For several years now, our passive real estate investment club has met monthly to discuss and vet hands-off investments. Every month, we go in on a new passive investment together so we can each invest small amounts without becoming a landlord.
While we historically focused on syndications, we’ve increasingly focused on private partnerships. We go in on deals together with smaller investment companies that don’t raise capital from the public.
These companies don’t have podcasts or YouTube channels. They aren’t out there trying to build a brand for themselves or sell courses or become “gurus.” They just focus on earning consistently high returns on real estate investments. Plus, private partnerships allow non-accredited investors since they aren’t securities.
Here’s what our Co-Investing Club looks for when we explore private partnerships to invest passively in real estate deals.
Asymmetric Returns
Ultimately, we want high returns with low risk: what fancy finance types call “asymmetric returns.”
On the return side, that typically means we look for 10% to 12% or higher for secured debt investments, and 15% or higher for equity investments. Because otherwise, what would be the point? If I wanted to earn 7% to 10% on equities, I’d just put all my money in the stock market. If I wanted 4% to 7% on debt investments, I’d invest in bonds.
I invest in real estate for high returns, stable income, tax benefits, diversification, and—here’s the kicker—low risk.
Anyone who’s invested in real estate long enough knows that you can earn asymmetric returns. An investor’s first real estate deal comes with enormous risk. But their 100th deal? If they’ve done that many, they’ve already learned all the expensive lessons. They know how to minimize risk while maximizing returns.
Plenty of passive real estate investments target high returns. Some of those come with equally high risk, while others come with…