Updated: Apr 17
Real estate investing is complicated, the nice thing is you don't have to do everything by yourself, as matter of fact as a Limited Partner in a Syndication you won't have much to do on the operations side. However, there are are some upfront learning required like:
A. Know the risk associated with this kind of investment...knowledge is KING and always will be.
As you know risk and reward go hand in hand, typical risk in these types of investments are:
1. You can lose all your money.. let's get that out of the way first thing
2. The capital you invest could be illiquid up to 5yrs
3. Economic & regulation factors could impact occupancy rate, therefore impacting revenue and cash flow
4. Poor Sponsor and Team selection
B.Ensure the Sponsor has a strong track record
Do a Google search on the Sponsor, if they have any clout what so ever, you'll find their business success online. Ten plus years in the game is a good track record, even better if the Sponsor have actually experienced several market cycles.
C. Understand how the investment will generate revenue
While there are other revenue streams in the apartment business for example vending machine income or washer/dryer income, the main revenue stream is through rental income. In short, the residence pays the rent (on time), the rent money pays for operations cost followed by debt (the loan), the cash flow pays the GP's/LP's. So you can see how important it is to provide the best customer care; take care of the tenants and the tenants will take care of you!