This question came about while talking to a passive investor (commercial apartments syndication) and wanted to share this information here.

Her question: Why would I want to put my money in a deal for 5-8 years?

My answer:

1- Cash flow

2- Bonus depreciation that can offset any other passive income (tax breaks)

3- It might not be 5-8 years that your money is deployed- Most deals do a refinance. If the deal you are investing in, plans to refinance the asset, the passive investors would be pay off a portion of their money invested. Read the deal’s business plan and ask exit strategy questions.

For example, one deal we are passively investing in is planning on refinancing the asset 2 years after acquisition. This will return 80% of our invested money. This leaves 20% of the invested money to cash flow for the rest of the holding period of the asset.

If you have any questions or need more information as you dive to become a passive investor please reach out. I would be happy to share my experiences as a passive investor in over 1,000 apartment units, over 6 markets.

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