3 Real Examples of Returns On Passive Real Estate Deals
Syndicate Investment Examples
We’ve all heard that hindsight is 20/20. It seems that we’re able to evaluate our past choices MORE clearly than at the time of the original choice.
This is especially true when it comes to investing. It’s easy to look back and see the best possible choices, what should have been done, and what would have been a smart decision.
Harnessing the ability to thoroughly understand your financial situation, identify actual financial goals, and commit to a plan of action are all easier said than done.
Most of us have good intentions for ourselves but sometimes it doesn’t work out as well as we hoped for.
Regarding passive real estate investments, specifically apartment syndications, it might help you understand them better by looking at:
- the past performance of three multifamily projects
- how much they returned to investors
- the impact they’ve had in their respective communities
Keep in mind that, although these are based on actual projects and data, some identifying information has been adjusted to protect the privacy of the deals, partners, and investors.
Let’s get started…
#1 Case Study – 320 Unit Syndicate Investment (Apartment)
In May of 2016, a 320-unit apartment was acquired for $26.6 million. The class B apartment community was built in ‘83 in a rapidly growing submarket of the Dallas-Fort Worth area.
The business plan included on-site operations improvement and renovations for each unit for a full value-add deal. Upon acquisition, a professional property management team was put into place.
They maximized operational efficiencies and executed each phase of the business plan perfectly.
Within 18 months, the renovations were completed, and, since the market was favorable, the team sold the property for $35.2 million.
This means by the time the property sold and everything was finalized, which actually took 22 months total, they’d exited the value-add real estate syndication with a profit of $8.6 million dollars. Not too bad in that short period of time.
But what does this mean for investors?
Let’s pretend you’d invested $100,000 into this particular deal as a passive investor.
You would have ended up with $170,000 in less than two years from your initial investment date.
A $70K profit in 22 months with zero work? I’d take that all day long….Join the Passive Investors Circle
#2 Case Study – 216 Unit Apartment Community
The next example is also in the Dallas-Fort Worth area but only had 216 units and was built in ‘81.
Although dated, it was a nice class B asset in a growing submarket of the metroplex.
One key difference between this example and the one above is that this apartment complex hadn’t been publicly listed. It was acquired off-market because of a partner/broker relationship established prior.
They had a great track record and were able to make a quick, favorable deal without the challenge of competing against other potential buyers.
For $12.2 million the deal was done. The team rebranded and repositioned the property and invested several thousand per unit for renovations.
In just 18 months, the property sold for $18.25 million. They exited this particular real estate syndication deal with over a $6 million dollar profit.
If you were an investor in this deal with a $100,000 buy-in, you would have exited the deal with $200,000 just a year and a half later.
I don’t know too many places you can double your money that quickly.
#3 Case Study – 200 Unit Apartment Complex
Our final syndicate investment is a more current project that was acquired off-market in December of 2017 for $16 million.
This 200-unit apartment community, also a class B asset, is in the Dallas-Fort Worth area like the other two.
Since it’s an ongoing deal, let’s dive deeper and study the progress.
May 2018 (6 months after purchase)
By now 38 units have been remodeled and new rental rates are $20 more than original projections. So, basically, we’re ahead of schedule – renovations-wise and rental rate-wise, which is great news.
I get that $20 per unit doesn’t sound too exciting. But when you talk about raising the rent per unit not only to a projected value, but $20 more than that…that’s when things really start to add up.
38 renovated units x $20 = $760 per month and $9,120 per year.
At a conservative cap rate of 10%, this adds $91,200 of unexpected, positive equity to the property.
Other projects completed within the first 6 months include:
- an outdoor kitchen
- new dog park
- rebranding with new signage
- construction of over 40 carports
Renovations continued to run smoothly and new units are achieving rental premiums beyond projections. In fact, as a result of the increased rental rates, investors are receiving an additional 2% in returns this month.
That means investors who put $100,000 in are receiving an extra $2,000 above and beyond the standard returns which have been about 0.67% or $667/month.
This property and the team are consistently outperforming projections. In fact, within the first year, it experienced a 26.4% surplus which will allow a refinance deal to go through at the end of the month.
That’s exciting news because, with these kinds of numbers, investors will receive 40% of their capital back while still maintaining the same cash-on-cash returns based on the original value invested.
What that means is the property is performing SO well that the team is okay pulling some of the originally invested capital out of the project.
If you’d originally invested $100,000, not only would you have been receiving your $667 each month, plus the $2,000 bonus back in December, but now you’ll receive a check for $40,000 of your original investment back with no change to your monthly returns.
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Renovations including eco-friendly toilets and shower heads have been completed on 135 out of 200 units.
Not only are the renovated units renting for an astounding $80 over projections, but we’re also saving tons of cash on the overall utility costs for the property.
All renovations on this property to complete the value-add process should be done in just a few months. At that point, the team will either choose to sell or hold the asset until market conditions are most favorable.
Either way, this passive syndicate investment has been a huge success, and residents and investors alike are very happy.
Invest In Yourself
The #1 thing holding back potential investors is education.
I get it. All of these types of passive investment returns sound GREAT but it’s also scary whenever you put your own money on the line.
I was there only a few short years ago so I can understand what you may be going through.
Self-education toward understanding real estate syndications can be time-consuming and require a lot of energy upfront before you feel comfortable.
The case studies above are all real projects.
None of the returns or the performance of the projects have been fabricated.
What can you do today, that your future self will thank you for?
Investing in your financial education is one of the best ways to jump-start the progress toward your success two, five, or ten years from now.
Look back at the syndicate investment deals mentioned here. Within 2-3 years the amount of income these investments have generated is absolutely impactful, to anyone’s life.
Are you ready to get started?
Join the Free Passive Investors Circle today.