3 Reasons NOT to Invest in Real Estate Syndications
Real estate syndications are a great way to generate passive income and build wealth, but they’re not for everyone.
Here are 3 reasons why you should stay away from investing passively in real estate syndications:
#1) Illiquidity: You need money in the near term
When you invest passively in a real estate syndication, your money is illiquid for the length of the project hold time (typically 5 years, but could be shorter or longer). So you have to be comfortable keeping your money in for that period of time. If you think you may need the money before the exit plan for the syndication, then don’t invest in a syndication.
Unlike stocks or mutual funds where you can buy and sell with just a few clicks on a button, you cannot just take your money in and out of a real estate syndication whenever you want.
So before you invest, make sure you don’t need that money in the immediate future. If you can’t plan for your investment capital to be unavailable for a period of time, then passively investing in real estate syndications is not for you.
#2) High Minimum Investment: You don’t have more than $50K of “play” money
For most real estate syndications, the minimum investment is $50,000, which is no small amount of money. You have to ensure that you have the minimum investment amount, plus an emergency fund and any other savings for your life’s aspirations.
So if you have a total of $52,000 in your bank account, it’s probably not the best move to tie up $50,000 into a syndication.
Real estate syndications do carry risks and you have to be prepared to lose your entire investment amount and still be okay financially. If that’s not the case, then real estate syndications are not for you.
#3) Lack of Control: You’re not okay with someone else being in the driver’s seat
The third reason not to invest in real estate syndications is if you’re not okay with someone else being the driver’s seat and taking control.
If you buy your own rental property, you have full control over all aspects of the investment. You can choose when to buy, sell or refinance, which property management company to use, which tenants to approve, and what type of renovations you want.
Investing in a real estate syndication is quite the opposite. You won’t be involved in any day-to-day decisions. As a passive investor, you take a back seat and leave the driving to the professionals. You put your trust in the sponsors to execute on the plan.
So if lack of control and giving trust to someone else doesn’t sound like your cup of tea, then real estate syndications are not for you.
Conclusion
So there you go…the three reasons NOT to invest in a real estate syndication: illiquidity, large minimum investment, and lack of control.
If any of these sounds like something you don’t like or can’t tolerate, then stay away from real estate syndications!
Syndications are great way to invest in real estate without the hassles of being a landlord. However, being a passive investor is not for everyone. You need to take an honest evaluation of whether real estate syndications are right for you.
If you do decide that passively investing in real estate IS for you, then what’s holding you back? Join our Clear Vision Investor Club to learn more about investing passively in real estate so you can start living life and practicing medicine on your own terms.
