller piece of the property. But this gets your foot in the door to bigger, better deals that are going to set you on the road to creating long-term wealth. 🤩
Who are the major players in apartment syndication?
Now that you’re feeling excited about the possibilities of apartment syndication, it’s time to get into the details. Let’s start with the people that make syndication deals possible in the first place.
The most prominent players are the general partner (GP) and the limited partner (investors).
In very simple terms…the GP is responsible for mostly everything that happens behind the scenes. They are highly educated and experienced in real estate investing and are in charge of all the things.
The general partner handles the following:
- Conducting market research.
- Locating and securing properties.
- Making a business plan.
- Raising capital.
- Finding passive investors.
- Managing the property.
- Keeping investors informed.
Liiiike we said…all the things. 🤣
Now, on the other hand, passive investors have very little responsibility. They are in charge of one important thing – to help fund the deal! Once the money is in play, investors get to carry on living their best lives while their money works for them.
Sounds like a pretty good role to have, right?
That’s why apartment syndication is such a great choice for high-level entrepreneurs who want to grow wealth without taking time out of their careers and lives to do so.
The apartment syndication dream partnership is this: the general partners do the daily work, and the limited partners get PAID. 🙌
We know what you’re thinking, but no. It’s notttt too good to be true.
How are syndication deals structured?
Now let’s peek into how this partnership works. Different deals are structured from simple to complex, with the most basic structure being a straight split. This means the capital gains are divided based on percentages.
We’ll use a common example to help you get a better understanding of what the split could look like.
If a syndication deal has an 80/20 split, it means 80% of the gains go to the limited partner, and 20% go to the general partner. This applies to monthly cash flow AND whatever amount the property is eventually sold for.
For this example, if the property gets sold for $10 million, that gives the LP $8 million, and the GP $2 million.
Pretty great, right?
That hypothetical $8 mil is the reward for simply putting in money and trusting the GP to put it to work.
It’s important to note that some structures can be more complex. But in every scenario, investors can get paid lots of passive income with their eyes closed. 🤩🤩
If you want to dive into more apartment syndication details, we’ve got you covered!
How to step up your step up to save more in taxes.
There’s one more thing we must share about apartment syndication. Because just when you think it can’t possibly get more enticing…well, it does.
The tax benefits are really, really great for both general and limited partners. Since you would be the LP in this scenario, let’s play it out real quick.
Just by being a passive investor, you would receive a document called a Schedule K-1, which shows your income and losses for every asset.
Here’s the best part 〰️ the first year usually shows up as a paper loss, meaning your losses were HIGHER than your income! This means you get to significantly reduce the taxes you owe on your syndication investments (they might even cancel each other out).
And if you’re in the mood to truly step up your step up another notch, you have options. Anyone who gets qualified for Real Estate Professional Status (REPS) can save even more money in taxes.
👉 Investors who qualify can use their losses to offset other income from their W-2 or 1099.
This resource will give you all the deets on REPS if you’re interested… Is Being a Real Estate Professional for You?
And there you have it! Apartment syndication gives you amazing opportunities to grow your wealth and step up your investments in a biiiig way. As always, take a look at your goals and lifestyle to know what investment strategy is best for you, and then put your money to work there!
We’re here to support you in chasing your dreams and creating the life you deserve.✨
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