Taxes – What You Need to Know

Taxes & Syndications

7 Eye-Opening Things Every Passive Real Estate Investor Should Know

If you’re like me, well at least the OLD me, one of the last things you think about when making a new investment is taxes. It’s so much easier to think about all the potential luxury vacations you’ll take and the new cars you’ll buy, than to think about the taxes you’ll be paying.

Well, I’m here to tell you that, when you start out investing in real estate, it’s actually okay that taxes aren’t on your mind. That’s because, unlike when you invest in stocks and mutual funds, investing in real estate tends to make your tax bill lower, not higher.

Yes, you read that right. Investing in real estate can often help lower the amount of taxes you owe, even while you’re making great returns on your investment.

But how is that possible, you ask?

Investing in real estate can often help lower the amount of taxes you owe, even while you’re making great returns on your investment

There’s actually a HUGE difference between the way the IRS views stock market gains and the way they view real estate gains. And that’s exactly what we’ll discuss in this article, specifically from the standpoint of a passive investor in a real estate syndication.

But First, a Disclaimer

Just so you know, I am not a tax professional, nor will I ever seek to become one (those people have really tough jobs). As such, the insights and perspectives provided in this article come from my experience only.

** Always consult with your CPA for more details, and specifics on your exact situation.

Okay, now that that’s out of the way, let’s dive in.

The 7 Things You Should Know about Taxes and Real Estate Investing

Alright, get ready to have your mind blown (as much as the topic of taxes can blow your mind anyway).

Here are seven key concepts I think every passive investor in a real estate syndication should know about taxes:

  1. The tax code favors real estate investors.
  2. As a passive investor, you get all the same tax benefits an active investor gets.
  3. Depreciation is freaking powerful.
  4. Cost segregation is depreciation on steroids.
  5. Capital gains and depreciation recapture are things you should plan for.
  6. 1031 exchanges are amazing.
  7. Some people seek real estate investments solely for the tax benefits (like ME!).

Let’s dig in…

#1 – The tax code favors real estate investors

You may have heard that more people become millionaires through investing in real estate than through any other path.  Well believe it or not, the tax code plays a big role in that.

Governments around the world recognized the power of using the tax code to shape and guide social direction.  If you want more corn, subsidize corn.  Fewer smokers…tax tobacco.  Carrots and sticks. 

One of the primary social needs that the US government wants more of is quality, affordable housing for its inhabitants.  And the primary tool they encourage that is through awesome tax benefits for housing providers.  As such, the tax code is written to reward real estate investors for investing in real estate, maintaining those properties, and even making upgrades over time (which I’ll explain more about in a moment).

So as a real estate investor, you’re like the IRS’s golden child and they want to reward you for it.

Hey, there are worse things.

#2 – As a passive investor, you get all the same tax benefits an active investor gets

This is a big deal. This means that, even though you’re not actively fixing any toilets, plugging leaks or climbing on any roofs, you still get full tax benefits, whether you’re an active or passive investor.

This is because, as a passive investor in a real estate syndication, you invest in an entity (typically an LLC or LP) that owns the property, and the entire entity is what’s known as a disregarded entity in the eyes of the IRS (sometimes also called “pass-through entities”).

What that means is any of the tax benefits flow right through that entity, to the members of the entity, which is you – the investors.

Note: This is different for investing in REITs. With a REIT, you are investing in a company, not directly in the underlying real estate, and hence you don’t get the same tax benefits.

Common tax benefits from investing in real estate include being able to write off expenses related to the property (including things like repairs, utilities, payroll, and interest), and the biggest benefit – being able to write off the value of the property over time (this is known as depreciation).

Let’s focus in on this beautiful thing called depreciation.

#3 – Depreciation is f-ing powerful!

Depreciation is one of the most powerful wealth building tools in real estate. Period.

Depreciation is the concept that ‘things’ wear down over time.  The usage of items, like floors and doors and buildings, leads to wear and tear over time and a “theoretical” loss of value. 

Imagine going to the car dealer and buying that brand new Lambo you’ve always wanted.  You sit in the sales manager’s office and agree on the bargain price of $199,000.  Wanting to show him what a hot-shot investor you are, you whip out your checkbook, sign your John Hancock, and with the flair of an orchestra conductor you rip off that check and hand it over in exchange for the keys to your new mid-life-crisis-mobile.  Well after firing up all 12 cylinders and stalling the engine a couple of times, those tires screech off the lot and onto the pot-hole filled street.  And now that those tires have hit the street, your $199,000 purchase is worth about $145,000 on resale – and that’s before any wear-and-tear!  Depreciation baby!!

So Why the Heck is Depreciation So Magical?

Let’s use a simpler example relative to the world of business; so, let’s imagine you just bought a new laptop. On day one, that laptop works great – fast, powerful and bright. Over time, however, the keyboard gets sticky, the processor slows down, and the battery barely lasts more than a few minutes. Eventually, the whole thing will go kaput and this technological marvel will be worth very little, if anything. This is the essence of depreciation.

Essentially this is the same as with a multifamily property.  The IRS is acknowledging that, if the property is used day in and day out, and if you do nothing to improve the property, that over time, the property will succumb to natural wear and tear, and at a certain point in the future, the property will become uninhabitable (just like when that laptop eventually dies).

As you can imagine, every “thing”, or asset, has a different lifespan. You wouldn’t expect a laptop to last more than a few years. On the flip side, you would expect a house to still be standing several years, or even decades, later.

For residential real estate, the IRS allows you to write off the value of the property over 27.5 years.

Note: Only the property itself is eligible for depreciation benefits, not the land. The IRS is smart enough to realize that the land will still be there in 27.5 years and will still be worth the same, or more.

Here’s an example:

Let’s say you purchased a property for $1,000,000.  We determine the land is worth $175,000, and the building is worth $825,000.

With the most basic form of depreciation, known as straight-line depreciation, you can write off an equal amount of that $825,000 every year for 27.5 years. That means that each year, you can write off $30,000 due to depreciation ($30,000 x 27.5 years = $825,000).

The reason that this is such a big deal is this.  Imagine in that first year that you make $5,000 in cash-on-cash returns (i.e., cash flow) on that property.  Well, instead of paying taxes on that $5,000, you get to keep it, tax-free.

Wait. What?  Really?

Yes, really.*

*Disclaimer: This depends on your individual tax situation. Please consult your CPA.

That $30,000 in depreciation means that, on paper at least, you lost money, while in reality, you made $5,000.

Plus, as an additional benefit, properties acquired after September 27, 2017, are eligible for what’s called bonus depreciation, which allow owners to stack up the majority of the depreciation costs into the first year, which can really amp up the tax benefits.

This is why depreciation is f-ing powerful!

#4 – Cost segregation is depreciation on steroids

But wait, there’s more!

In the last example, we talked about something called straight-line depreciation, which allows you write off an equal amount of the value of the asset every year for 27.5 years.

But, for most of the real estate syndications we invest in, the hold time is around just five years.  So if we were to deduct an equal amount every year for 27.5 years, we’d only get five years of those benefits.  We’d be leaving the remaining 22.5 years of depreciation benefits on the table.

This is where cost segregation comes in.

Cost segregation acknowledges the fact that not every asset in the property is created equal. For example, that printer in the back office has a much shorter lifespan than the wood flooring, which has a shorter lifespan that the roof on top of the building.

In a cost segregation study, an engineer evaluates every element of a property and itemizes them, including things like electrical outlets, wiring, windows, carpeting, and fixtures.

Certain items can be depreciated on a shorter timeline – 5, 7, or 15 years – instead of over 27.5 years. This can drastically increase the depreciation benefits in those early years.

Here’s another example:

This is one based on a true story.

A few years ago, real estate syndication group purchased an apartment building in December of that year. That means that the investors only held that asset for one month of that calendar year.

However, due largely to cost segregation, the depreciation schedule was accelerated for many items that were part of the property, including things like landscaping, blinds and carpeting.

The K-1 that was sent out to investors the following spring showed that, if you had invested $100,000 in that real estate syndication, you showed a paper loss of $50,000.

That’s 50% of the original investment…just for owning the property for a single month during that tax year.

And, if you qualify as a real estate professional, that paper loss can apply to the rest of your taxes, including any taxes you owe based on your salary, side hustle, or other investment gains.*

*Again, this depends on your individual situation, so please consult your CPA.

BOOM!  Game.  Changer.

#5 – Capital gains and depreciation recapture are things you should plan for

You didn’t think that real estate investing would be 100% tax-free, did you?

Unfortunately, the IRS likes to be included in everything.

In real estate investing, the way they get their cut is through capital gains taxes when a real estate asset is sold, and sometimes, through depreciation recapture, depending on the sale price.

In a real estate syndication that holds a property for 5 years, you wouldn’t have to worry about capital gains taxes and depreciation recapture until the asset is sold in year 5.

The specific amount of capital gains and depreciation recapture depends on the length of the hold time, as well as your individual tax bracket.

Here are the brackets and percentages based on the new 2018 tax law:

  • $0 to $77,220: 0% capital gains tax
  • $77,221 to $479,000: 15% capital gains tax
  • More than $479,000: 20% capital gains tax

For more details and the most up-to-date laws and info, I recommend you discuss the specifics with your CPA.

#6 – 1031 exchanges are amazing

I mentioned above that when a real estate asset is sold, capital gains taxes (and often, depreciation recapture) are owed.  However, as with many things in the tax code, there’s a way around this.  That’s through a special arrangement called a 1031 exchange.

A 1031 exchange allows you to sell one investment property, and, as long as you reinvest within a set amount of time, swap that asset for another like-kind investment property.

Doing so means that, instead of having the profits paid out directly to you, you roll them into the next investment.  As a result, you don’t owe any capital gains when the first property is sold.

Not every real estate syndication offers a 1031 exchange as an option. Often, the majority of the investors in a syndication have to agree to a 1031 exchange to make it a possibility, as there are certain reporting requirements and restrictions that come in to play.

Unfortunately, you cannot do a 1031 exchange on just your shares in the real estate syndication.  The sponsors must decide to do a 1031 exchange on the whole shebang.  It’s all or nothing.

Every sponsor is different and approaches 1031 exchanges differently.  So if a 1031 exchange is something you’d be interested in, be sure to ask the sponsor about it directly.

#7 – Some people invest in real estate solely for the tax benefits

The tax benefits of investing in real estate are so powerful that some people (namely, wealthier investors) do so purely for the tax benefits. You see, by investing in real estate, they can take advantage of the significant write-offs, and then apply those to the other taxes they owe, thereby decreasing their overall tax bill.

This is how real estate tycoons can make millions of dollars but owe next to nothing in taxes.

It’s perfectly legal, and it’s a powerful wealth-building strategy.  As mentioned earlier, the government uses the tax code to incentivize, and real estate investors and developers are helping the government achieve it targets.  And, you don’t have to be wealthy to take advantage of the tax benefits of investing in real estate. The tax code makes the benefits of investing in real estate available to every real estate investor.


Like I mentioned at the start of this article, you don’t have to worry about taxes when investing in real estate, especially as a passive investor in a real estate syndication. In most cases, you’ll be able to make money via cash-on-cash returns, yet you won’t owe taxes on those returns due to benefits like depreciation.

To recap, here are the seven things I think every real estate investor should know about taxes:

  1. The tax code favors real estate investors.
  2. As a passive investor, you get all the tax benefits an active investor gets.
  3. Depreciation is f-ing powerful.
  4. Cost segregation is depreciation on steroids.
  5. Capital gains and depreciation recapture are things you should plan for.
  6. 1031 exchanges are amazing.
  7. Some people invest in real estate solely for the tax benefits.

As a passive investor, you don’t have to “do” anything to take advantage of the tax benefits that come with investing in real estate. That’s one of the benefits of being a passive investor. You don’t have to keep any receipts or itemize repairs. You just get that sweet form, the K-1, every year.  Hand it over to your accountant, and that’s it!  That’s why we love creating Passive Income…for life!

Be sure to sign up for the Deaton Equity Partners Passive Investor’s Group – it’s free and easy and you’ll get bonus content and access to amazing investment opportunities. 

Dissecting the Investor Summary – How to Know a Deal Is Good

Dissecting Investor Summaries

What To Look For And
How To Tell When A Deal Is “Good”

Investment summaries. 

I have yet to see one that leads with an intro “this isn’t a very good investment, but we still hope you’ll invest in it because we really like it.”  They are all packaged up with slick graphics, colorful charts and punchy lingo.  And in a world where our attention is perhaps the most valuable commodity and investment opportunities compete with one another, how could you expect anything less. 

However, given that, how are investors supposed to separate the wheat from the chaff, as they say, to take away the essential points and make an informed decision?

And while each investment summary inherently unique (some are image heavy while others more like an economics textbook), they do all target to portray the same fundamental information; and that’s where we can apply focus to pull out those essential details to see and understand the real investment opportunity.

just how are investors supposed to separate the wheat from the chaff?

So if you decide to invest because the investment summary looks pretty, you are putting yourself at risk, especially if you haven’t done proper due diligence on the deal and the team.

Likewise, if you pass on a deal because the investment summary looks like Elon Musk’s tax returns from last year and the material causes your eyes to glaze over, you might be missing out on a great opportunity.

So what exactly should you look for?  Good question.

Let’s take a look at a sample investment summary.  I’ll walk you through the thought process I go through when I first review an investment summary, so you’ll know what to look for the next time one lands in your inbox.

**Please note: For simplicity’s sake in this example, I’m assuming the summary is a very brief document, rather than a full-blown investment summary, which could be dozens of pages long.

The Investment Summary At A Glance

Even though every investment summary is different, there are some basic elements that are common across all multifamily real estate syndication investment summaries:

  • Project name (often the name of the apartment complex)
  • Photos of the property and area
  • Overview of the submarket
  • Overview of the investment
  • Details of the business plan
  • Projected returns and exit strategies
  • Detailed numbers and analyses
  • Team biographies

In a one-page executive summary, you usually get a little bit of each of these elements. It’s a first date.  If going forward, you definitely want to get the full investment summary and review all the details as well as ideally attend a webinar to have the opportunity to ask questions.

If this executive summary landed in my inbox, I’d start with a quick read-through.

In skimming this executive summary, here are the things that would jump out at me:

  • Off-market
  • Value-add
  • Reference to a track record
  • Strong submarket
  • Proven model
  • Equity multiple
  • Unit count


When an asset is acquired off-market, it means that the seller chose not to list the asset publicly. Maybe the seller didn’t want the tenants to know that the building was being sold (this is quite common). Maybe the seller needed to sell within a set timeline. Or maybe the seller already had a buyer in mind. 

Regardless, off-market is almost always a good thing. This means the deal sponsor team did not have to compete with other potential buyers on price. Thus, there’s a good chance that the purchase price is low, or at least reasonably below the market value.


A value-add investment is exactly what it sounds like – an asset that presents an opportunity to add value in some way. Maybe the rents are significantly below market rates because the previous owner hasn’t raised rents in 10 years. Maybe the kitchens & fixtures are still from the ’80s and could use some updating. Maybe there’s an opportunity to add some brand-new additional units.

Whatever the case may be, value-add means more control is in the hands of the deal sponsor team. Rather than relying solely on market appreciation, there are things they can do to create additional equity, even if the market stagnates.  This is known as forced appreciation.

One of the most common value-add scenarios is one in which the units need to be updated. Let’s say the apartments haven’t been updated in 10 years, and the current rents are $1,000 per month. Even if the team were to stay the course, that $1,000 per unit would still be able to cover the mortgage and fetch a modest profit.

But, who gets excited to make a “modest” profit?

Because there’s a chance to add value through improved living conditions, as well as increase the returns for investors, this is a true value-add. The team will go in, complete the renovations, then rent out the updated units for, let’s say, $1,200 per month.

When you add up the $200 per month increases across all 250 units, that creates so much value for all parties involved.  When residents see the updated spaces, they’re often happy to pay slightly higher rents for a nicer home and they start to take more pride in their community.  For the investors, they get to share in a tremendous amount of increased equity from those improvements.

Property values for commercial real estate are driven by income.  That extra $200 across 250 units across 12 months amounts to an additional $600,000 in revenue!  Not bad at all.  And the kicker?  That increased revenue multiplies the property value with a constant known as the cap rate.  Cap rates fluctuate by market, but even if we use one that’s very conservate, like 10% (easy math 😊), the actual increased value in the property is $6,000,000!  That’s the beauty of value-add.

Track Record

The next thing that catches my eye is, “Similar to Beta Apartments (acquired just last year and currently undergoing renovations)…” This tells me that this is not this team’s first rodeo. They’ve done this before and are currently in the trenches with another asset nearby.

I also see, in the Investment Highlights section, that they’ve started implementing their business plan at Beta Apartments and that they’re surpassing their original projections. This tells me that their business plan is working and that they would likely be able to continue to strengthen their track record through Omega Apartments.

Further, this tells me that they’ve likely built up a strong reputation in the area, amongst brokers, property managers, and other apartment owners. Otherwise, they wouldn’t have been awarded this off-market deal.

Strong Submarket

I don’t know about you, but if I’m going to invest in an apartment building, I want it to be in a growing and developing area.

The fact that this submarket is the “#1 fastest growing” within this fictional metropolitan area tells me that things are moving and shaking here. I would likely open a new browser tab and immediately google that metro area and that particular submarket, to learn more about them.

What am I looking for? Things like proximity to major employers in the area, shopping centers, decent schools, any news about developments in the area, what it looks like on Google street view, what nearby houses are selling for, and anything else I can find.

Much of this will be in the full investment summary, but it’s always a great idea to do a little independent research on your own as well.  Trust, but verify…especially when we’re talking investment amounts like these.

Proven Model

Did you catch it? “Ten units have already been updated and are achieving rent premiums of $150.”  Jackpot.

Why is this so important? This takes much of the guesswork and assumptions out of the value-add proposal. The previous owner already created the proof of concept. They updated a set amount of units, and they were able to get the higher rents.

This is great news. This means that all we have to do is go in and continue those renovations to achieve those same rental increases. To me, this signals much lower risk in a value-add opportunity.

Equity Multiple

There are certainly lots of numbers in any investment summary, and they can be overwhelming. Percentages, splits, projected returns, waterfalls…what do they all mean?

One metric I’ve come to rely on is the equity multiple. For me, the equity multiple is the real bottom line return that cuts through the other figures.  In this case, the projected equity multiple is 2.1x. This means that during the life of this project, my money will be more than doubled.

That is, if you were to invest $100,000, you would come out of this project with $210,000.

This $210,000 would include your original $100,000 investment, as well as $110,000 of profits. This $110,000 would include the quarterly cash-on-cash returns you would be getting as long as the asset is held, as well as your portion of the profits from the sale of the asset.

Typically, I look for an equity multiple around 2x over 5 years, so this one passes my test.

Unit Count

I always like to know how many units I’m investing in. In this case, Omega Apartments consists of 250 units. This is a pretty decent size. This means that the team would be able to take advantage of economies of scale (i.e., increasing efficiencies by leveraging shared resources across the many units).

I will typically look at anything above 75 units. Ideally, to maximize economies of scale, I like to see over 100 units.

Next Steps…

Now that I’ve taken the initial look through the executive summary, my immediate next step would be to decide whether or not to request the full investment summary.

In this case, I would go ahead and request the full investment summary, as this opportunity ticks off most, if not all, of the things I look for in a multifamily investment opportunity – strong team, strong submarket, opportunity to add value and a >2x equity multiple.

In the meantime, I would do some more research on both the submarket and the deal sponsor team. I would definitely google Alpha Investments and read about the core people on their team, learn about other assets in their portfolio, and see if I can find any negative reviews or stories out there about the individuals or the team.

Be Ready to Move Quickly

Once you find an investment summary that meets your investment criteria, it’s critical that you move quickly. Why? Because these opportunities fill up on a first-come, first-served basis.

Chances are, if this investment opportunity met your criteria, it likely met others’ criteria as well. In that case, you’ll want to be ready to make a soft commitment to reserve your spot, then take that additional time to review the investment summary in detail.

Pro tip: There’s no penalty for backing out of an investment down the road, so it’s to your benefit to reserve early, to ensure you get a spot in the deal. If you wait around to be 110% sure, others will have jumped in front of you in line, and you may be left on the backup list.

Request a Full Investment Summary Sample

If you’re interested in seeing a sample of a full investment summary, or to gain access to the deals in our pipeline, consider signing up for the Deaton Equity Partners Passive Investor’s Group.

We are here to support you in your investment journey and will never pressure you to invest. Our goal is to help you gain the knowledge you need to invest with confidence (whether in our deals or someone else’s), so that together, we can change the world, one investment at a time.

Passive Income…for life!

Why It’s Critical to Know Your Investing Goals

Why It's Critical to Know Your Investing Goals

Before You Invest in Your First Real Estate Syndication

Take a moment to think about the process that you used to find the home you’re currently living in.

You likely had a list, however large or small, that included a specific area, a particular school district, your desired commute, and/or the number of bedrooms you were looking for. If you were looking for a three-bedroom with a big yard for the kids to play and perhaps a pool, it’s very unlikely you would have settled for (or even looked at) a one-bedroom high-rise condo, even with an awesome view.

Well, it’s the same type of situation when you’re investing in real estate. Before you even begin to consider potential investment opportunities, it’s critical you know WHY you’re investing and WHAT you’re expecting to get out of it.

Without clear goals, you can easily be tempted by slick, marketing photos and well-polished investor presentations that don’t actually align with your investing goals.  Or even paralyzed by the overwhelming amount of investing options out there.

Let’s walk through a couple of examples and see if one resonates with you. With clear goals in mind, you’ll know just what to do when the right investment opportunity comes along.

Before you even begin to consider potential investment opportunities, it’s critical you know WHY you’re investing and WHAT you’re expecting to get out of it.


Investing Goal Example #1:


Investing for Cash Flow


Brian is a family man who works a corporate job full-time. While the income is great, the meetings, commute, travel and other daily (and nightly!) hassles dominate his time and takes him away from his fair share of opportunities with family and friends.

Brian wants to create and initial passive income steam of about $4,000 per month, which will help cover most of the family’s current expenses and that would give him the freedom to quit his job down the road. Finding investments that will provide steady cash flow now could eventually replace his income and allow him to be fully present with the wife and kids and enjoy a great lifestyle now.

If Brian requires $48,000 per year ($4,000 per month), he’d need to invest roughly $600,000 if expected returns are in the 8% range.

$600,000 invested x 8% cash flow returns

= $48,000 in passive income per year

With this knowledge and these numbers in mind, Brian should focus on cash flow first and foremost. That means that any investments with lower projected cash flow returns should automatically be discarded, and any opportunities reflecting 8% or higher should really command his attention.


Investing Goal Example #2:


Investing for Appreciation


Jesse, meanwhile, is single with no children, has excellent cash flow, isn’t necessarily interested in quitting his full-time job, and is more interested in potential appreciation.

He’s seen how property values have experienced huge upswings, and he loves the idea of investing in hidden gems or that are in growth areas like Austin, San Antonio or even Des Moines, Iowa. He’s aware of the higher risk and the longer amount of time he’ll have to wait until payout, but he’s okay with that since his current cash flow position is strong with a decent income and low expenses.

Even if his investment doesn’t appreciate as much as expected, that’s alright with him. He’s more interested in the “chance” that it might.

Common investment advice is that these types of investments are riskier and that you should always invest for cash flow. However, there are investors with a higher risk tolerance who will voluntarily take on the risk for the possibility of appreciation.

In this case, Jesse is aware of the pros and cons, knows that there are winners and losers in this game, and looks for deeply distressed deals in growing markets to increase his chance for high returns.


The Hybrid:


Investing for Cash Flow AND




But what if you didn’t really feel comfortable in either Brian’s or Jesse’s shoes, that’s okay! That just means you’re among the majority and that you’d like a mix of cash flow AND appreciation.

Hybrid investments that provide some cash flow throughout the project in addition to the potential for appreciation do exist! There are a lot of real estate investments out there located in markets with healthy appreciation (think Texas, the midwest, and even the southeast) and that present solid, value-add opportunities to ‘force’ additional appreciation.

Don’t be afraid to seek that sweet spot – where you get ongoing cash flow to cover living expenses, plus the potential for appreciation later on in the project. In many of the multifamily syndications we sponsor, investors easily achieve >8% cash flow on an annual basis and then also enjoy 150% to 200% return on your investment over 5 years.  So put $250,000 in just one of these deals and the hybrid investor receives ~$25,000/year in cash flow as well as another $125,000 in appreciation.  That’s a 20% average annualized return on your investment! Cha-ching!!



Know Your Goals!


Investment summaries and presentations for real estate syndication opportunities are purposely made to attract your attention with colorful graphics, nice charts and beautiful photos, which is exactly why it’s important to know your purpose for investing in the first place. You have to train yourself to see past the surface and understand the bones of the deal and your expected returns.

When a deal does come along that aligns with your goals, you’ll be able to confidently flip past those gorgeous pictures, focus on the numbers, act confidently & quickly, and start enjoy your returns…without second-guessing yourself.

Be sure to sign up for our newsletter and join the Deaton Equity Partners Passive Investor’s Group where we share even more education, investment opportunities and help you generate Passive Income…for life!

Redefining Retirement


If You Could Retire Today…Would You?

Tune in to a little sports on the weekend, maybe one of the golf majors, and you’ll quickly be inundated with commercials showing you glamorous couples in love and enjoying their golden years.  Ahh retirement.  Promises of travel, relaxation, hobbies and all the ways you’ll love spending that nest egg down the road.  Well, maybe way down the road.  Plenty of time to get there, right?  The 401k is doing ok.  At least it was the last time you checked.

Maybe later next week you can set aside some time to review your investments and see what retirement looks like.  It’s certainly not urgent.  After all, retirement is decades down the road, so why think about it right now? 

What we need to think about is getting that weekly report in tonight, or pulling together that information for the CPA, or hanging that new light fixture the wife wants installed.  Or if there’s any time, maybe we think about mowing the yard.  But…there probably won’t be any extra time.

Sound familiar?

Retirement is a daunting concept. It’s that massive stage of life looming out there. We don’t know where we’ll be or what we’ll be doing when we reach retirement, but we sure get shown lots of pictures of happy people playing golf and lounging by the beach and driving along the coast. So, maybe that’s what retirement is all about.

Maybe you feel a little guilt for not doing more to plan for retirement, yet it’s so far in the future, and such an overwhelming task, that it’s always something to put off till tomorrow, or the weekend, or next month. One of these days, you’ll have it all figured out, you’re sure of it. Maybe once you hit middle age, or once you at least pay off your kids’ college tuitions.

But stop right there. Nothing deserves the right to make you feel guilty about your life, not even your retirement.

So instead, let’s flip this whole thing on its head. Let’s reframe the entire concept of retirement.

Retirement 1.0

Traditionally, retirement has been a stage of life that comes near the end, once your kids are grown and out of the house, and once you’re too old to keep working. By that time, you’ll have poured over forty years of your life into a career. Your paychecks will likely have paid for your home, cars, some nice vacations and good educations for the kiddos.

Along the way, you’ve saved, let’s say, ten percent of your income every year, to put toward retirement planning.

By the time you reach retirement, you’re supposed to have saved enough to stop working and live off your savings for the rest of your life.  How long will that be exactly?

What If You Run out of Money?

What happens if you inherited the longevity gene from your great aunt Mary, and you live to be over one hundred years old? That’s potentially another thirty-five years after retirement!

Even if you have enough to last through the end, that amount will likely be much smaller than the amount you started with when you entered retirement, because you’ll be spending your savings during that time. There will be very little, if any, additional income coming in during your retirement.

Rather than accumulate more money, the typical goal of retirement is simply to enjoy your life, while not running out of money.

But this is, in fact, one of the most common fears about retirement. People worry that they’ll run out of money before they run out of life.  They’ll have to spend even more time working and earning and missing out on those rounds of golf with buddies.

And this fear makes total sense, when you think about retirement in the frame of this traditional model.

Rethinking Retirement 1.0

Let’s examine this from another angle. You know that cautionary tale about the squirrel who stores up acorns for winter? While his friends play all day, the squirrel works hard all spring, summer, and fall to store up enough acorns to last through the winter.

When winter comes, the squirrel can relax and enjoy the acorns he’s worked so hard to store up, while his friends, who didn’t think ahead, go hungry.

This is essentially the model of retirement we’ve all been taught. Save first, then spend.

But what if winter lasts longer than the squirrel had anticipated? Then the squirrel has to go back out to scrounge for food, even in the dead of winter.

What if, instead of spending all that time gathering acorns himself, the squirrel had devised ways for the acorns to accumulate automatically? (Don’t get caught up on the practicality of this hypothetical situation, just humor me for a minute.) Then, he could play with his friends during the best seasons of the year, have enough to last all winter, and potentially end the winter with more than he started.

This is the model of retirement I’d like to explore. Let’s call it Retirement 2.0.

Retirement 2.0
For a moment, let’s set aside the traditional model of retirement we’ve all been taught and reimagine retirement as it should be.

What if . . . we didn’t have to wait until the end of our lives for retirement?

What if . . . retirement could be something we could enjoy right now?

What if . . . we could be retired AND still continue working, but do what we love, not merely what we have to do?

What if . . . retirement wasn’t merely a stage of life but rather, a state of mind?

Now, this seems like a model of retirement that’s worth spending time on. This seems like a retirement that’s exciting, rather than daunting. This is a model of retirement I could get behind and enjoy spending time creating…instead that weekly report.

In order for this model of retirement to work, you have to imagine that you could find a way to generate income without you having to do anything (i.e., passive income).  You find ways to put your money to work – working for you and your family.

This additional income would cover your living expenses, or perhaps even more, making it possible for you to quit your job and start a new adventure, or continue working your job, but with the mindset that you get to do it, rather than have to do it.

Retirement 2.0 is not a stage of life that comes at the end, a last hurrah. Rather, it’s an ongoing part of your life. Retirement 2.0 allows you to replace your active income (from working your job) with passive income (that you make even while you sleep), so that you get to live the life you’ve always wanted, while your kids are still young, while you’ve still got your health, and while you can really enjoy the essence of life.

And not only that, Retirement 2.0 allows you to create a cash-flowing engine for ongoing income and wealth accumulation, so that, regardless of what you do, you’re generating income for your family. That way, at the tail end of your life, you’re continuing to generate more income, rather than worrying about spending it all.

But, of course, Retirement 2.0 is not easy to achieve. It requires work, ingenuity, and courage. It requires you to think outside the box, to hustle, and to dare to create your own path.

Retirement 2.0 is certainly not for everyone.

But if you’re ready to take life by the horns and to make retirement an active part of your life, read on, to learn about how to make Retirement 2.0 a reality.

Achieving Retirement 2.0

Retirement 2.0 requires you to think outside the box, challenge the conventional wisdom you’ve been brought up with, and try new things in an effort to achieve financial freedom.

Start by working backwards from the amount of money you need to live each month.

This is your freedom number.

Your mission now is to discover ways to generate this amount of money passively each month. The keyword here is passive. You’re not looking for another job to replace your current one. That’s called a career change, not retirement.

What you’re looking for are ways to generate income while you sleep.

If you haven’t done this before, it can seem like a completely foreign concept. Generate income while I sleep? That sounds like something right out of a late-night infomercial.

But believe me, once you get the hang of it, it’ll open up a world of possibilities you never even knew existed.

There are countless ways to generate passive income. Some people write books, some people create online courses and businesses, …and some people invest in real estate.

It is, of course, the last of those that has brought us to where we are, and Deaton Equity Partners to where it is – helping others create Passive Income. For life!

Through investing in real estate, we generate income while we play!

Regardless of what we do that month – working overtime or hiking in the Rockies – that distribution check comes in regularly, like clockwork.  My fish keep piling up, and I don’t even need my fishing pole anymore.

Each piece of real estate I’ve invested in generates income on my behalf and contributes to my freedom number.

As long as I hold the real estate, it continues to generate income.  It’s money coming in each month, rather than money going out, which makes it possible for retirement to be part of my life now, rather than down the road.

To Retirement, and Beyond!

As I mentioned, there are many, many ways to generate passive income. It can be difficult to take that initial leap, to think outside the box, and to get started.

But once you do, that little passive income snowball will keep getting bigger and bigger, and soon, you’ll spend all your time on your retirement, and no time at all weekly reports.

If you’re interested in leveraging passive real estate investments on your journey to your Retirement 2.0, a great place to start is by joining the Deaton Equity Partners Passive Investor’s Group.  We provide additional resources and investment opportunities to accelerate your retirement and get you living your best life now.

Here’s to retirement!

Which Investor Type Are You

The Beginner’s Guide to Investing In Real Estate Part 2

Which Types Are Best for You?

There are TONS of ways in which to get started investing in real estate. Everything from crowdfunding sites to residential real estate fix and flips to commercial storage units and office buildings are at your fingertips if you know where to look.

This is also why, as a beginner in the whole wide world of real estate investing, you might feel overwhelmed. However, with a little guidance, you’ll be able to narrow down which types of investments suit your lifestyle, financial goals, and personality best.

In our last article, The Beginner’s Guide to Investing in Real Estate: How to Get Started, we walked through gaining a macro-view of your current life situation, determining your why, deciding how hands-on you desire to be, assessing your risk tolerance, and even learning how much money you’re ready to invest.

Ultimately, it’s likely that, after slogging through those six soul-searching steps, you fall into one of the groups below.

You Likely Fall Into 1

of These Categories


  • The Lots of Money / Little Time / Hands-off Investor
  • The Little Money / Little Time / Hands-off Investor
  • The Little Money / Plenty of Time / Hands-on Investor
  • The Lots of Money / Plenty of Time / Hands-on Investor

Ready to learn which investments fit each type of investor?

Let’s go!

The Lots of Money / Little Time / Hands-off Investor


If you’re someone who fits predominantly into this category, it’s likely you’ve been saving a while or investing in the stock market since the day you received your first paycheck. It’s also possible that the tax breaks, passive income, and potential positive impact your real estate investments can make on a community are attracting your attention.

However, you’re a very busy individual – maybe with a family or in the prime of your career or both! You haven’t got the time to research neighborhoods and markets or tour properties, much less to actively renovate or manage a property.

–> Recommendation: Become a Passive Investor

For investors with the money to invest but not enough time on their hands to manage the property and get the maximum returns, passive real estate investments are the ticket. You can invest passively through turnkey rental properties or commercial real estate syndications.

Turnkey Rental Properties

Turnkey rental properties are smaller scale and as simple as they sound. You purchase a to-be rental property, ready to go, with minimal involvement or work needed. It’s even possible to hire a small scale property manager and you can enjoy some cash flow, albeit usually small, very quickly.

Commercial Real Estate Syndications

Another opportunity lies in group investments where money is pooled together to buy a large piece of commercial real estate property – a.k.a. a syndication.

Syndicators do all heavy lifting from the research and analyzing markets to meeting brokers, hiring contractors, overseeing the business plan, communications and much more. They find commercial real estate properties they think would be an awesome investment and then orchestrate the deal, the renovations, operations of the property, and usually a few years down the road, the sale of the property.

This is where investors like you come in. You rely on the syndicators’ time, expertise, and partnership team. Meanwhile, your money is invested, and every quarter you receive a distribution check – your portion of the returns earned on the asset. Plus, when the property sells after the hold period, you receive a part of the sale’s profits.

Overview of These Types of Real Estate Investments

What you put in
Investment dollars

What you leverage
Other people’s time and expertise

What you get
Ongoing passive income, confidence knowing your money is being put to good use by an experienced team, tremendous tax advantages and an equity stake in real estate.

The Little Money / Little Time / Hands-off Investor

In contrast, if you don’t have a large pool of money or time to spend investing in real estate (yet!), but are attracted to real estate as a way to build such wealth, there are options for you too!

One of the best ways to get started investing in real estate with little capital is using crowdfunding sites.  Another clever way is to find some friends or family and pool your money into a larger sum in an LLC created to invest in a property.

–> Recommendation: Invest through a real estate crowdfunding site

Just as Kickstarter funds new products, there are real estate crowdfunding sites where people can pitch in low amounts of capital toward commercial real estate projects. The difference? Crowdfunded commercial real estate pays cash dividends instead of t-shirts and sneak peeks of the product’s prototype.

Real estate crowdfunding sites are open to public use, typically have low initial investment requirements, and are available to both accredited and non-accredited investors.

Overview of These Types of Real Estate Investments

What you put in
Your money (in small amounts)

What you leverage
Crowdfunding platforms, experienced deal sponsors, strength in numbers (i.e., lots of people all putting in small amounts of money)

What you get
A variety of choices on crowdfunding platforms and real estate projects, ability to invest with very little capital, various project types and project lengths to suit your investment goals


The Little Money / Lots of Time / Hands-on Investor

So, you’re interested in real estate, but cash isn’t exactly “flowing” in your life right now. That’s okay, because if you’re willing to roll up your sleeves, there are still ways you can make your first investment in real estate.

You still have something of value to bring to the table – sweat equity. This means you’re willing to spend the time and effort to find properties, devour the paperwork, rehab the property (maybe personally), and make your passion for real estate become create cash.

Your Strengths, Interests, and Goals

If the above describes you, take a moment to identify your strengths and passions. Does the thrill of hunting for deals interest you the most? Is the renovation planning and execution process exciting to you? Maybe you’re a numbers nerd and can’t wait to analyze the trends and markets of each neighborhood?

Additionally, what are you in it for? Long term equity or short-term capital?

Here are some of the most common ways you can invest in real estate with little money and lots of time.

–> Recommended Real Estate Investment Strategies

1) Fix and Flips

This is where you buy a run-down piece of property, fix it up, and then sell it for a profit – just like it sounds! Fix it.  Flip it.  If you don’t have cash for a down payment, short-term private loans might be an option. You just need a few months to a year or complete the renovations. Then when the property sells, you pay off your loans and pocket the profits.

2) The BRRRR Strategy

I hate to break it to you, but no, BRRRR doesn’t mean it’s cold in here. BRRRR stands for buy, renovate, rent, refinance, and repeat. It’s a lot like the fix and flip strategy except that you hold onto the asset for a longer term.

If you took out a private loan to cover the down payment, you pay off that loan during the refinance step of the process. If done correctly, the value of the property after renovations/repairs will be significantly higher than the purchase price. This abrupt upward appreciation will allow you to do a cash-out refinance and pay off any loans you took to buy the property.

3) Wholesaling

If you’re a good networker and are able to find “off-market” deals, you may be able to get a property under contract at a low price. Then, while under contract and before the purchase is complete, you wholesale it to another buyer at a higher price. The difference between the two purchase prices goes in your pocket.

4) House Hacking

Depending on your local market, you may be able to get your foot in the proverbial real estate door via house hacking. This is where you buy a property with 2-4 units, you live in one of them, and you rent out the other units. The rental income received from other tenants pays your mortgage. Sweet!

5) Real Estate Crowdfunding Sites

Crowdfunding sites are a great place to start learning about real estate syndications without the pressure of running one (yet!). You can learn to find and compare deals, research sponsor teams’ track records, and learn what to expect in a syndication deal as far as communication and returns for investors.

Overview of These Types of Real Estate Investments

What you put in
Your time

What you leverage
Other people’s money

What you get
Firsthand experience, potential for high returns on very little cash investment

The Lots of Money / Lots of Time / Hands-on Investor

Um, can we be best friends? 😊

You’re in a fantastic position to make your money grow exponentially.

–> Recommendation: Lead commercial real estate syndications

If you’d like to be an active investor, leading your own syndications puts you in the driver’s seat. You get to find the deals, assemble the team, raise the capital, and have a say in the day-to-day operations. The choice is yours to go it alone as the syndication lead or to partner with others and create a syndication business.

–> Recommendation: Become a passive investor in commercial real estate syndications

You also have the option to be a passive investor who’s extremely active in finding and vetting deals for real estate syndicators or private equity firms.

Savvy passive investors know the lingo and have some basics down about deal structures and underwriting. Any investment can look great in a fancy marketing packet, but only savvy investors will know the right questions to ask and be able to reveal details about the deal and the team.

Overview of These Types of Real Estate Investments

What you put in
Your money and your time

What you leverage
The power of others’ expertise, time, and money to help you go bigger, faster

What you get
The freedom to carve your own path and maximize how hard your money is working for you





This article just threw a ton of information at you, and even though it was separated into categories, an overview might do you some good.

Before reading this, we hope you took some time to identify your investing goals, your current life stage, your risk tolerance, and your investing goals, as outlined in The Beginner’s Guide to Investing In Real Estate: How to Get Started.

From there, it’s likely you fell into one of four categories. Within each group, beginner investors have multiple opportunities to get started on their real estate investment journey. Our suggestions for real estate investment opportunities per investor-type are as follows:

The Lots of Money / Little Time / Hands-off Investor

Consider investing passively in commercial real estate syndications

The Little Money / Little Time / Hands-off Investor

Consider investing small amounts through real estate crowdfunding sites

The Little Money / Lots of Time / Hands-on Investor

Lots of options: Fix and flip, BRRRR method, wholesaling, house hacking, crowdfunding, and more

The Lots of money / Lots of time / Hands-on Investor

Active: Consider leading your own commercial real estate syndication

Passive: Invest through real estate crowdfunding sites or directly through syndicators and private equity firms




All in all, there are real estate investment opportunities for every type of investor, at every stage of life, with any range of available capital and time freedom. Once you’re able to identify which investor type you are at this time in your life, you can see the opportunities within that category and how they make sense for you.

One common misconception is that you need a decent amount of capital saved up in order to get started investing in real estate. The options presented above, coupled with The Little Money investor type, debunked that myth!

Now, I encourage you, don’t wait a minute longer. Get started toward becoming a real estate investor by taking action on one of the passive or active investment opportunities described above, according to the category in which you best fit.

We look forward to chatting with you in the near future about our syndication opportunities. It’s a fabulous way to create Passive Income…for life!


In addition to the ideas just presented, you can amplify your journey with the following resources: 

  • EXPLORE more about the power of passive real estate investments in our section of other blogs and videos.
  • SIGN UP for our newsletter for passive income-related content delivered right to your inbox
  • JOIN our Passive Income Investors Group to gain access to multifamily investment opportunities and more behind the scenes content

5 Things Every New Investor Should Do Before Investing In Their First Real Estate Syndication

5 Must-Do Actions

– For The New Investor –

When you first begin considering real estate syndication as an investment option, it can feel intimidating, overwhelming, or like that first day on the new job.

I personally experienced fears around investing in a real estate investment property I’d never seen; had concerns about how I’d get my money back; and fought with doubts around the inability to log into an account and even see my “money”.

I addressed my fears head-on through research and education. Every article I read, podcast episode I listened to and each conversation I had, built up my confidence until I felt ready for action.

If you’re considering your first real estate syndication and feeling hesitant, I recommend taking time and action to do research, connect with other real estate investors, read through previous deals, and build up your knowledge base.  With education comes confidence! 

In addition to our amazing content, here are a few of our favorite resources to help you on your journey…

Do Your Homework


The best way to build your real estate investing confidence is through self-education and research. Listen to podcasts, read books, and find websites on real estate.


Rich Dad, Poor Dad, by Robert Kiyosaki – without a doubt this classic was fundamental in our mindset shift to making our money work for us with cash-flowing assets. A must-read!!

Tax-Free Wealth, by Tom Wheelwright – Tom is Robert Kiyosaki’s CPA and has an incredible wealth of knowledge about how to maximize your investments with the ultimate goal of reducing or eliminating your tax liability.

ABC’s of Real Estate Investing, by Ken McElroy – more of a behind the scenes look at finding, acquiring and running syndications, Ken delivers a great overview of the multifamily syndication process from the active partner’s perspective.

YouTube Channels We Love:

  • Ken McElroy
  • Bigger Pockets
  • Graham Stephan


  • BiggerPockets Podcast – seemingly endless episodes across a wide variety of topics
  • Best Real Estate Investing Advice Ever with Joe Fairless – an insane amount of content from one of the biggest in the business
  • The Real Estate Radio Guys – these guys have been focused on real estate investing for about 15 years and have some great content

Ask Questions

You can find amazing, relevant Facebook groups and also forums like BiggerPockets can help answer questions…and even help you learn what questions you should be asking!

It’s likely that other real estate investors have asked about your same concerns and, just by reading through the forum’s questions and answers, you’ll gain clarity.

Remember there are no dumb questions and that you have the right to be diligent about gathering answers to your concerns.

Connect with Other Real Estate Investors

It’s a common refrain to hear that real estate investing is a team sport. And every successful real estate investor needs a supportive community.  Considering that a syndication is literally a group real estate investment, you’ll want to network with other like-minded investors.

New investors will share similar anxieties, questions, confusion, and excitement. Experienced real estate investors can provide invaluable firsthand accounts of their experience with various projects, including apartment complex investments, and sponsors.

Find other investors through online forums like BiggerPockets, local networking events, meetups, or by asking sponsors of other syndications if they’ll connect you to their current real estate investors.

Review Previous Real Estate Deals

Finding comfort with financial projections, summary data, and real estate investment lingo may feel overwhelming.

A great way to help understand the language and how investments play out is to review other investment summaries.  You’ll start to understand the flow of the deal packages, how each sponsor communicates, and exactly which real estate investments interest you.

Take Your Time…But Be Ready!

Simply due to the nature of the process, multifamily syndications usually have a limited time between becoming an official, approved deal and closing the deal.  As a result, each new real estate investment opportunity will fill up quickly. This can make new real estate investors anxious from the small window to decide and at the same time panic from fear they are missing the best deals. 

Stay calm.  Remember, there will always be another high-return investment opportunity.

Allow yourself time to complete the steps laid out here, so that when you make your real estate syndication choice, you are confident about the investment information provided.

Considering Everything…

If you take nothing else from this article, remember it’s completely normal to feel skeptical, anxious, and even timid when making your first real estate syndication commitment.

The ability to take action is what separates the successful from those who give up.

Your first real estate syndication deal is a huge milestone in your investing journey, and even though your head might be spinning now, this is a time to savor taking steps to control your future.

It is absolutely life-changing when you start generating Passive Income…for life!

In addition to the ideas just presented, you can amplify your journey with the following resources: 

  • EXPLORE more about the power of passive real estate investments in our section of other blogs and videos.
  • SIGN UP for our newsletter for passive income-related content delivered right to your inbox
  • JOIN our Passive Income Investors Group to gain access to multifamily investment opportunities and more behind the scenes content

Real Estate Syndication Investing 101

What the #@%& is a Multifamily Syndication?

– And How Does It Work? –

Many real estate investors “get their feet wet” through some form of residential real estate. Whether those initial investments are flips, standard rental homes, or even duplexes, it can be a great way to start and has served many real estate investors very, very well. In the course of our journey, we’ve discovered and absolutely love the power of multifamily syndications.  However, whenever we speak to many of our friends, family and colleagues, they may have only vaguely heard of multifamily syndications…or not at all – nothing but blank stares.

Actually, that’s pretty common. Until somewhat recently, SEC (Securities Exchange Commission) regulations did not allow for real estate syndication opportunities to be publicly advertised. This made it so that you had to be part of the “inner circle” (i.e., you had to know someone who was doing a deal) in order to invest in one. The intent of the regulation was, and is, to protect unsuspecting and ill-informed potential investors from getting involved in investments they don’t fully understand.

The SEC now however allows certain opportunities to be shared more broadly, with caveats, which opens the door for more people to learn about and invest in alternative investments, like multifamily syndications, which are actually quite common and well-structured.

But maybe you’re unfamiliar with multifamily syndications too, and are wondering things like:

  • What exactly is a real estate syndication?
  • How does a real estate syndication work?
  • Why would I invest in a syndication deal?
  • What would an example real estate syndication look like?
  • What are the risks and benefits?

Well, let’s take a look under the hood…

Multifamily Real Estate Syndications – WTH Are They!


Let’s start with the basics.

  • A multifamily property is, well…exactly as it sounds – a property that can house multiple families. They are like an apartment, 4-plex, or a grouping of housing units.
  • And a syndication simply means a group of people (or entities) that pool resources together.

So a multifamily real estate syndication is when a group of people pool their resources (funds, time and expertise) together to invest in a multifamily asset. Instead of buying a bunch of small properties, each individually, the group of people come together and buy a larger asset, and typically share in a larger return while de-risking the overall investment.

Let’s pretend you have $50,000 for investing, beyond other savings and retirement funds. You could invest it in an individual rental property, but that would also require time to find a property, evaluate the cost-benefit analysis, negotiate the contract, do the inspections, get the loan, find the tenants and then manage the property.

But it’s likely you don’t have the time or energy (or desire!) to deal with so many obligations. This is where most people assume real estate investing is too hard and too much work, so they stop there.

Real estate syndications are the alternative that allows you to still put your money into real estate without having to actively do the work of finding or managing the property yourself. Instead, you can invest that $50,000 into a real estate syndication as a passive investor. So you contribute $50,000, maybe a friend has another $50,000 to invest, someone else puts in $100,000, along with others until you’ve raised what’s needed to close on the property.

By pooling resources, the group now has enough to buy not just a single rental property, but something bigger, like an apartment building. And as a passive investor you don’t have to do any of the work managing the property. A lead syndicator or sponsor team does the upfront work and manages the investment (i.e. all the active work) and in return, they get a small share of the profits. Additionally, a professional property management company can be hired to run the day-to-day operations. And you, the passive investor, enjoy putting your money to work to generate nice, stable returns so that you can focus your time and energy on the things you really want to do. 

When done right, real estate syndications are a win-win for everyone involved.


So How Does A Syndication Deal Work?

Ok, curiosity piqued, you’re interested in the “behind the scenes” details of a syndication to see how this all really shakes out.

First off, there are two main categories of investors who come together to form a real estate syndication:

  1. the active investor(s), aka the general partners (GP’s), and
  2. the passive investors, or the limited partner (LP’s)

The prior section described a team that would take care of all day-to-day management (so you don’t have to!) in exchange for a small share of the profits. That team is called the general partners (GPs). They are called the ‘active partners’ and do all the legwork of finding and vetting the property; creating the business plan; securing lender financing; putting up initial “at-risk” funds necessary to close; securing other investors for the down payment & equity; and managing the investment after closing and thereafter, until any subsequent sale. Essentially, they do the work that you would be doing as the owner and landlord of a rental property, but on a massive scale.

The limited partners (LPs) are the passive investors (others like you), who invest their money into the deal in exchange for a portion of the cash flow and/or a percentage of the asset. The limited partners have no active responsibilities in managing the asset.

A real estate syndication is designed to work best when general partners and limited partners join together and collaborate in this manner. The general partners find a great deal and put together an efficient team to execute on the intended business plan. And the limited partners invest their personal capital into the deal, which makes it possible to raise the down payment, acquire the property, and fund the renovations.

Together, the general partners and limited partners form an entity (usually an LLC), and that entity holds the underlying asset. This serves to protect the partners and investors from personal liability and formally organize the structure and responsibilities of each of the partners, along with expected compensation. Because the LLC is a pass-through entity, you also get to share in the tax benefits of direct ownership of a real estate asset.

Once the deal closes, the general partners work closely with the property management team to improve the property according to the business plan, with the intent of increasing business revenue and compounding the property’s overall value.  During this time, the limited partner investors receive regular communications as to the performance of the investment and ongoing cash flow distribution checks (usually sent out quarterly).

Depending on the business plan and strategy (such as planned renovations, improved operations or simply maintaining smooth operations), there may be refinancing events and/or a planned sale of the property. A refinancing event is similar to a home equity refinancing to leverage increased value and/or better loan terms and generates a return of capital distribution to the investors.  And the sale of a property is most often exercised to capitalize on improved property value, which also returns equity to the investors.  When these events take place, even larger payouts are distributed among the partners. And in the case of the sale of an asset, the partnership is then dissolved and team members can work to find yet another great deal.

Why Should You Invest In A Syndication?

Okay, now that you understand the basics of how real estate syndications work, let’s talk about what’s in it for you, the passive investor. There are a number of reasons that passive investors decide to invest in real estate syndications.

Here are a few of the top reasons:

  • You want to invest in real estate but don’t have the time or interest in being a landlord
  • You want to invest in physical assets (as opposed to paper assets, like stocks), which is a great way to diversify and hedge against inflation
  • You want to invest in something that’s historically been more stable than the stock market
  • You want transparency in how your investment dollars are invested and any fees that may be charged
  • You want the tax benefits that come with investing in real estate
  • You want to receive regular cash flow
  • You want to invest with your retirement funds
  • You want your money to make a difference in local communities

A real estate syndication is a nearly perfect way that a busy professional can invest in large-scale, physical real estate assets, without the commitment of time or excessive mental energy, while also positively impacting the community and earning interest and tax benefits. This opportunity for passive income is sounding better and better!

Let’s Look At An Example Real Estate Syndication:

Okay, so you’re interested, but you’re still like, “Is this real?” Here’s an example of what a real estate syndication deal would look like.

Let’s say that Jane and John are working together to find an apartment community in Dallas, Texas. Jane lives in Dallas, so she works with real estate brokers in the area to find a great property that meets their criteria. After looking at a bunch of properties, they find one, listed at $10 million.

John takes the lead on the underwriting (a fancy term that means analyzing all the variables, costs and benefits to make sure that the deal will be profitable), and they determine that this property has a ton of potential. Greenlight!

Since Jane and John don’t have enough money to purchase the $10-million property themselves (approximately $3-million upfront costs), they decide to put together a real estate syndication to purchase the property. They create the business plan and investment summary for prospective investors and work with a syndication attorney to structure the deal.

Then, they start looking for limited partners (passive investors) who want to invest money into the deal. Each passive investor invests a minimum of $50,000 until they have enough to cover the down payment, closing costs, as well as the cost of any planned renovations and a safety net to support the transition of operations.

Once the deal closes, Jane works closely with the selected property management team to improve the property and get the renovations done on budget and on schedule.

During this time, Jane and John send out monthly updates, as well as quarterly cash flow distribution checks, to their passive investors.

When the renovations are complete, Jane and John determine that it’s a perfect time to sell and the property sells for $15 million after just 3 years. Each passive investor receives their original capital investment PLUS their split of the profits according to the original deal. In this case, a 70/30 split was agreed upon at the creation of the syndication (70% to investors, 30% to the Jane and John).

At this point, each passive investor has received regular cashflow distribution checks during the renovation and hold period, plus their initial capital investment back once the property sold, plus their portion of the profit split after the sale…a pretty sweet deal for little-to-no work!

In Conclusion

Now that you know the ins-and-outs of a real estate syndication, including what it is, how it works, how little effort on your part it requires, and how simple it could be to begin receiving your first passive income check, definitely don’t wait 10 years to make a move.

We always recommend doing your research until you’re comfortable with how investments work in general as well as any specific investment strategies. Now that you’re armed with this knowledge about real estate syndications though, you’re miles ahead of most other investors. Keep at it!  Investing in real estate has given us a huge degree of personal and financial freedom in our lives and we hope you find it just as beneficial, if not even more so!  As we love to say…passive income. For Life!

And here are a few ways you can continue taking action to take back your time:

  • EXPLORE more about the power of passive real estate investments in our section of other blogs and videos.
  • SIGN UP for our newsletter for passive income related content delivered right to your inbox
  • JOIN our Passive Income Investors Group to gain access to multifamily investment opportunities and more behind the scenes content

Quit! Trading Your Time for Money

Stop Trading Your Time for Money

– And Start Creating Passive Income –

Take a brief moment with me and imagine this…

You wake up on a normal workday morning and, checking your emails as you so often do first thing every morning, you notice an impromptu meeting with the boss has been scheduled for early this morning. After quickly getting ready for your day, you commute to the office (whether you drive in or log on from the home office). Popping into the boss’s meeting room, you notice HR is present. Uh-oh you think, as your stomach flips. That’s not usually a great sign.

Within the first couple of sentences, you hear the words “we have to let you go”.  Your blood rushes to your ears and anything said after that is lost. You’ve just been laid off. If you’re lucky, maybe there’s a couple of months of severance pay. Otherwise, that’s the last paycheck for a while.

“But we just upgraded the lease on our cars. What about the kids? Christmas? Health insurance? Ugh. Why haven’t we been saving more. How am I going to break this to my wife?”

This situation plays out all too often.

The rich don’t work for money. They make their money work for them. – Robert Kiyosak

Now let’s imagine an alternative scenario – one in which you’ve been leveraging your money…   

Over the last couple of years you’ve regularly put aside some of your paycheck, as well as taking a nice portion of those bonuses that have come in, and invested passively in real estate. Those investments have built up into an envious and steady income stream and you’ve even reinvested most of the returns and a couple of the larger cash distributions from refinancing events into additional real estate deals – compounding your gains. 

Ironically enough, of late you’ve actually been considering submitting your notice to the boss in order to spend more time with the family while the kids are still around and to work on that passion project that you’ve been dreaming of for what seems like ages now. This is just the nudge you’ve needed – a relief!  And you’ll even come out with some severance to fund the latest real estate deal you’ve been analyzing.  This day couldn’t get much better!  Time to call the wife and invite her to a celebratory lunch!

The three Types of Income


Active Income: is a wage from your employer and requires your activity in exchange for money.  When you stop, the income stops. Time for Money.

Residual Income: means you receive money after the work is done. For example, an author invests time upfront into a book and then receives residual income on the subsequent sales.

Passive Income: is earned with very little effort and continues flowing even when you aren’t working. Real estate investments are one of the most stable and high-returning sources of passive income.

Now remember the job loss scenario? In that scenario where you’ve built passive income on the side, although you lose your active salary, you still have income.

Social norms guide most people into active income jobs where they get stuck trading their time for money. Wealthy people implement a different approach.  They don’t trade their time for money.  They have learned to make their money work for them!

Financial freedom is achieved when your earned passive income allows you to live without relying on your active income.


Historically, the stock market returns about 8% annually, which means $100,000 would produce roughly $8,000 per year. That’s only $667 per month.

To replace an income of $3,000 per month, you’d need $36,000 per year, which would be 8% of $450,000.

However, with real estate, $100,000 could buy a $400,000 rental home. How? Through leverage.

Leverage means the bank brings $300,000 to the table.

You put in 25%, the bank puts in 75%, and you earn 100% of the profits.

A $400,000 home renting for $3,600 with a mortgage of $2,100 would net you $1,500 per month. Theoretically, 2 investments of this size could replace a $3,000 monthly income.

The total rental income plus $25,000 in additional equity (based on 5% annual appreciation) equals $43,000, or 43% return in just one year.


While the numbers for real estate sure look enticing, for many people being a landlord does not. As they say in the rental business – tenants, termites and toilets. No thank you!

This is where, instead, you can join a small team to acquire real estate and leave the property management to the professionals.

When investing $100,000 in real estate syndication, it’s quite common to earn $8,000 per year (8%), similar to the stock market. This 8% comes in the form of cash distributions, also known as ‘cash on cash returns’.

However, the powerful opportunity lies in the sale of the asset. Syndications usually hold property investments for about 5 years. During this time, building improvements are made, which directly drive up the overall value of the asset, and the general market value typically rises.

Upon the sale, it is common that you receive $160,000 (your initial investment of $100,000 plus $60,000 in profit). This, plus the passive income of $8,000 per year (totaling $40,000), equals $200,000, which is a 20% average annual return. Just putting a few of those investments together over time (or upfront) can generate a tremendous passive income cash flow stream.



  • Trading your precious time for a paycheck
  • Working on someone else’s plan
  • Paying so much in taxes
  • Missing out on your dreams, time with your family and adventures
  • Putting off your future!

Take action today and start building up your passive income road to freedom.

  • EXPLORE more about the power of passive real estate investments in our section of other blogs and videos.
  • SIGN UP for our newsletter for passive income related content delivered right to your inbox
  • JOIN our Passive Income Investor’s Group to gain access to multifamily investment opportunities and more behind the scenes content