TOP 10 REASONS TO INVEST
In our opinion, real estate is the best way to grow wealth for accredited investors.
It is a limited commodity that has a proven track record of lucrative returns, the offer of diversification, and resilience to economic recessions.
One of the biggest reasons investors diversify their real estate investment portfolio is to mitigate risk exposure. The phrase “don’t put all your eggs in one basket” applies directly to this concept, as spreading your investment across a broad spectrum is how investors balance risk.
There are several types of diversification as by niche and geography.
Spreading investments amongst apartments, boutique buildings is a great way to achieve this. Understand asset cycles and trends. Some areas like office may not do so well in a down economy where more stable assets like apartments, homes may hold up nicely.
Another form of diversification within real estate syndication is geographically. Some of the best deals are out of state in growing markets. It can be very difficult trying to be an active out of state investor due to competition, relationships, market knowledge, etc but if you align yourself with a reputable, successful operator in that local market you can gain access to some great deals you otherwise wouldn’t have had access to.
ACCESS TO LARGE INVESTMENT OPPORTUNITIES
ABILITY TO INVEST PASSIVELY
When you invest the syndicator will handle all aspects of the deal: due diligence, locating a profitable properties, hiring and managing and so on. Investors will pay the syndicator via the performance of the deal with a split of the cash flow and appreciation.
In exchange for the sponsor fee, you are able to be completely passive as an investor.
TAX DEFERRED STATUS
For instance, let’s say you are investing in a syndication where the sponsor is purchasing a fully occupied apartment building and holding it for cash flow. Because of depreciation, interest payment write offs, expense write offs, and so on, your annual tax exposure for this opportunity will usually be zero or even NEGATIVE, even if you receive thousands of dollars in distributions from the property’s cash flow.
Of course, when the property is sold, the investors will pay taxes on the gains they receive from distributions, but giving your money the chance to compound without paying taxes can completely change your portfolio’s trajectory. Note: Savvy syndicators will utilize 1031 exchanges to roll your investments into the next deal, thus pushing taxes off further.
Then you can add the appreciation of the property over time.
We all know that using an entity such as an LLC is advisable when investing in real estate. However, when you invest in a real estate syndication with a sponsor, you add another layer of protection between you and any liability resulting from the fund’s managers or debt obligations.
In real estate syndications, there are typically two sides of the operating agreement: the “A Side,” which lists the managing members who are responsible for the decisions behind the fund, and the “B Side,” which lists the investors who bring only capital to the table. Under no circumstance will “B Side” investors be responsible for making management decisions of the fund, and, therefore, under no circumstance would a judge find the “B Side” investors liable for decisions made during the fund’s performance. This way you are completely removed from any lawsuits that may arise due to fund-related activities.
All building costs and renovations, contractors price per unit will be lower the higher the number of units, and providers of renovation materials as well by ordering in bulk.
The long-term performance of real estate makes it a compelling asset class for investors. It brings consistent performance compare to more volatile investments as stock markets.
GREAT INFLATION EDGE
Because of the limited amount of land, in certain markets, and rising population growth, demand in the real estate apartment sector is high. This limited supply and high demand means that increased property values offset any deterioration in wealth caused by a rise in inflation.