Reasons for not Investing in Real Estate Syndications
So far you all might be aware that Real estate syndication is a great way to generate passive income and build wealth. However, it's not for everyone. These are the top four reasons below not to invest in real estate syndicates.
Reason #1 – You can’t withdraw money freely
When you passively invest in a real estate syndication, your money is not liquid for the life of the project. That is, if the asset has been held for 5 years, we must assume that there will be money in the investment for the entire 5 years. This is very different from stocks and investment funds. Money is liquid when you invest in stocks. When investing, you must sign a comprehensive legal document (PPM or Private Placement Memorandum) detailing the expected holding period and illiquidity of the investment. Therefore, you should be very sure that you will not need access to this money shortly. If you have any doubts, or if the idea of locking $50,000 or more for five years gives you hives, change now.
Reason #2 - Requires a large investment
All real estate syndicates we undertake have a minimum investment of $50,000. This is a lot of money for everyone. For some people, it can even be a year's salary. Don't invest $50,000 in real estate syndicates. That high minimum investment can be a hurdle. So, if the mere thought of wiring $50,000 makes your palms sweaty and you haven't seen it in a few years, follow your intuition to find another investment.
Reason #3 - You need to learn new processes
Most people you talk to will give you a basic overview of how to invest in rental properties. Just like what Monopoly taught us. But when you start investing passively in real estate syndications, you have to throw away most of what you've learned about rental properties. The process of investing in real estate syndicates can take some getting used to, and it takes time to do your research and get comfortable with this new way of investing.
Reason #4 – You Need to Give Up Control
Investing in a rental property gives you complete control over almost every aspect of your investment, how you receive your payments, and what needs to be improved. Investing passively in real estate syndication is quite the opposite. You are not allowed to make decisions. So, if trust isn't your thing, you can also leave real estate syndicates off your list, as passive investing requires a good amount of trust.
When you invest passively in real estate syndicates, you invest large sums of money over the long term. At the end of the day, only you know what's best for you and your family, so forget all the sales pitches about why real estate syndication is so good and find out where you stand and why real estate syndication is right for you. Be honest in your assessment and remember to listen to your intuition.