Being a real estate syndicator, I thought the main thing that would make accredited investors want to passively invest and partner with our firm was the return. But I soon realized that wasn’t the biggest concern. After all, offering good returns cannot be the primary factor since there are other profitable investment avenues and syndications these investors can put their money into.
If returns are not the primary motivation, then what is?
My experience has given me the opportunity to better understand passive investors. And in today’s blog, I will be talking about the 3 main reasons I’ve found to be why investors invest passively in our apartment syndication.
- Knowing their money is in safe hands
- Being a part of a process that is trouble-free
- Consistent updates on important information about the deal
Knowing their money is in safe hands…
The first thing passive investors want to know is that their money will be safe. That is, they want to be sure that – come what may– they are not going to lose their money. American real estate mogul Warren Buffett said he has only two rules for investing. Rule #1: Never lose money. Rule #2: Never forget rule number one. We believe in this rule so much we feature that very quote on our website. So, the preservation of capital is Syndication Capital’s number one priority when managing other people’s money.
As with any other investments, there are no profit or capital preservation guarantees in the real estate investment business. Therefore, passive investors want to know that we are taking all preventive measures to minimize risks. We achieve this in-part by sticking to the following three basic principles of apartment investing. (i) We secure long term debt (ii) We don’t buy for appreciation only for cashflow (iii) We make sure there is adequate cash reserves.
In addition to this, accredited passive investors will like to know that their money is with a capable apartment syndicator. Out team has a sound educational foundation and a good past performance in real estate and/or business. A reputable team who knows the apartment investing industry ins-and-outs. We understand for investors to invest in our deals, they need to have confidence in our team’s abilities to preserve their capital and give them their expected returns.
Also, passive investors need to know we are trustworthy. We seek to create meaningful relationships with our investors. It is important that we connect with each investor and they believe that we truly wish them well and that we are not going to misguide them. To establish this trust, we learn more about their goals, not just financially but life in general. We show them our expertise through your thought leadership, experience and being committed to continuously expanding our market knowledge. Once this trust has been established, investors see us as someone who is sensible, makes informed decisions, assumes responsibility, does what needed to be done before buying an apartment, and at least, capable of meeting the estimated returns on investment.
Lastly, they want to know that we are excellent communicators. They want to be sure that we will notify them and have a good solution in place should there be any issue with the deal. We’re always sure to respond to all investor inquiries in quick and timely manner. All in all, investors want to know that their money is safe. As their syndicator, we show them this by being excellent communicators, minimizing associated investment risks, having the necessary industry experience and building a good meaningful relationship.
Being a part of a process that is trouble-free…
Every passive investor wants a trouble-free process. They want to become a passive investor because they wished to put their money in a profit-yielding investment without having to bother themselves about daily operations. Most savvy passive investors are busy with other money-making business ventures, so they have little time to spare.
After undertaking initial due diligence on the deal before investing, investors want an investment that won’t give them sleepless nights. It is for that reason the only work we want our investors to do is check their monthly email on the deal and receive their cashflow and profits. We even offer investors a direct deposit option rather than sending checks in mail so investors won’t need to go to the bank every month to cash a check.
And if an investor contacts us with a question or concern, we not only respond in a timely manner we often proactively and preemptively address any possible concerns investors may have in our monthly email updates.
Consistent updates on important information about the deal…
Which bring us to my last point, investors want to be kept in the loop about the deal. They want to get status updates about the project on a consistent basis. Our investors don’t want a fancy over the top powerpoint presentation that’s confusing and filled with foreign terms and complex calculations nor do they desire a vague boiler plate template that’s missing a realistic view of the current state of their investment. What our investors want is what we supply, a clear, plain english, to-the-point, no fluff investment update with real numbers, solutions (if there’s an issue) and real time property info & data.
To ensure our investor receive the very best communication every month our deal updates include but are not limited to:
- Any community engagement events
- Any issues and our proposed solutions
- Actual rents versus projected rents
- Rehab and cost updates with images of the progress made
- Distribution details
- Actual rental premium versus expected rental premium
- Relevant market and/or submarket updates
Then, every four months, we provide investors with the current rent roll and the profit and loss statement so that they can review the operations of the property and thoroughly investigate the details if they want to. Our passive investors get distributions every month (not quarterly or yearly) so they not only receive updates but also receive payment.
Are you an accredited investor interested in learning more about passively investing in apartment communities? Join our passive investor club here and receive our free Ebook: How To Passively Invest In Multifamily Apartments.