On Destroying Myths about Hold Times and Risk-Adjusted Returns


I’ve heard this comment more than a few times. 

And I have no idea how many times it went unspoken…

“I think I’m gonna pass on this one. The ten-year hold is too long. And I doubled my money in five years last time. I’m gonna look for another deal like that one.” 

Another prospective investor looking for a shorter hold time. Or trying to double their money twice in a decade.

I get it. The IRRs can bedazzle. And a decade-long hold period can throw a wrench in this world of instant gratification. But don’t forget Mr. Buffett’s quippy comment on this topic…

Doubling your capital twice in ten years (an apparent 4x MOIC) is clearly better than tripling your money in one ten-year hold decade. 



I’m writing this post to help you think outside the common knowledge box. It is critical to account for taxes, risk, and friction costs in your analysis. And I think you’ll be quite surprised at how the actual returns shake out. 

Our Hypothesis

When comparing two investments where one is projecting a 2x MOIC (Multiple on Invested Capital) in five years and the other projects a 3x MOIC in 10 years, many investors will immediately gravitate toward the former because they believe they can reinvest that 2x into a similar investment to achieve a 4x in 10 years.

But in employing this obvious math, some investors miss several key points that should be included. 

(Note that I say “our hypothesis” because our astute Director of Investments, Troy Zsofka, developed this analysis. Thanks, Troy!) 

What is missing from this analysis? 

At least three elements are missing from the first blush analysis. And surprisingly, we’ll see below that the math may not be what it seems. 

  1. Taxes: When exiting the initial investment after five years, there will be capital gains taxes assessed. This can be mitigated to some extent by the depreciation achieved from the new investment, a so-called Lazy 1031 Exchange. But unless substantial bonus depreciation is available in the Internal Revenue Code at that time, it will only partially mitigate the tax liability (bonus depreciation will be phased out in less than five years unless Congress renews it). 

So, the new investment amount will be less than 2x the initial investment due to the tax bill, and the end result in 10 years will therefore be less than 4x. (I’m not doing actual math here since capital gains, depreciation recapture, and accelerated depreciation will vary by project, state, and year.)

  1. Risk: Experienced investors aren’t just seeking good returns. They’re looking for good risk-adjusted returns. 

An investment that achieves a 2x in five years will, almost certainly, be development, opportunistic, or value-add. There is Execution Risk associated with these types of investments. (Nothing wrong with that, but it must be accounted for!) 

By the time the five-year mark is reached, the asset will be restabilized at a value that achieves that 2x return, it will likely have long-term fixed rate debt, and the investment will be significantly de-risked. 

If that asset is then sold and the proceeds reinvested into a new investment with a 2x in five years return profile, the entire original investment amount, plus the gains net of tax liability, will be subject to an entirely new set of Execution Risk. 

Choosing the investment plan of making two investments over 10 years effectively doubles the Execution Risk to which the original investment is exposed.

  1. Friction: It is easy to invest in a syndication or fund. You can do it the same day you hear about it. 

But it’s hard to perform appropriate due diligence on an operator, their track record, their team, their debt, their underwriting, and a hundred other things that should be studied and inquired about. 

Doing this once per decade is hard enough. And most investors don’t have the time, team, or tools to do this on a variety of investments in their portfolio. 

Doing this twice as often (every five years) doubles the effort, time, travel, and expense. One might be tempted to rush. Or just wing it. I am all for praying, but that is not a sound investment strategy for most people. 

The friction costs here include potential time away from work, family, retirement, and more. And rushing here could add to your risk (see item #2 above). 

Furthermore, we should account for the potential time lag issue in making the second investment. Especially when performing careful due diligence. The “slack time” between investments could lower ultimate returns in either scenario, and this could impact the outcome.  

A peek at the math

Is the former investment plan of 2x in five years really more lucrative than a 3x in 10? To answer this question, let’s compare them side by side. 

We’ll keep as much constant as possible by assuming that it is the exact same investment strategy on the exact same asset. But one aims to sell in year five while the other aims to refinance in year five to access half of the forced equity achieved through the execution and then hold for another five years to achieve that 3x total MOIC over a 10-year hold. 

We’ll demonstrate with a $100K investment amount and, for simplicity, assume there is no cash flow along the way in either case, other than from capital events (sale or refinance). (Cash flow would just muddy the analysis without adding any benefit to the outcome.) 

Year 5: The first investment is de-risked and has achieved an asset value that translates to a 2x MOIC.

  1. Investment Strategy #1: Asset #1 is sold, creates a tax liability, and the remainder ($200K minus the tax liability) is reinvested in a similar deal (Asset #2) with a new set of risks.
  2. Investment Strategy #2: Asset #1 is refinanced, returns the initial $100K to the investor, and continues on as a relatively de-risked investment. The $100K Return of Capital is reinvested, tax-free, into the same investment (Asset #2) that Investment Strategy #1 is. 

Year 10: The original investment and the new investment (into which both Investment Strategies #1 and #2 reinvested their respective amounts in Year five) are sold. 

  1. Investment Strategy #1: Achieves less than a 4x MOIC due to the tax liability taking a piece of the sale proceeds that were then reinvested into Asset #2. Capital gains are taxed. 
  2. Investment Strategy #2: Achieves a 4x MOIC ($200K from Asset #1 which is the 3x MOIC minus the $100K already returned, plus $200K from Asset #2 which is the 2x MOIC in five years). Capital gains are taxed.

So, perhaps surprisingly, not only does Investment Strategy #2 achieve the same 4x MOIC over 10 years, but it outperforms Investment Strategy #1 by the degree to which the tax liability in year five reduced the amount that Investment Strategy #1 reinvested into Asset #2. And half of the capital gains are delayed in Strategy #2, providing a more tax-efficient scenario. 

But what if the investment in Asset #2 fails?

Assume the new investment in Asset #2 fails and loses all investor capital. It will affect them equally since they both invest in Asset #2, right? 


  1. Investment Strategy #1: The initial $100K turns into $0, a total loss. Uncle Sam is the only winner because some of that loss was paid in taxes after the sale in year five. 
  2. Investment Strategy #2: The initial $100K turns into $200K. Only the gain achieved during the first five years of the initial investment, that which was returned at refinance, is lost. Not fantastic to get a 2.0 MOIC over 10 years, but much better than a total loss. This is because Investment Strategy #2 was only partially exposed to the second round of risk from the new investment.

The bottom line

The takeaway is that, regardless of what the IRRs might look like on paper for Investment Strategy #1 and Strategy #2, the total return achieved by Investment Strategy #2 is both nominally superior and exposed to less risk. 

Investing into shorter-term, higher IRR investments, one after another, exposes an investor’s initial investment capital to repeat risks with each new investment and is like playing a game of musical chairs. 

When the music stops, will your capital have a chair… or be left exposed? 

Another analogy is that each round of risks is like a professional athlete sustaining a sub-concussive impact. How many of those can that athlete sustain before the big one comes along that takes them out of the game for good?

Are you looking to learn more about longer hold times for investments?

On June 12th, be on the lookout for a webinar from Wellings Capital’s fund manager and real estate author, Paul Moore. He will be presenting “A Surprising Case Study on 5-Year vs. 10-Year Hold Times” as part of the LFI Lunch & Learn series. This thought-provoking webinar will challenge conventional wisdom by exploring factors that could make longer hold periods more lucrative than shorter ones for real estate investments. Paul will delve into the underappreciated power of illiquidity and draw from a hedge fund manager’s perspective on why “boring” real estate can outperform sophisticated strategies.

Learn more about the webinar here.

Chris Franckhauser

Vice President of Strategy & Growth, Advisory Partner

Chris Franckhauser, Vice President of Strategy & Growth, Advisory Partner for Left Field Investors, has been involved in real estate since 2008. He started with one single-family fix and flip, and he was hooked. He then scaled, completing five more over a brief period. While he enjoyed the journey and the financial tailwinds that came with each completed project, being an active investor with a W2 at the time, became too much to manage with a young and growing family. Seeing this was not easily scalable or sustainable long term, he searched for alternative ideas on where to invest. He explored other passive income streams but kept coming back to his two passions; real estate and time with his family. He discovered syndications after reconnecting with a former colleague and LFI Founder. He joined Left Field Investors in 2023 and has quickly immersed himself into the community and as a key member of our team.  

Chris earned a B.S. from The Ohio State University. After years in healthcare technology and medical devices, from startups to Fortune 15 companies, Chris shifted his efforts to consulting and owning a small apparel business when he is not working with LFI (Left Field Investors) or on his personal passive investments. A few years ago, Chris and his family left the cold life in Ohio for lake life in the Carolinas. Chris lives in Tega Cay, South Carolina with his wife and two kids. In his free time, he enjoys exploring all the things the Carolinas offer, from the beaches to the mountains and everywhere in between, volunteering at the school, coaching his kids’ sports teams and cheering on the Buckeyes from afar.  

Chris knows investing is a team sport. Being a strategic thinker and analytical by nature, the ability to collaborate with like-minded individuals in the Left Field Community and other communities is invaluable.  

Jim Pfeifer

President, Chief Executive Officer, Founder

Jim Pfeifer is one of the founders of Left Field Investors and the host of the Passive Investing from Left Field podcast. Left Field Investors is a group dedicated to educating and assisting like-minded investors negotiate the nuances of the passive investing landscape and world of syndications. Jim is a former financial advisor who became frustrated with the one-path-fits-all approach of the standard financial services industry. Jim now concentrates on investing in real assets that produce cash flow and is committed to sharing his knowledge with others who are interested in learning a different way to grow wealth.

Jim not only advises and helps people get started in passive real estate syndications, he also invests alongside them in small groups to allow for diversification among multiple investments and syndication sponsors. Jim believes the most important factor in a successful syndication is finding a sponsor that he knows, likes and trusts.

He has invested in over 100 passive syndications including apartments, mobile homes, self-storage, private lending and notes, ATM’s, commercial and industrial triple net leases, assisted living facilities and international coffee farms and cacao producers. Jim is constantly looking for new investment ideas that match his philosophy of real assets producing cash flow as well as looking for new sponsors with whom he can build quality, long-term relationships. Jim earned a degree in Finance & Marketing from the University of Oregon and a Master’s in Business Education from The Ohio State University. He has worked as a reinsurance underwriter, high school finance teacher, financial advisor and now works exclusively as a full-time passive investor. Jim lives in Dublin, Ohio with his wife, three kids and two dogs. In his free time, he loves to ski, play Ultimate frisbee and cheer on the Buckeyes.

Jim earned a degree in Finance & Marketing from the University of Oregon and a Master’s in Business Education from The Ohio State University. He has worked as a reinsurance underwriter, high school finance teacher, financial advisor and now works exclusively as a full-time passive investor. Jim lives in Dublin, Ohio with his wife, three kids and two dogs. In his free time, he loves to ski, play Ultimate frisbee and cheer on the Buckeyes.

Chad Ackerman

Chief Operating Officer, Founder

Chad is the Founder & Chief Operating Officer of Left Field Investors and the host of the LFI Spotlight podcast. Chad was in banking most of his career with a focus on data analytics, but in March of 2023 he left his W2 to become LFI’s second full time employee.

Chad always had a passion for real estate, so his analytics skills translated well into the deal analyzer side of the business. Through his training, education and networking Chad was able to align his passive investing to compliment his involvement with LFI while allowing him to grow his wealth and take steps towards financial freedom. He has appreciated the help he’s received from others along his journey which is why he is excited to host the LFI Spotlight podcast and share the experience of other investors and industry experts to assist those that are looking for education for their own journey.

Chad has a Bachelor’s Degree in Business with a Minor in Real Estate from the University of Cincinnati. He is working to educate his two teenagers in the passive investing world. In his spare time he likes to golf, kayak, and check out the local brewery scene.

Ryan Steig

Chief Financial Officer, Founder

Ryan Stieg started down the path of passive investing like many of us did, after he picked up a little purple book called Rich Dad, Poor Dad. The problem was that he did that in college and didn’t take action to start investing passively until many years later when that itch to invest passively crept back up.

Ryan became an accidental landlord after moving from Phoenix back to Montana in 2007, a rental he kept until 2016 when he started investing more intentionally. Since 2016, Ryan has focused (or should we say lack thereof) on all different kinds of investing, always returning to real estate and business as his mainstay. Ryan has a small portfolio of one-to-three-unit rentals across four different markets in the US. He has also invested in over fifty real estate syndication investments individually or with an investment group or tribe. Working to diversify in multiple asset classes, Ryan invests in multi-family, note funds, NNN industrial, retail, office, self-storage, online businesses, start-ups, and several other asset classes that further cement his self-diagnosis of “shiny object syndrome”.

However, with all of those reaches over the years, Ryan still believes in the long-term success and tenets of passive, cash-flow-focused investing with proven syndicators and shared knowledge in investing.

When he’s not working with LFI or on his personal passive investments, he recently opened a new Club Pilates franchise studio after an insurance career. Outside of that, he can be found with his wife watching whatever sport one of their two boys is involved in during that particular season.

Steve Suh

Chief Content Officer, Founder

Steve Suh, one of the founders of Left Field Investors and its Chief Content Officer, has been involved with real estate and alternative assets since 2005. Like many, he saw his net worth plummet during the two major stock market crashes in the early 2000s. Since then, he vowed to find other ways to invest his money. Reading Rich Dad, Poor Dad gave Steve the impetus to learn about real estate investing. He first became a landlord after purchasing his office condo. He then invested passively as a limited partner in oil and gas drilling syndications but quickly learned the importance of scrutinizing sponsors when he stopped getting returns after only a few months. Steve came back to real estate by buying a few small residential rentals. Seeing that this was not easily scalable, he searched for alternative ideas. After listening to hundreds of podcasts and attending numerous real estate investing meetings, he determined that passively investing in real estate syndications was the best avenue to get great, risk-adjusted returns. He has invested in dozens of syndications involving apartment buildings, self-storage facilities, resort properties, ATMs, Bitcoin mining funds, car washes, a coffee farm, and even a Broadway show.

When Steve is not vetting commercial real estate syndications in the evenings, he is stomping out eye diseases and improving vision during the day as an ophthalmologist. He enjoys playing in his tennis and pickleball leagues and rooting for his Buckeyes and Steelers football teams. In the past several years, he took up running and has completed three full marathons, including the New York City Marathon. He is always on a quest to find great pizza, BBQ brisket, and bourbon. He enjoys traveling with his wife and their three adult kids. They usually go on a medical mission trip once a year to southern Mexico to provide eye surgeries and glasses to the residents. Steve has enjoyed being a part of Left Field Investors to help others learn about the merits of passive, real asset investments.

Sean Donnelly

Chief Culture Officer, Founder

Sean holds a W2 job in the finance sector and began his real estate investing journey shortly after earning his MBA. Unfortunately, it could not have begun at a worse time … anyone remember 2007 … but even the recession provided worthy lessons. Sean stayed in the game continuing to find his place, progressing from flipping to owning single and multi-family rentals to now funding opportunities through syndications. While Sean is still heavily invested in the equities market and holds a small portfolio of rentals, he strongly believes passive investing is the best way to offset the cyclical nature of traditional investment vehicles as well as avoid the headaches of direct property ownership. Through consistent cash flow, long term yield and available tax benefits, the diversification offered with passive investing brings a welcomed balance to an otherwise turbulent investing scheme. What Sean likes most about the syndication space is that the investment opportunities are not “one size fits all” and the community of investors genuinely want to help.

He earned a B.S. in Finance from Iowa State University in 1995 and a MBA from Otterbein University in 2007. Sean has lived in eight states but has called Ohio home for the last 20+.  When not attending his children’s various school/sporting events, Sean can be found running, golfing, shooting or fly-fishing.

Patrick Wills

Chief Information Officer, Advisory Partner

An active real estate investor since 2017, Patrick Wills’ investing journey began like many others – after reading the “purple book” by Robert Kiyosaki. Patrick started with single family rentals, and while they performed well, he quickly realized their inability to scale efficiently while remaining passive. He discovered syndications via podcasts and local meetups and never looked back. He joined Left Field Investors in 2022 as a member and has quickly become an integral part of the team as Vice President of Technology.

An I.T. Systems Engineer by trade, he experienced the limitations of traditional Wall Street investing firsthand in his career and knew there had to be a better way to truly have financial freedom.

Unfortunately, that better way is inaccessible to those who need it most. His mission is to make alternative investments accessible to everyone who seeks to take control of their financial future and to pursue their passions in life.

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