The Case for Passive Real Estate Investing

Table of Contents

If you’ve ever experienced owning single-family or multifamily homes, you know that these investments require time and energy.

Residential real estate investing can be challenging because, typically, you as the investor wear many hats throughout the seemingly never-ending process. You have to find the property, negotiate and fund the deal, renovate the property, interview tenants, and even perform maintenance.

The trouble is, it doesn’t stop there. You have to repeat most of the process over again when your tenant’s lease is up.

Investing in Multifamily Rentals Has Advantages, But Still Can Be a Lot of Work

Small multifamily rentals have some advantages over single-family homes. For example, if one tenant moves out, the tenants in the other units are still there to help cover the mortgage. Plus, it’s much easier to manage one property with multiple tenants than to manage multiple properties with one tenant each.

But, even with a property manager on board to help with your rentals, bookkeeping, strategic decisions, and maintenance/repair costs are still your responsibility. You’re basically running a small business, which can be challenging if you’re working a full-time job.

The Case for Passive Real Estate Investments

On the flip side, there are fully passive investments in commercial real estate. These are professionally managed and operated investments so you don’t have to deal with any of the three T’s – Tenants, Toilets, and Termites!

Once you begin to understand passive commercial real estate investments, it’s common to move toward syndications. Here’s why:

  1. Minimal Time Required

Have you heard the phrase “set it and forget it”? In a syndication deal, you put money in, collect cash flow during the hold period, and receive profits upon the sale of the property.

You won’t be fixing toilets, screening tenants, or handling maintenance. The sponsor team and the property management team expertly attend to those things so you can sit back, enjoy the returns, and focus on living life.

  1. Opportunity for Diversification

It would be unreasonable for anyone to attempt to become an expert in every phase of the property investment process, and even more so when it comes to different markets.

By investing with experienced deal sponsors, you can easily diversify into various markets and asset classes while knowing that professionals are taking care of business. This allows you to quickly and easily scale your portfolio while also mitigating risk.

  1. What About Tax Benefits?

Similar to personally owned rentals, you get pass-through tax benefits when investing in real estate syndications. You’ll be able to write off most of the quarterly payouts, which means you basically get tax-free passive income throughout the holding period.

You will, however, likely owe taxes on the appreciation income you earn upon the sale of the property.  Always check with your own CPA on your personal situation.

  1. Limited Liability

When you invest passively through real estate syndications, your liability is limited to the amount of your investment. If you were to invest $50,000, your biggest risk would be losing that $50,000. You wouldn’t be on the hook for the entire value of the property, or the loan to buy the property, and none of your other assets would be at risk.

  1. Positive Impact

With personal investments, you make a difference in two to four families’ lives. But with real estate syndications, you have the chance to change the lives of hundreds of families and whole communities with just one deal.

Each syndication creates a cleaner, safer, and nicer place for people to live and impacts the community and the environment positively. And that’s something you won’t get from stocks and mutual funds.

Conclusion

If you’re on the fence between active and passive real estate investments, the experience you gain from owning small rentals is irreplaceable. However, personally owning rental properties is not a prerequisite to commercial real estate syndications.

Either way, investing in real estate is a great way to diversify your portfolio and mitigate risk. It gives you an opportunity to have a positive impact on the families who will live in your units, as well as a positive impact on the environment and community.

 

Prevail Innovative Real Estate Opportunities, LLC., (PREO) is affiliated with Prevail Wealth Advisors, LLC (Prevail IWA) and Prevail Strategies LLC., because they are under common ownership and control. PREO was formed to provide real estate investment opportunities for high-net worth investors looking for diversification. Prevail Wealth Advisors, LLC., is a federal registered investment advisor. Registration with any securities authority is not an endorsement of the services offered by the investment adviser. Fixed insurance products and services are offered through Prevail Strategies, LLC., a licensed insurance agency. Any investment by a Prevail IWA client into a PREO sponsored real estate investment would be without the involvement of Prevail IWA and should be not seen a s a recommendation by Prevail IWA. Additionally, Prevail IWA clients should realize that any capital they invest in a PREO-sponsored real estate investment would be completely outside of their advisory relationship with Prevail IWA and not part of their Prevail IWA account going forward. Finally, there are material differences between the type of investments PREO may offer and the investments on which Prevail IWA provides advice in terms of risk profile and liquidity, and the compensation PREO earns from a real estate project in which Prevail IWA clients invest may be materially different than the investment advisory fees Prevail IWA charges its clients.
An offer or solicitation to acquire interests in the investment may only be made by our Private Placement Memorandum (“Memorandum”) in accordance with the terms of all applicable security laws. All information contains herein is subject to and qualified by the contents of the Memorandum. Participation in any securities offering is limited to Accredited investors. Please call to obtain a copy. You must read it before investing. Past Performance is no guarantee of a future results. An Offer to buy or sell any security is only made by our Private Placement Memorandum. Prevail Real Estate Opportunities, LLC., Prevail Innovative Wealth Advisors, LLC., and Prevail Strategies LLC., do not provide tax or legal advice.  You should your CPA or tax professionals for decisions involving tax implications present and future.

Kerry Lawing

CEO

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The Case for Passive Real Estate Investing

Frequently Asked Questions

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Andrew Stafford

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