How to Earn "Infinite Returns" on Real Estate Investments

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Infinite Returns on Real Estate Syndications

The same model works with apartment complexes, just on a larger scale.

A syndicator or sponsor finds a property that needs updating, what they call a value-add deal. They take out a loan to cover some of the purchase price, and they cover the rest of the costs with both their own cash and by raising money from private investors (called limited partners or LPs). As an LP, you invest passively in the project and become a fractional owner.

The sponsor spends the next year or two renovating the exterior, the common areas, and the interior of each unit. This drives up the market rent for each unit, so the net operating income rises. That in turn drives up the value of the property, since income properties like apartment buildings are priced based on the income they generate.

Once all renovations are completed and the rents are stabilized at new higher prices, the sponsor can refinance the property based on the new higher value. They pay back the passive investors’ capital, but all investors retain their ownership share in the property.

Again, the cash flow will drop, based on the new higher debt. But investors keep collecting cash flow on the property, even though they already got their initial investment back. As with the BRRRR strategy, you can then reinvest that money in more properties or syndications, snowballing your passive income from real estate.

Risks & Challenges with Infinite Returns

Earn real estate cash flow without having any of my own money tied up in properties? What’s the catch?

While there’s no catch per se, there are risks and challenges. The first of those I touched on above: more debt means less cash flow per property. If you leverage your properties too much, you run the risk of negative cash flow.

For direct property investments, that also means you need far more properties to create the same amount of net rental income. That means more labor: finding deals on properties, hiring and overseeing property managers, accounting, and so forth. The labor gets even more intense if you self-manage your properties.

Some investors rapidly expand their portfolio with the BRRRR method, let the properties appreciate and generate more cash flow over time as rents increase, and eventually sell some of their portfolio to pay off the loans on their remaining properties. That eventually leaves them with a smaller number of properties that cash flow well and require less labor to oversee.

On the syndication side, you don’t have to worry about labor in managing more properties. But you do need to find new investments to redeploy your capital as you get it back after refinances. Still, finding good passive investments is far easier than finding good deals on properties to buy directly.

Finally, you do need money to invest in the first place. That initial down payment for a rental property could still cost you $50,000 or more, which says nothing of closing costs or the money you need to put up for the renovation. Sure, most purchase-rehab loans for investment properties reimburse you for renovations, but you still need to come out of pocket for each draw before the lender reimburses you. Syndications also require $50-100K as a minimum investment, unless you pool funds for group real estate investments (like we do in our Co-Investing Club).

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How to Earn “Infinite Returns” on Real Estate Investments

Infinite Returns

Infinite Returns

Infinite Returns

Infinite Returns

Infinite Returns on Real Estate Syndications

Risks & Challenges with Infinite Returns

Infinite Returns

Infinite Returns

Infinite Returns

Infinite Returns

Infinite Returns

Infinite Returns

Infinite Returns

Infinite Returns

Infinite Returns

Infinite Returns

Infinite Returns

Infinite Returns

Infinite Returns

Infinite Returns

Infinite Returns

Infinite Returns

Infinite Returns

Infinite Returns

Infinite Returns

Infinite Returns

Infinite Returns

Infinite Returns

Infinite Returns

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