There are tons of books out there that teach you how to invest in real estate syndications with other people’s money. But what if you’re the ‘other people’? What resource teaches you how to evaluate opportunities and pick the right sponsor to trust with your money?

Brian Burke is the President and CEO of Praxis Capital, a private equity investment firm that focuses on repositioning multifamily properties. An expert real estate syndicator and investor, he has acquired 3,000 multifamily units and 700 single family rentals in his 30-year career. Brian is also the author of the new book, The Hands-Off Investor: An Insider’s Guide to Investing in Passive Real Estate Syndications.

On this episode of Apartment Building Investing, Brian joins me to explain why passive investors need to look beyond returns when comparing syndication opportunities. He discusses why the sponsor is a more important consideration than the market or the deal itself, sharing the cautionary tale of an investor who lost her life savings to an unethical syndicator. Listen in for Brian’s insight on the benefit of investing in a non-correlated asset like real estate and learn what questions to ask as you evaluate different investing opportunities.

The cautionary tale Brian included in The Hands-Off Investor

• Grocery clerk sold fourplexes to invest in TIC syndication
• Sponsor ran off with money and she lost life savings

The three indicators used to measure the performance of a real estate investment

1. IRR
2. Cash-on-cash return
3. Equity multiple

Why passive investors must look beyond returns when comparing opportunities

• Sponsor can manipulate what forecasted cashflows will be
• Look at what’s behind numbers to determine if reasonable

Why the sponsor is more important than the market or the deal itself

• Bad sponsor can ruin good investment in great market
• Take time to determine moral character, track record

What secrets sponsors don’t want passive investors to know

• Hidden asset management fees
• Treatment of bad debt
• How distributions made

The pros and cons of being a passive investor in multifamily syndications

• Professional edge (make more money working with expert)
• Give up control, can’t exit if don’t like what’s happening

The benefit of investing in non-correlated assets like real estate

• Drop in stock market unlikely to impact real estate
• Reduces any single point of failure in portfolio

Brian’s advice for skeptical investors looking at multifamily real estate

• Look at where world’s wealth made
• Minimize risk with balanced portfolio

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The Hands-Off Investor: An Insider’s Guide to Investing in Passive Real Estate Syndications by Brian Burke

Brian on Apartment Building Investing EP005

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