There are several ways to passively invest in apartments, including through syndication or real estate investments.
In a syndication, a group of investors pool their money together to invest in a property. The syndication is typically led by a General Partner/Sponsor, who is responsible for managing the investment and maximizing returns for investors.
Syndications may be structured as a limited liability company (LLC) or a limited partnership (LP), and investors may have the option to invest as equity investors or debt investors. Syndications can offer higher potential returns than other passive investments.
Options for passive investing in apartments:
REITs offer investors the opportunity to invest in a diversified portfolio of properties that may be publicly traded or non-traded. Non-traded REITs may offer higher potential returns than publicly traded REITs but may also have higher fees and restrictions on liquidity.
Cash: Passive investors can use their own cash to invest in real estate deals, including apartments. This can be done through a private syndication.
Self-directed IRAs (SDIRA): are retirement accounts that allow investors to invest in a variety of alternative assets, including real estate. Investors can use their SDIRAs to invest in apartments or other real estate assets and may be able to take advantage of tax benefits associated with investing through an IRA.
Home Equity: An option for passive investors to find available funds to invest in a real estate syndication. This approach involves taking out a home equity loan or home equity line of credit (HELOC) as well as doing a refinance on a home loan to access funds that can be used for investment purposes.
Leveraging the equity in their home, investors may be able to access a significant amount of capital at a relatively low-interest rate and use it to invest in a real estate syndication that offers the potential for higher returns.
1031 Investments: A 1031 exchange allows investors to defer paying capital gains taxes on the sale of an investment property, provided the proceeds from the sale are reinvested in a similar “like-kind” property within a specific timeframe. Completing a 1031 exchange, investors can sell a property they own and use the proceeds to invest in a real estate syndication, while deferring taxes on the sale until a later date.
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