Investing $50K Each Year Into Real Estate Syndications: A 10-Year Overview
Listen, $50K is a good chunk of money. Fortunately, as physicians, most of us make a good six-figure income and should be able to save $50K a year.
I was speaking to a fellow female physician earlier this week. She was starting to feel burned out by the assembly-line work in her clinic, tired of having to see more patients just to earn the same income, and frustrated she couldn’t be more present for her young children.
She was interested in dipping her toes into real estate syndications, but had a hard time conceptualizing how investing $50K into a syndication would impact her life.
I thought I’d share the conversation and how I broke it down for her.
Year #1
While it’s super exciting to invest in your first syndication, it’s also feels the slowest.
In the first year, let’s say you invest $50K into a 200-unit value-add apartment in Atlanta, Georgia. We’ll call this Property #1.
A few months after you invest, you begin getting a monthly distribution check for $333, which is roughly a 8% annual return.
When you get that first distribution check, you’re probably thinking, “This is nice. But this $333 can barely cover a week of daycare for my kid.”
Or you may be thinking, “What’s the point? I can work another shift and make at least 3x that amount of money in a few hours!”
Hang on, I hear ya. I’ve been there too, wondering if this relatively small amount of money coming in every month was even worth it. But the beauty is that this money is completely PASSIVE. You didn’t have to put on those scrubs and go to work, squeeze in another surgery, or double book yourself to see another patient to earn that money.
You earned this money without having to trade your time for money. You earned this money by doing nothing. Let that thought sink in for a moment.
Now let’s keep going…
Year #2
In the spring, you get your first Schedule K-1, which is the tax document showing your income and losses from your investment.
You now see the tax benefits of real estate, particularly the magic of accelerated depreciation. Even though you’ve been collecting money every month, your K-1 shows a nice paper loss for Property #1. These paper losses offset the monthly cashflow you’ve been getting, so you get to keep all that money tax-free. Yay!
This year, you decide to invest $50K into another syndication, Property #2. This increases your monthly cash flow to $666 ($333 from each property).
Year #3
In year three, you invest another $50K into your third syndication, Property #3.
Now you’re receiving three monthly distribution checks, totaling about $1000 monthly (or $12,000 annually).
Year #4
In the middle of year, you get news that Property #1’s renovations are complete and the property is being sold. Property #1 gets sold for a great profit.
You get back your original $50K investment from Property #1, plus an additional $25,000 in profits from the sale.
You start seeing the incredible benefits of real estate, and decide to reinvest all the returns from Property #1 ($75,000) plus the $50,000 you saved in year 4 (for a total of $125,000) into another syndication, Property #4.
Now you have a total of $225,000 ($125,000 + 50,000 from year 2 + 50,000 from year 3) invested. At a preferred return of 8%, you’re now getting $1500 each month (or $18,000 per year) in cash flow distributions.
Remember, this is all passive income. The money comes in whether you work or not.
Year #5
This year, you get news that Property #2 (your investment from year 2) has completed renovations and is being sold. You get your original $50K investment in Property #2, plus an additional $25,000 in profits from the sale.
You see the money coming in and now you’re hooked! So you decide to reinvest all the returns from Property #2 ($75,000), plus the $50,000 you saved this year, into another syndication, Property #5.
Now you have a total of $300,00 invested in syndications. At this point, your monthly cash flow is $2000 each month ($24,000 annually).
Years #6 – 7
You’re starting to see the pattern here, so let’s crank up the speed a bit.
In years 6 and 7, Properties #3 and #4 are sold, respectively. You reinvest the additional capital that’s returned to you from the exited deals. In years 6 and 7, you invest $125,000 into Properties #6 and #7, respectively.
You now have a total of $487,500 invested in syndications. Your cash distributions now total $3,250 per month ($39,000 per year).
You continue to show a paper loss due to depreciation, all the while collecting the cashflow tax-free.
Years #8-10
You’ve now been investing $50,000 each year for 10 years. The first six deals have exited, each time leaving you with with more money to reinvest.
In each year of years 8, 9, and 10, the syndication deals are sold, leaving you with additional capital to roll into the next investment.
By the end of year 10, you have over $880,000 invested in multiple real estate syndications, producing $70,500 in passive income per year. That’s more than the median household income in the US (and certainly more than what you made as a resident).
Of course, real-life is not as clean and simple as what’s been illustrated here. But this blog post gives you a general idea of what’s possible when you invest $50,000 a year into real estate syndications.
Conclusions
Investing passively in real estate syndications is NOT a get-rich-quick scheme, but rather a long-term strategy to steadily build wealth.
This method of investing $50K each year is a predictable, operable process that any doctor can implement. I hope this blog post illustrates how investing one 50k at a time in real estate syndications can change your financial future and help you live life and practice medicine on your own terms.
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