A syndication is a group of passive investors (Limited Partners or LPs) who contribute funds to acquire a property led by a small group of active investors (General Partners or GPs).  Think of a syndication as a ride on an airplane.  The LPs are the passengers who have paid to get from one place to another without responsibility for the flight.  The GPs are the pilots responsible for the flight arriving safely at the destination.  

Depending on the deal, preferred returns will be distributed on a monthly or quarterly basis as defined in the legal documents of the deal. A final distribution will be made upon disposition of the property.

A monthly report will keep you apprised of activities and performance metrics at the property. You will have access to that info and more in your online investor portal.

Yes. We have many investors that do it.

Investing in real estate can be done with a self-directed retirement account which requires the use of an SDIRA custodian and must follow very strict rules. Your SDIRA Custodian is in the best position to explain the full implications of investing in real estate in this manner.

The terms are interchangeable and typically mean the same thing.

A sponsor is the lead person or company who finds a property to invest in, brings together the General Partners (the sponsor team), guides the acquisition process, and oversees the management of the real estate (usually through a third-party property management company).

There are two major areas of risk for any commercial real estate deal — the market risks and operational risks.

Each deal gets our independent scrutiny to ensure the investment fits our criteria. We visit the property and the submarket, study the submarket demographics, review the investment documents and conduct an independent underwriting verification of each deal.

Because we are experienced, full time professionals, we can ensure our investors get a much more thorough analysis of each deal than virtually any passive investor could conduct on their own.

Each available investment opportunity meets the following criteria prior to being offered to investors:

– 6% to 8% average annual cashflow (distributed on a monthly or quarterly basis)
– 14% to 16% annualized cumulative return from all sources. The return includes both the cash flow and equity growth. Equity growth includes the appreciation and principal pay down (realized at an equity harvesting event).

While our model is proven to perform well, these are not guaranteed returns. Investing in commercial real estate is not a good fit for everyone. You should consult your CPA and/or attorney prior to making an investment decision.

Most syndications do not allow passive investors to have voting rights. The reason is that the property is managed by professionals who are educated and experienced in the specific class of property.

In addition, many passive investors (the other Limited Partners in a deal) are not typically experienced real estate professionals and you will not know who they are or what their backgrounds are.

Depreciation is one of the most important tax benefits in real estate investing.

When you invest alongside Passivo, you invest in an LLC (or LP) that owns the property. The benefits of the property, including depreciation, are passed through the LLC to each investor. In most real estate deals, depreciation and other tax write-offs allow all cash flow during the hold period to be received tax-deferred.

This means that the taxable gain of the cash flow received during the hold period will be a net negative, or very close to it. When the property is later sold, there will be a federal tax based on the capital gains rates as well as a tax on the depreciation recapture.

We are not accountants or attorneys and you should always consult your own accountant and attorney when making a decision about an investment.

A Limited Partner (LP) is a passive investor in a deal who typically has a preferred cash on cash return on their investment and no liability or credit risk in the deal.

A General Partner (GP) is the real estate professional who finds, structures and manages the investment.

We invest in every deal we offer to you, so our families’ financial interests are in sync with yours.

In some deals, we use our own personal funds to pay for expenses before the deal closes.

A typical deal pays the Limited Partners (LP) a cash on cash preferred return, generally about 5% to 7%, and a split of returns above that of 70% to 80% of the LP investment. The preferred return is paid to all LPs before any of the GPs are paid anything. And if the preferred return is delayed for any reason, the delayed payment is accrued and paid later in total before any payment is made to the GPs.

For example, if the deal offers 6% preferred return and a 70% split above the 6% pref, then for an investment of $100,000, the investor gets $6,000 per year cash plus 70% of the profit above 6% when the property is sold.

Natural disasters can happen in any location. It is a risk, and is why property and liability insurance is a normal expense of real estate. Normal insurance coverage includes business interruption for loss of income and wind and water damage.

As a general rule, Passivo will not invest in properties in a FEMA area designated as greater than a once in 500 year flood zone.

Syndications should always be considered illiquid and non-transferable.
With that said, if an emergency arises, the investor should contact the sponsor and explain the situation. Most sponsors will make efforts to return the investment according to the terms in the legal documents of the investment. This may require finding another investor to purchase the shares to be withdrawn and paying an administrative fee or other provisions. Read the legal documents carefully.

Investments should be made with funds that will not be needed for the expected hold period, or even longer (should unforeseen events arise).

See the Portfolio page for our previous and current property investments. For more our principles, go to our About Us page.

But of course, we are legally obligated to mention: past performance is not indicative of future results.

We have a stake in every deal. Each deal is different. We may provide Earnest Money Deposits, front the Due Diligence expenses, pay travel expenses for early property evaluations, personally sign on the mortgage, invest as Limited Partners, or in other ways put our own capital at risk. But much more important to us, we put our reputations on the line for every deal. While our business can take a monetary hit, if that were to occur, we value our integrity and the respect of our investors much more.

The passive approach allows investors to experience diversification across multiple geographies, tenant types, product types, management styles, operators, and many more aspects of the real estate sector. As a passive investor you do not have to do any work on the property. The only job is to be sure to get your annual K-1 tax form to your tax preparer to gain the tax advantages of investing in commercial real estate. Another important benefit as a passive investor is that you will not incur any credit or liability risk, only the sponsor team does. When someone is investing in highly complicated asset classes such as commercial real estate, a top-tier operator can bring great value to the opportunity.

It is a legitimate concern to be wary of fraud in the investment world.

Here are some primary signs of security and legitimacy:

You are purchasing interest in a legal entity that is incorporated with the sole purpose of owning the real estate. You will be a direct owner of the asset alongside the other limited partners and the general partners. The offering is structured following strict guidelines established by the U. S. Securities and Exchange Commission, the branch of government created with the specific focus of protecting investor interests in private and public investment offerings.
Also, you are investing in a tangible asset that you can visit anytime.
Just like we do at Passivo when vetting our operating partners, we encourage our investors to run independent background checks on us as well as on our Operating Partner for that specific deal.

Passivo visits and inspects each investment property at least quarterly, reviews the financials and verifies that property reports are accurate. Passivo periodically attends property operations calls to monitor property performance.

Property Management (PM) is about daily operations and Asset Management is about overall performance.

The Property Manager (PM) handles the daily operations of the property from marketing the property, showing units, securing rental agreements, maintaining the property, preparing units for new renters, collecting rents, managing unit renovations, and overseeing all daily operations.

An Asset Manager ensures the business plan for the property is followed, makes sure the Property Manager runs the property according to the wishes of the sponsor, oversees the financial aspects of the property, approves expenses that exceed the PM’s limit, reviews the capital expenditures, works with the PM to develop the annual budget, ensures the investor distributions go out on time, and oversees the CPA filing the annual tax returns.

A Real Estate Syndication is a private offering where investors acquire interest in an entity that’s created with the sole purpose of owning a specific asset. When you invest in a real estate syndication you become a direct owner of the real estate and gain access to all the benefits of direct ownership, like depreciation and other tax benefits. A REIT is an entity created to hold interest in and operate a large portfolio of properties, typically of the same asset class. When you own shares in a REIT you are not a direct owner of the real estate, and therefore you do not receive the benefits associated with direct ownership.