Real Estate Syndication – Reasons NOT To Invest In Real Estate Syndications


Hey, this is Annie Dickerson
with Goodegg Investments. Ready to talk real estate? Let’s get crackin’. All right, today I want to
talk to you about something that we rarely talk about,
which are all the reasons that you should NOT invest
in real estate syndications. And so, I’ve come up
with the top four reasons why you should absolutely
NOT invest in syndications, ’cause they’re not for everyone. So, here are the top four
in no particular order. Okay, first, illiquidity. Illiquidity means you
can’t pull your money out. When you invest in a
real estate syndication or a group investment like this, you can’t just willy nilly
pull your money out, because you’re investing with a group. There’s sometimes hundreds of other people who are all putting their money together to buy an asset like
an apartment building. So, it’s not like investing
in the stock market or a mutual fund where
you can say, eh, you know, I think I need my money
back in the next few days, so I’m gonna sell my stocks
and pull my money out. And it’s definitely not like
a checking or savings account, where at any time you
can pull your money out, move it somewhere, give it to somebody. It’s not like that at all. So, when you invest in a syndication, that money is illiquid for
the length of that investment, which is often around five years. So, you have to be
comfortable having your money in the investment for five
years, which is a long time. So, that’s the first reason
not to invest in a syndication. Okay, number two, the second
reason you should not invest is because there’s a high minimum. A lot of these syndications,
most of the ones that we do, have a minimum investment
of $50,000, which, to anyone, is a lot of money. So, if you don’t have
$50,000 lying around, or you’re gonna need that
money for a kitchen renovation or your kid’s going off to
college in the next year or so, then definitely do not invest
that money in a syndication. Okay, number three, number three, the third reason that
you should not invest in a real estate syndication is it’s way different than
investing in a rental property. Most people, when they think
about investing in real estate, is they think about rental properties. You buy a single family
home, you rent it out, and every month, you get those
rental income checks, right? But, investing in a
real estate syndication is way different. It’s an entirely different process. And so it’s not immediately intuitive, it’s gonna take some time for you to learn all the ins and outs and the
risks and all this stuff, so it’s very different. So, for that reason, there’s another one, why you shouldn’t invest
in real estate syndications is it’ll take time to learn the process because it’s very different from investing in rental properties. And the number four reason not to invest in a real estate syndication is because you won’t have
control over the investment. Now, if you’re the type of person who likes to make those
strategic decisions, likes to have their finger on the pulse of everything that’s going
on with an investment, absolutely do not invest in
a real estate syndication because as a passive investor, you’re really gonna be taking a backseat. So, you’re not gonna be able to make those day-to-day decisions. You’re not gonna be on those phone calls with the property manager. You won’t get those
phone calls from tenants or be able to screen
those tenant applications. In fact, you won’t even get a vote. You have to put all of your trust into the sponsor team, the operator team, who’s going to be running
the asset day-to-day. And so, those are my top four reasons NOT to invest in a real
estate syndication. Your money’s gonna be illiquid, you’re not gonna be able to pull it out. You got to invest a lot
of money to get into it. It’s gonna be a very different process from what people traditionally think of as real estate investing. And you’re gonna have to put
your trust in other people. So, if those sound like deal
breakers for you, stay away. (laughs) Real estate syndications are
definitely not for everyone and so that’s why I wanted to
share these top four reasons not to invest in a real
estate syndication. Well, that’s it for now. Until next time. Have a sunny-side-up day.

8 comments

  • Keep Up The Great Content! Hitting The Bell and Looking Forward To More Vids 🙂

  • Point #3, how do syndications pay you?

  • Annie, what is your take on investing on single property syndication vs funds? have you seen better structures on single properties syndication vs funds ? thanks for the Video.

  • I sense negative vibes in most your videos😏 not feeling it! sorry

  • This is really informative! Thank you!

  • Hey guys, I agree about the 1st reason. The 2nd one falls into the 1st category that people (typically can't take thri funds out and put them towards something else). Your 3rd reason is NOT a reason at all! That's how people learn about the details of syndication. Besides, you failed to mention how different they are. Which is really not that different on a typical value-add syndication. The 4th reason is not accurate!!! They can have control if they decide to participate as General Partners (or GPs). They can learn, add value to their team AND have ability to sell their share if they decide to exit. So, I recommend you guys read up more on Syndication process. If you have any further questions, you can find me on Social Media.

  • I am an active duty practicing physician who has started investing in real estate in 2013 and exclusively in passive syndications in 2017, now I am hooked! Real estate income now covers my living expenses plus a bunch more, so I'm financially free 🙂 Just found your channel, going to take a look. Please reach out and let me know briefly what to expect. Thanks!

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