It’s hard to believe that just one year ago passive syndication investing was a foreign world to me. Twelve months back, I was nose-deep in a course on active real estate investing, researching markets, contacting various agents, lenders, and contractors, analyzing deal after deal, and wondering how I would ever find a cash-flowing rental property with rapidly rising interest rates and zero industry relationships while sitting 2000 miles away from my chosen market!
When I first heard about syndication investing, it seemed like something reserved for the “elite.” – some sort of “club”. Maybe this was an “advanced” level of real estate investing that I would have to painstakingly work toward with active rentals, in hopes of being invited to “the magical world of passive” some years down the line.
Thankfully, my welcome to this foreign world came far sooner than I had imagined. Today, I can say I’ve been invested in real estate passively for five months and am enjoying the consistent cash flow that multifamily syndication investing brings without the worry of tenants, toilets, or termites.
So how did I get here, and how can you?
Know Your Goals
Even though I had a consistent stream of capital from my W-2 job, I was limited on free time. This made passive investing sound pretty attractive. Syndications checked the boxes for cash-flowing income and diversified markets and asset classes, and it’s relatively easy to scale. It also provided the opportunity to leverage professional operators’ experiences, relationships, and deal flow – three things that I didn’t yet have on my own. Passive investing provided most of the benefits that active did but without most of the challenges. I decided this was the way for me at this point in my life.
Dip Your Toes In
I started by going to Left Field Investors’ free monthly Zoom meetings to see what passive investing was all about. After the one-hour meeting, I apprehensively joined the virtual networking session that followed and was pleasantly surprised to see how welcoming and helpful the community was. I was able to hear real-world experiences from my peers who were steps ahead of me, and, once comfortable, openly ask questions and express concerns. I received a ton of encouragement, got plenty of suggestions on how to further explore opportunities, and gained support from others willing to answer my questions down the line. All of this with no commitment and nothing to lose!
I started by listening to podcasts and reading blog posts to get a feel for this new world. Next, I selected ONE asset class that I was familiar with and dove into learning everything I could about it. I had already done research on multifamily investing and had lived in apartment buildings myself, so I started there.
If you are interested in investing in a multifamily syndication, I’d highly recommend reading The Hands-off Investor by Brian Burke. It explains the ins-and-outs of how everything in multifamily syndication works, what to expect moving forward, and what to watch out for along the way. It’s a dense read, but I chipped away at a few pages each day, and soon enough I had a solid foundation and understanding of the entire process.
Not sure what asset class to start with? The Alternative Investment Almanac by Denis Shapiro can help.
Develop Sponsor Relationships and Crank Up the Deal Flow
As a passive investor, your main goal is to vet the sponsor. As they say, “A bad sponsor can make a good deal go bad, and a good sponsor can turn around a deal that’s gone sideways.” You want to find sponsors who you know, like, and trust so when a good deal with them comes your way, you are confident and ready to buy in.
I started by setting up 15- to 30-minute intro calls to meet sponsors and get on their deal list. These calls helped me become familiar with terminology, know what to expect, and recognize differences and similarities between sponsors, deals, and processes.
HOT TIP: You don’t need to “finish” learning to start this process! I was about halfway through The Hands-Off Investor when I started scheduling calls with sponsors. I had a list of questions to ask, and I aimed for 2-3 sponsor calls per week. Your outside learning will prompt questions with the sponsors, and vice versa. Take good notes!
Utilize Your Resources
If you’re an Infielder, don’t neglect the additional resources that LFI provides! I used the LFI Sponsor Summary to find sponsors that fit my criteria (asset class, region, investment minimum, accreditation status, etc.). The LFI Sponsor Screener was the perfect list of questions to get started on calls with sponsors. The LFI Deal Analyzer was a great tool to practice deal analysis and prompted more questions that I could post in the Forums when considering a deal.
Leverage Your Network
You’ve heard the phrase “Your network is your net worth.” Well, it’s true. Relationships are EVERYTHING! Start reaching out to others in the passive investing space as soon as you can… and don’t be scared! The passive investing community is small, and I’ve found that most passive investors will take any opportunity to chat syndications when they get the chance.
If you’re an LFI Infielder, participate in the forums. Introduce yourself on the New Members thread, and don’t be afraid to ask questions! The forums are packed with good information on sponsors, deals, theory, and more.
Find a Mentor, Tribe, or Accountabili-buddy.
LFI’s “Intros”, which is open to all Left Fielders, is a great way to be paired with another member whose investing interests are similar to yours for a laidback, one-on-one video call. You can meet a new member once a week, every two weeks, or once a month — whatever cadence works for you.
This was HUGE for me! I was so nervous to be paired up with an experienced investor, and even more worried that I would be taking far more than I could give in the conversation. But I committed to an Intro every week and have since gained knowledge, confidence, and mentors. Intros helped me know the LFI community on a first name basis and gave me the confidence to attend LFI’s in-person Meetup in the Left Field in Columbus, Ohio. I highly recommend getting involved!
Join a Sub-Group
Ladies, join us in LFI’s new Women’s League! It’s completely free and is open to all women who subscribe to LFI’s newsletter. It’s an open space for questions and camaraderie. We meet on Zoom every quarter on the second Tuesday of January, April, July, and October from 8:00-9:30pm EST. I’ll see you there!
If you’re between the ages of 18 and 35ish, connect with other younger folks at LFI’s Next Gen Investors meetings on Zoom! We meet the fourth Tuesday of each month from 8:00-9:00pm EST.
Meeting in person is the BEST way to create lasting relationships. You’re sure to leave feeling enlightened, energized and inspired. If you can make it to an event, go! You won’t regret it. 😉
My First Deal
A couple of months into my learning journey, a new deal had stirred up some excitement on the forums. I decided to investigate this sponsor and use the deal as a “trial” to find any holes in my analysis process.
While following the forum conversation closely, I reached out to the sponsor for an intro call and asked them to send through any documents for the deal. I received a deal summary, Private Placement Memorandum (PPM), investor commitment form, bank transaction requirements, and copies of past investor reports that I had requested.
After thoroughly assessing the sponsor’s track record and business model, I read through the deal documents one step at a time. Whenever I found myself feeling stuck or confused, I wrote down my questions and what was holding me back so I could ask other investors what they would have done at that point. This process helped fill in any gaps in my learning and put me in a better position to thoroughly analyze a deal. Next time a good deal came through, I would be ready to pull the trigger in a more timely manner.
Feeling good about this sponsor, I reached out once again, this time to inform Investor Relations that I had my capital ready and would like to be placed on the “early look” list for future deals. As a non-accredited investor, I knew that spaces can be limited in each deal. On the early look list, I’d have the chance to view and commit to the deal before it was shared with the larger mailing list.
About a month later, an early look email arrived with the sponsor’s next deal. I had a few extra days to review all the documents, ask questions to the sponsor and other investors, fill out the deal analyzer, and post questions in the forum. The deal seemed to fulfill my needs, and I went ahead and committed my investment! Before I knew it, I had my first taste of “mailbox money”. It sure is sweet!
Quick Thoughts on Mindset
Love Being a Beginner
You won’t be a beginner forever – so take advantage of the perks! Ask every question you have, even if it seems like a stupid question. Some veteran investors out there may be wondering the same thing but are too embarrassed to ask. Do everyone a favor, and just ask!
Avoid Analysis Paralysis
Take action – even if you’re fearful. Move forward and course correct along the way. If you’re letting fear stop you at THIS point… just wait until you need to wire your first $50k! 😉
F.A.I.L. = First Attempt In Learning
Consider Starting Small
Join a tribe. Ask sponsors for a lower investment minimum. Take your time to do thorough due diligence before committing.
Evade Shiny Object Syndrome
Pick ONE asset class and learn as much about it as you can. Once you’ve committed to a deal you feel good about, then consider moving on to the next asset class.
Keep It Simple
Nobody else is going to simplify your life. Know your goals and focus on what will get you there most efficiently so you can use your most valuable resource (your time) to do the things you love.
Enjoy the journey!
There is sure to be ups and downs, but your community is rooting for you!
Nothing on this blog or website should be considered financial advice. Investing involves risks which you assume. It is your duty to do your own due diligence. Read all documents and agreements before signing or investing in anything. It is your duty to consult with your own legal, financial, and tax advisors regarding any investment.
Katie Viola is a freelance, computer graphics artist for visual effects. A lover of travel, she’s developed a passion for personal finance as a means to fuel her next adventure. Katie lives in Los Angeles with her husband, Joe and cat, Cody. Katie is an active LFI Infielder and helped kick-start LFI’s Women’s League and Next Gen Investors subgroups. When she’s not geeking out on the computer or digging into personal finance books, she can be found rock climbing, hiking, swimming, or cycling. You can contact Katie at ViolaRealEstate314@gmail.com.