There’s a learning curve to everything, and you have to put in the work to move past the newbie stage — just like progressing from light weights at the gym. That’s why I’ve always said most people should start with single family homes.

Personally, I am sold that syndications are a safer and more scalable way than many alternatives to invest for high net-worth investors. I have spoken a lot about my experience of getting to 11 rentals back in 2015 and the un-scalability and inability to optimize your return of equity when your portfolio is structured with rental property.

When I started to join different higher-level masterminds (and ultimately create one for our community) it became clear that this is how accredited investors invest.

For SFHs, vacancies can drastically reduce your annual returns and contribute to higher return volatility (i.e., overall unevenness in rent collections) in your investment portfolio.

Multifamily syndication invests in multi-occupancy properties, therefore one or two tenants moving out of an apartment building doesn’t impact the net income as heavily as it would per SFH. Syndications also provide a great avenue for scalability.

Similar to SFHs, syndications provide returns from monthly cash flow as well as appreciation. However, the year-over-year 2-3% increase in rent for 20-30+ spaces will increase the net income of the property and your return much more than a 2-3% increase in rent for an SFH.

As of 2020, I am personally in over a couple dozen syndications. In 2018, I sold most of my rentals (for a capital gain and depreciation recapture of $200k which I did not have to pay taxes on – because I had so many passive losses in the syndication deals I was already in – more on taxes here and costseg here).

Most investors start off with single family homes or duplexes, which is a great way to start your real estate investing journey. However, the issues that come with single family homes (SFH) include:

Non-Diversified Risk

Investors are tied down to that one house, if a tenant moves out, the investor’s monthly passive income stream is at a standstill until the next tenant moves in.

In fact, the investor will directly be responsible for all of the associated expenses: the mortgage, insurance, tax, etc. until the next tenant is found.

Difficult to Scale

There is a point in time when a few hundred dollars in profit margin for the first few years per property just doesn’t seem enough. An investor would have to invest in 10-20 properties to ever replace one’s salary.

Additionally, even if an investor acquires 10-20 homes, the time invested in dealing with broken faucets, evictions, late payments, etc. is a headache even with a property manager for the return that it provides.

Numbers in the examples on this page are hypothetical and for illustration only. Return targets are not guarantees, and investors can lose money.

Cash on Cash (CoC) Return is Limited

When investing in a single family home, one has to put down a minimum of 20% of the purchase price to acquire the home. For an 8-10% return, it’s worthwhile to have since there is a profit margin.

There are other real estate investment opportunities that may provide more return for the capital that is invested.

Pros of Investing in Syndications

There are still plenty of reasons to invest in single family homes — building legacy wealth, a relatively low-cost way to learn about investing in real estate, and for the most part, SFHs are a stable monthly income stream.

However, investing in the right syndications can help with all of the above goals as investing in SFHs, but with a more efficient investment of time and energy.

Below are some benefits of syndication investments:

Asset Managers are the ones who watch over all of the assets in the portfolio at a high level:

→ Definition: Asset management involves overseeing a portfolio of investments to maximize returns while minimizing risk. It is a strategic approach to managing a range of assets to meet specific financial goals.

→ Scope: In the context of real estate, asset management typically refers to the management of an entire real estate portfolio, which may include various types of properties such as residential commercial, and industrial. The goal is to optimize the performance of the entire investment portfolio.

→ Responsibilities: To make strategic decisions related to acquisitions, dispositions, financing, and overall portfolio strategy. They focus on the financial performance of the portfolio, taking a holistic view of the assets and their contribution to the investor’s objectives.

Property Managers are responsible for the individual properties:

→ Definition: Property management is more focused on the day-to-day operations of individual real estate assets. It involves the oversight of specific properties to ensure they are well-maintained, operate efficiently, and generate income for the owner.

→ Scope: The responsibilities include leasing, maintenance, tenant relations, rent collection, and other operational aspects.

→ Responsibilities: They work to preserve and enhance the value of a specific property. Their duties include dealing with tenants, coordinating maintenance and repairs, setting rental rates, and ensuring the property complies with local regulations.

Minimizing PITA (pain-in-the-ass):

No more managing tenants, vacancies, maintenance, and managing the manager (who might be a $12-20/hr employee whose compensation structure is not aligned with your goals). Bypassing the control of the day-to-day operations to true experts who are literally partners (direct alignment of compensation and motivations — and not vendors like a property manager, who is not really aligned with what you want as an owner), you can ensure the investment is being optimized while you spend your time on what you really want such as:

1) Making more money at your day job

2) Spending time with your family

3) Finding that one-off deal that you want to do on your own (that you enjoy!), while pairing with a Limited Partner strategy

Asset Diversification:

Many commercial real estate investments have high acquisition prices (think $10M+) which most people don’t have access to. You want to get away from those other “Mom and Pop” investments (1-40 unit deals).

When I was a syndication newbie, I thought I could do everything by myself and did not trust anyone. I then realized in a few months that 1-40 unit deals had horrible pricing — because all the amateurs were involved, and the ones that looked good from a per-unit price perspective were under 80% occupied and had ISSUES.

Investing passively in a group can allow you to invest in multiple asset classes (e.g., apartments, mobile homes, assisted living), in multiple locations and with varying business plan durations.

Four ways sophisticated investors diversify in syndications:

Leads/operators
Asset classes, such as multifamily housing (MFH), self-storage, mobile home parks, assisted living
Geographical markets
Business plans (5-year exits vs legacy holds)

Tax Deferred Status:

All the deprecation tax benefits of single family homes in your DIY direct investing — but even better! Bigger deals are able to pay for a cost segregation to squeeze out even more depreciation.

Avoiding Credit and Liability Risk:

Investing passively allows one to avoid being exposed to credit or liability risk. No W2 documented income, no problem! You are not the one to personally guarantee multi-million dollar loans and be the fall guy. Plus, now you can get into all the travel hacking credit cards and tradelines you want (theWealthElevator.com/tradelines).

Cash Flow:

The goal of an LP syndication investor is to create a “ladder” of investments, which create accumulated annual cashflow and cash-outs at different times in order to spread your tax liability from capital gains and depreciation recapture. If timed well — and you build up a large passive loss reserve — you may never pay taxes. It’s like your grandpa’s (ordinary income) CD ladder strategy, but with 10-30x returns and no taxes.

Cons of Investing in Syndications

Simple Syndication Portfolio Example

$50K invested each year for 5 years, with each investment returning 10% annual cash flow and selling at $25k profit after 5 years.

Investments:
Yr 1 investment A: $50K
Yr 2 investment B: $50K
Yr 3 investment C: $50K
Yr 4 investment D: $50K
Yr 5 investment E: $50K

Returns (assuming each of A-E sell after 5 years):
Yr 1: A COC return $5K
Yr 2: A+B COC return $10K
Yr 3: A+B+C COC return $15K
Yr 4: A+B+C+D COC return $20K
Yr 5: A+B+C+D+E COC return $25K, return of capital (A) of $50K, profit (A) of $25K
Yr 6: B+C+D+E COC return $20K, return of capital (B) of $50K, profit (B) of $25K
Yr 7: C+D+E COC return $15K, return of capital (C) of $50K, profit (C) of $25K
Yr 8: D+E COC return $10K, return of capital (D) of $50K, profit (D) of $25K
Yr 9: E COC return $5K, return of capital (E) of $50K, profit (E) of $25K

Total investment (returned after 5yrs): $250K
Total COC return: $125K
Total profit: $125K
Total return: $250K. That is a 100% total return on the $250K invested, or a 2x multiple, spread over nine years. It is not 100% a year.

This is a hypothetical example to show how staggered investments stack up over time. It assumes every deal pays its target cash flow and sells on schedule, which real deals often don’t. Actual results vary, and investors can lose money.

Investments:

Year 1

Year 2

Year 3

Year 4

Year 5

Investment A

Investment B

Investment C

Investment D

Investment E

^$50k

Returns (assuming each of A-E sell after 5 years):

Year 1

Year 2

Year 3

Year 4

Investment A

A+B

A+B+C

A+B+C+D

COC return

^$5k

^$10k

^$15k

^$20k

Year 5

A+B+C+D+E

COC return

^$25k

Investment A

Return of Capital

^$50k

Investment A

Profit

^$25k

Year 6

B+C+D+E

COC return

^$20k

Investment B

Return of Capital

^$50k

Investment B

Profit

^$25k

Year 7

C+D+E

COC return

^$15k

Investment C

Return of Capital

^$50k

Investment C

Profit

^$25k

Year 8

D+E

COC return

^$10k

Investment D

Return of Capital

^$50k

Investment D

Profit

^$25k

Year 9

Investment E

COC return

^$5k

Investment E

Return of Capital

^$50k

Investment E

Profit

^$25k

Total Investment

(Returned after 5 years)

^$250k

Total

COC Return

^$125k

Total

Profit

^$125k

Total

Return

^$250k

Annualized ROI of the portfolio is 100% (2x multiplier of investment)

🗝️ Conclusion and Key Takeaways

Scalability and Risk Management – Single-family homes are a good starting point, but syndications allow investors to scale more efficiently while reducing risk through diversification and professional management.
Consistent Cash Flow – Syndications generate more stable cash flow by spreading risk across multiple tenants, whereas vacancies in single-family homes can significantly impact returns.
Time and Effort – Managing single-family rentals can be time-consuming and inefficient, even with property managers. Syndications provide passive investors with hands-off investment opportunities.
Tax Benefits and Wealth Building – Syndications offer enhanced tax benefits like cost segregation and passive losses, helping investors reduce taxable income more effectively than single-family rentals.
Credit and Liability Protection – Passive investors in syndications are shielded from liability and loan guarantees, unlike direct owners of single-family homes who must personally sign for financing.
Diversification Opportunities – Investing in syndications allows investors to diversify across asset classes, markets, and business strategies, reducing concentration risk while maintaining strong returns.

This is educational content, not tax, legal, or investment advice. We are not attorneys, CPAs, or financial planners. Please let us know if you need a referral to a 💼 CPA, ⚖️ Lawyer, or other vendor here.

The Wealth Elevator Syndication eCourse

Single Family Homes vs. Syndications

Non-Diversified Risk

Difficult to Scale

Cash on Cash (CoC) Return is Limited

Pros of Investing in Syndications

Asset Managers are the ones who watch over all of the assets in the portfolio at a high level:

Property Managers are responsible for the individual properties:

Minimizing PITA (pain-in-the-ass):

Asset Diversification:

Tax Deferred Status:

Avoiding Credit and Liability Risk:

Cash Flow:

Cons of Investing in Syndications

Simple Syndication Portfolio Example

🗝️ Conclusion and Key Takeaways

Course Progress