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Income replacement via passive RE investment : who's done it

5,022 Views | 33 Replies | Last: 1 yr ago by AggieRAGE
TikkaShooter
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Seeing the light at the end of the RE tunnel, that gets you out of the 9-5 hamster wheel.

Looking at doing it through syndicated/passive RE investments.

Anyone done it? Full or even partial income replacement through RE Investment?

Wondering what your path was, timeline, etc.
Medaggie
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I invested into 6 properties, typically min buy in 50K but sometimes they will lower to 25K. Track record of syndication management is most important and what model they are using to increase value.

I bought into 6, 3 yrs ago over about 12 months. Set up was 8% annual dividend plus income at refinance/sale which believe are typical. Given market conditions I hear that the 8% has dropped to 5-7%. typical options include 8% guaranteed (or atleast 1st to be paid) vs the market dividend + participation in cash out. I prefer the 2nd option.

Either by luck, chance, timing, or picking the right syndication all 6 have sold out with about a 2.3-2.5x return on investment which I am doing a 1031 back into other syndications.

So In theory, I should be able to get about 16% dividend/passive income on my original investment.
jagvocate
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AG
Nice
TikkaShooter
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Thanks for sharing.

Did our first Multi Fam syndicated RE investment last year, and hadn't planned on doing a second until 2023, but the opportunity came up, and the liquid cash is available. Considering doing R2.

Were your goals return based? Alternative to the market? Income replacement or just adding an income stream?

Thanks for the response.
CS78
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Not passive. 10 years of buying rentals and flipping. While working 8-5. Currently have 13 houses and 2 duplexes. Numbers have gotten much tougher in recent years, compared to when I was really active. I'm still property tax poor. It can be done but it's going to be really hard unless you have a surplus of salary or savings to put to work.
Medaggie
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TikkaShooter said:



Were your goals return based? Alternative to the market? Income replacement or just adding an income stream?

Thanks for the response.
I have a good job and other income so investment mainly appreciation based. 8% dividends are nice but jumped in mostly to achieve 2-3x in 5 yrs or so. If syndication is flat in 5 yrs, 40% return is not bad.

I have 9 investment properties in the Austin/BCS/Lake LBJ area that prob cash flow alittle but gains mostly from appreciation. Once I pay them all off, they should cash flow significantly around 200K/yr. With the high Tx prop taxes, it is very hard to cash flow carrying a mortgage. But given appreciation, I have 3-4x my investment in the past 7 years.

I have my medical business, retirement funds, actively managed investment properties, and was given the opportunity to get into passive syndication which has been great; Actually better than projected.

Wealth accumulation strategy for me is diversification, passive syndication just added to more diversification. The way everyone is moving to Austin/Dallas/Atlanta where my syndications are, I see a good outlook for apt syndications. Rent in these cities are going up substantially so if a syndication can manage expense, should do well.

My plan is to continually roll the closed out syndications into new ones if avail through 1031s. Best case scenario would be 2x every 5 years. So in 20 yrs, it could be worth 10M; I can dream right?

As I do not have need for rental income, I will push all the excess liquidity into new properties or pay down my current debt.

I am always looking for new properties and get 2-3 more in the next 5 years. With rates going up, I think homes will sit longer so might be a buying opportunity
TikkaShooter
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Thanks for the input and sharing your experience.

At this stage, my interest is passive syndicated MF RE opportunities. I like passive. Already have enough active management in life with jobs, kids, home/land upkeep.

Like you, I agree that growth of many southern cities will continue to explode, and I don't see how MF occupancy will go down. Not as a whole. And with the increases in rental home rates that will be required to keep up with prop tax explosions, I wonder if that will also keep MF occupancy rates high.

Again, thanks for your time.
ChoppinDs40
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AG
McKenna?
12thMan9
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AG
Got into passive in 2020 after selling my home of 25 years. Still have ability to get into more, but keeping it close in some high yield savings. Also bought more EPD stock to accentuate my passive income.

Hitting 8% cash on cash on 2 properties, #3 hasn't started distributions yet. Eventual goal is to utilize it to meet all our needs, not there yet.

Returns have come down as prices have risen for MF, narrowing the ability to offer better returns. The RE mentoring group I belong to has great training/mentoring, and always have access to the lead investor on deals. We also utliize Dr. Dotzhour(sp) from A&M who gives a great analysis of the market at the beginning of the year.
Ronnie '88
Medaggie
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12thMan9 said:

Got into passive in 2020 after selling my home of 25 years. Still have ability to get into more, but keeping it close in some high yield savings. Also bought more EPD stock to accentuate my passive income.

Hitting 8% cash on cash on 2 properties, #3 hasn't started distributions yet. Eventual goal is to utilize it to meet all our needs, not there yet.

Returns have come down as prices have risen for MF, narrowing the ability to offer better returns. The RE mentoring group I belong to has great training/mentoring, and always have access to the lead investor on deals. We also utliize Dr. Dotzhour(sp) from A&M who gives a great analysis of the market at the beginning of the year.
You got into Syndications around the time I did. I got into this alittle over 2 yrs ago so right around late 2019/early 2020. I got immediate 8% dividends (per prospectus). 2/3 kept 8% throughout, 1/3 Delayed distribution a few month when Covid hit due to uncertainties but resumed 8% plus paid back lost months. So all my 7 paid 8% throughout the past 2 yrs.

If you were in Multifamily/large apt complexes, I am just curious why dividends were so slow/non existent given the appreciating market?
12thMan9
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AG
There's 1200+ passive investors w/that question. We have removed the lead investor thru the courts, long story short it appears he was having issues w)a couple of properties & was moving $ to cover.

Expectations are they all return to forecasted 8-10% w/new mgmt.

He had different lenders in the properties so different requirements. That is why 1 had huge reserves & no distributions.
Ronnie '88
shaynew1
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AG
My personal experience has been: if you want it truly passive you aren't going to net as many dollars as you'd hope after holding costs, management fees, and adequate reserve replacement.

But I like the model and trying to leverage my borrowing power while I can.

ETA- My bad I somehow missed syndication specific question. I haven't done it but do know some folks that have, and like it.
aggiefan2002
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It's not syndicated RE, but I'm in the process of doing this now with "traditional" RE. I've bought and sold over the years to have money for the next deal, but now I'm buy and hold with the goal of funding my entire retirement plus money for future generations through RE. I have a partner, and we've picked up 11 houses together in the last year. Goal is 30-40 more in the next 2 years.

As of today I'm bringing in nearly 4k/month after all expenses including paying 5% to management company. Should be 20k plus when all is said and done in a couple years with all houses paid off when I turn 65.
TikkaShooter
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How are you guys handling the explosion in prop tax values?
aggiefan2002
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Raising rents to cover most of it. People have to live somewhere; and most sure aren't buying houses right now if they hadn't already.
TikkaShooter
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That's my concern with the future of single fam rent homes.

When do rent increases (to cover prop
tax explosions) price renters out of the SF dwelling market?

It's a question I don't have the answer to. But I do wonder if it may favor MF dwellings that can offer lower/various rent rates.
aggiefan2002
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Certainly a risk. But even if I lose all immediate cash flow and have someone else pay the mortgage off, I have an appreciating asset, a tax write off, and can either choose cash flow or liquidate when I'm 65. That x 40 is basically my own real estate mutual fund. I don't need them all to win as long as most do.
ChoppinDs40
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AG
TikkaShooter said:

That's my concern with the future of single fam rent homes.

When do rent increases (to cover prop
tax explosions) price renters out of the SF dwelling market?

It's a question I don't have the answer to. But I do wonder if it may favor MF dwellings that can offer lower/various rent rates.
it's a good point... their only option would be to move down to MFH, which I also invest in.

MFH is both recession and boom proof.

Boom? people can't afford houses because they're too much, or they're just waiting it out until they find something they can afford.

Bust? people can't afford to purchase a house so they rent.

I do think moving from SFH to MFH is a big, backwards leap for some people. They've got yard equipment, their boat, busted ass classic car they're trying to fix up, 3 big dogs that tear up everything. Kinslee's playhouse, etc.

Once you get people stuck in a SFH, it's hard to get them out.
aduey06
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Where is everyone finding the syndication deals or contacts. Been to a couple of investment group meetings but they is entrance fees and I just can't pull the trigger on that.
barnag
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aduey06 said:

Where is everyone finding the syndication deals or contacts. Been to a couple of investment group meetings but they is entrance fees and I just can't pull the trigger on that.
This forum, bigger pockets forums, networking, telling everyone you know you do real estate, local meetups, etc.
Red Pear Realty
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aduey06 said:

Where is everyone finding the syndication deals or contacts. Been to a couple of investment group meetings but they is entrance fees and I just can't pull the trigger on that.


I have posted one fully funded syndication deal that I sponsored on this forum. The SEC makes it very illegal to publicly advertise for syndications unless you already have an established relationship with the investor if you do not have certain registrations that cost a lot of money to obtain. So nobody will really ever advertise for their current syndications publicly.

https://texags.com/forums/59/topics/3275599
Sponsor Message: We Split Commissions. Full Service Agents in Austin, Bryan-College Station, Dallas-Fort Worth, Houston and San Antonio. Red Pear Realty
12thMan9
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Ditto to this. I'm part of Lifestyles Unlimited, a 30 yr old RE mentoring group where you can get on mailing lists for syndicators( we call them lead investors).

Lots of education for SF or MF folks, as well as different entry levels depending on your desire. There are several options out there but we chose Lifestyles b/c of the offerings and the people we have met. They have a wealth of info as well as guidelines lead investors must follow. They are all about the passive investor.
Ronnie '88
MAS444
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Quote:

Where is everyone finding the syndication deals or contacts. Been to a couple of investment group meetings but they is entrance fees and I just can't pull the trigger on that.
I'd highly recommend anyone interested in any such deals to reach out to Jamie Poirier at Red Pear Realty. I invested in one deal of his last year and would consider doing others.

I don't know Jamie personally other than talking to him about real estate over the last few years - but I've been very impressed so far.

schwack schwack
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Quote:

But even if I lose all immediate cash flow and have someone else pay the mortgage off, I have an appreciating asset, a tax write off, and can either choose cash flow or liquidate when I'm 65. That x 40 is basically my own real estate mutual fund. I don't need them all to win as long as most do.

This is the way we look at it, too. We don't carry mortgages, so all of ours pay off within 5-ish years. At that point we've gotten all of our money back, have a paid off asset, the tax write offs AND income. We can be fairly fluid on what we charge for rents if things become really competitive. At this point we self manage and survive quite well on the income from them alone. Our plan is to sell them off one a year later if/as we need money.

That said, when we started, we were picking up houses for as low as $15K - $25K (I know!) but those would need about $50K+ in renovations. Those houses/prices do not exist anymore.

New property taxes are hurting but with the current market here, there are no comps to pull to try to get them down. Most are still under what we have in them and we'll raise rents as people move out or renew. We are informally protesting a few - especially our MF units that went to an income based appraisal this year. That's been a learning curve & we've won a reduction on a couple but we have to provide records to support our position which would be tricky on some of the others.


Medaggie
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Yes, Jamie seems like a good guy. I got into this from a friend referral. Typically the really good syndication will find a property, put it out to past/current investors, then put it out to friends/referrals of past/current investors. So a syndication performs well, typically all the equity are bought up by current investors.

The 7 I am involved in has 2-2.5x my money in 3 years so many current investors are waiting for more to pop up.
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Red Pear Realty
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My contact info is in my profile. Shoot me a text or email and we can discuss!

Jamie
Sponsor Message: We Split Commissions. Full Service Agents in Austin, Bryan-College Station, Dallas-Fort Worth, Houston and San Antonio. Red Pear Realty
wilhunting
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AG
Landlord here since 2000 but started selling off my rental portfolio (44 units) in 2016. I've been involved in over 20 different deals with 9 different syndicators since 2016. One syndicator absolutely sucks and several others are awful communicators. Ashcroft Capital separates themselves from all others and they are completely buttoned up. I'm super impressed and will continue investing with them. I am currently in both Ashcroft Funds and am completely happy with my passive investments. These last few years of my real estate investing career have been the most rewarding and seem to have paid off. The passive investing vehicle is amazing but IMO I never could of gotten to this point without being a landlord from the beginning. I still buy local deals but never plan on being a landlord again. No horror stories during my time and I most definitely wouldn't trade my overall experience. I enjoyed all of it but as I got older having too many irons in the fire grew tiresome and I wanted more time with my family.
schwack schwack
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Quote:

The passive investing vehicle is amazing but IMO I never could of gotten to this point without being a landlord from the beginning.

We found it to be a fast - but labor intensive - way to build wealth. We were lucky enough to buy LOW, be able to do a lot of the renovation work ourselves & find some great, long term tenants that have paid us back everything we put in. That has left us with paid off assets that if we sold today would mostly more than triple what we invested initially.

Medaggie
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Most of mine are with Ashcroft and the others with another highly reputable group that has had similar returns. Ashcroft is quality and I was lucky to get in.

I just assumed that most syndications did well during the past 3-5 yrs given how much real estate has increased.



itsyourboypookie
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We own a few hundred rentals, and now with rents exploding they do pretty well, but appreciation or syndication is the only truly passive income, and most of that income comes on the exit.

These smaller apartment deals have been easy to come by and do extremely well for us. We've gone full cycle on a 26 unit in Lytle texas, 16 unit in Hamilton, 41 units in Comanche, 8 unit in Amarillo, and 8 unit in Ennis.

We are about to refi this one that we underwrote at $650 a month rent but are currently getting $945 a month. It's a 20 unit. We have turned almost every unit, new A/C's, parking lot, and metal roof. We are going to landscape it and add up lights. Cost basis will be around $900,000.

I'm going to California to door knock an owner of a 300 unit complex we should be able to get for 30k a door. That will be our first large deal.

Or model is fairly simple. Pick up assets that were bought during the savings and loan crisis from people who want to sell them at basis to avoid the taxes. Get them performing. Sell them to a syndication that will let us participate in the 10 year hold for a discount. Repeat.

TikkaShooter
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Thought I'd bump this.

Up to our 3rd passive holding.

Basically stopped dumping money into taxable brokerage, and started doing this instead.

Currently all deals have been min $75K buy in, so would be interested in seeing some smaller investment opportunities with different groups to help spread the eggs to diff baskets.
Medaggie
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What are the current percentage dividends are they quoting. Mine has gone from 8 to 5% with most gain on the back end
AggieRAGE
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Just invested in my first deal. Minimum was $75k but I asked if they'd allow a smaller investment and they allowed $50k. Never hurts to ask!
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