Should You Invest In Rental Properties Or Real Estate Syndications?

by | Apr 8, 2022 | Investing Advice | 0 comments

Owning rental properties requires a great deal of time and energy. If you’ve ever experienced owning single-family or multifamily homes, you know exactly how challenging the process can be. 

When you invest in residential real estate, you’re required to wear many hats during the seemingly never-ending process. For instance, as the investor, you have to find the property, fund the deal, renovate the property, screen tenants, and even work as the maintenance crew. 

As daunting as owning rental property sounds, the problem is, it doesn’t end there. When your tenant’s lease is up you have to repeat the process again and again. 

Single Family and Small Multifamily Rentals are Labor Intensive

There are some advantages to owning small multifamily rentals as opposed to owning single-family homes. To put it simply, if a tenant moves out, the tenants in the other units are still there to help cover the mortgage, which is a nice safeguard when an unexpected vacancy occurs. It’s also much easier to manage one property with multiple tenants than to manage multiple properties with only one tenant living there. 

Even if you make the smart decision to hire a property manager to help with the day-to-day operations, you’re still responsible for making final decisions and covering the costs of all maintenance and repairs. Owning rental property becomes increasingly difficult if you’re also working a full-time job. Many investors mistakenly assume that investing in rental properties will be a passive endeavor, which couldn’t be further from the truth. 


Why Passive Real Estate Investments are Game-changers 

Oftentimes, would-be investors are unaware that there are fully passive investments available in commercial real estate. These passive investments are professionally managed and operated. What that means for you, as the investor, is you never have to deal with the unexpected issues that inevitably arise with rental property ownership. 

Once they understand the benefits of investing passively in commercial real estate, it’s common  for investors to move toward syndications. Here are the main reasons why:


1. Minimal Active Time Required

A real estate syndication deal is truly a set it and forget it type of investment. As a passive investor, you simply put in your capital, collect your monthly cash-on-cash returns during the hold period, and then receive your portions of the profits upon the sale of the property.

You’ll never be responsible for handling maintenance, dealing with unexpected emergencies or screening tenants. The sponsor team and the property management team will handle everything on your behalf. All you have to do is sit back, relax and enjoy the returns, knowing you’re creating financial freedom for your family.


2. Great Opportunity for Diversification

The beauty of investing in real estate syndications is that you’re able to leverage the expertise of the sponsor team. More specifically, you’re able to invest in markets and asset classes where you don’t have any personal experience that would be otherwise unavailable to you. 

Essentially, by investing with experienced deal sponsors, you can easily diversify into various markets and asset classes. The sponsor team handles all the moving parts, while you focus on scaling your portfolio, all while mitigating risk.  


3. Attractive Tax Benefits

When investing in real estate syndications, you get pass-through tax benefits, similar to those received with personally owned rentals. Typically, you’re able to write off most of the quarterly payouts, which means you basically get tax-free passive income throughout the holding period, which is usually around five years. 

Note however, that you’ll likely owe taxes on the appreciation income you earn upon the sale of the property. To be sure, always check with your own CPA on your personal situation.


4. Limited Liability

A major benefit of investing in real estate syndications is that your liability is limited to the amount of your investment. Say you invest $50,000, your biggest risk would be losing that initial investment of $50,000. Meaning if something goes wrong during the life of the deal, you would never be responsible for the entire value of the property. Furthermore, none of your other assets would ever be at risk.


5. Opportunity to Make a Positive Impact

When you invest solo in a property, you’re able to make a difference in the lives of around two to four families. While this impact is great, real estate syndications give you the chance to change the lives of hundreds of families and whole communities at large, with just one deal.

Every real estate syndication deal creates a cleaner, safer, more appealing place for people to live. As a result, the community and environment are positively impacted. That’s definitely something that can’t be accomplished by investing in stocks and mutual funds.


Are Rental Properties or Real Estate Syndications the Best Fit for You?

Investing in real estate is a reliable way to gain financial freedom and grow your wealth over time. In order to best decide which method of real estate investing is right for you, you should first consider your personal goals. 

While having an active role in owning rental properties gives you invaluable experience, it’s certainly not a prerequisite for investing in a real estate syndication deal. If you’re interested in learning the ins and outs of how to manage and maintain a rental property you should consider investing in a single-family or small multifamily home. 

However, if having someone else handle the heavy-lifting for you sounds like a better fit, we encourage you to explore passive real estate syndications. 

Regardless of which you choose, investing in real estate is a great way to diversify your portfolio and mitigate risk. You’ll have an opportunity to have a positive impact on your tenants, as well as a positive impact on the environment and the surrounding community. 

If your priority is to create financial and time freedom and establish a family legacy, investing in real estate will help you get there. While no investment is risk-free, when you partner with an experienced sponsor and operator team, they handle all the leg work and mitigate risk on your behalf. 

Through the 25/8 Investor Club, you get to leverage our connections, experience, and market knowledge and reap the benefits of steady monthly cash flow and long-term appreciation while you enjoy your family time and the lifestyle you always dreamed of.


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