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Real Estate Syndication – Reasons NOT To Invest In Real Estate Syndications - YouTube
Channel: Goodegg Investments
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Hey, this is Annie Dickerson
with Goodegg Investments.
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Ready to talk real estate?
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Let's get crackin'.
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All right, today I want to
talk to you about something
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that we rarely talk about,
which are all the reasons
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that you should NOT invest
in real estate syndications.
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And so, I've come up
with the top four reasons
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why you should absolutely
NOT invest in syndications,
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'cause they're not for everyone.
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So, here are the top four
in no particular order.
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Okay, first, illiquidity.
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Illiquidity means you
can't pull your money out.
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When you invest in a
real estate syndication
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or a group investment like this,
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you can't just willy nilly
pull your money out,
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because you're investing with a group.
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There's sometimes hundreds of other people
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who are all putting their money together
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to buy an asset like
an apartment building.
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So, it's not like investing
in the stock market
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or a mutual fund where
you can say, eh, you know,
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I think I need my money
back in the next few days,
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so I'm gonna sell my stocks
and pull my money out.
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And it's definitely not like
a checking or savings account,
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where at any time you
can pull your money out,
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move it somewhere, give it to somebody.
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It's not like that at all.
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So, when you invest in a syndication,
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that money is illiquid for
the length of that investment,
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which is often around five years.
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So, you have to be
comfortable having your money
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in the investment for five
years, which is a long time.
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So, that's the first reason
not to invest in a syndication.
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Okay, number two, the second
reason you should not invest
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is because there's a high minimum.
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A lot of these syndications,
most of the ones that we do,
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have a minimum investment
of $50,000,
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which, to anyone, is a lot of money.
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So, if you don't have
$50,000 lying around,
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or you're gonna need that
money for a kitchen renovation
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or your kid's going off to
college in the next year or so,
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then definitely do not invest
that money in a syndication.
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Okay, number three, number three,
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the third reason that
you should not invest
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in a real estate syndication
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is it's way different than
investing in a rental property.
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Most people, when they think
about investing in real estate,
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is they think about rental properties.
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You buy a single family
home, you rent it out,
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and every month, you get those
rental income checks, right?
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But, investing in a
real estate syndication
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is way different.
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It's an entirely different process.
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And so it's not immediately intuitive,
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it's gonna take some time for you to learn
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all the ins and outs and the
risks and all this stuff,
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so it's very different.
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So, for that reason, there's another one,
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why you shouldn't invest
in real estate syndications
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is it'll take time to learn the process
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because it's very different
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from investing in rental properties.
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And the number four reason not to invest
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in a real estate syndication
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is because you won't have
control over the investment.
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Now, if you're the type of person
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who likes to make those
strategic decisions,
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likes to have their finger on the pulse
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of everything that's going
on with an investment,
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absolutely do not invest in
a real estate syndication
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because as a passive investor,
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you're really gonna be taking a backseat.
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So, you're not gonna be able to make
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those day-to-day decisions.
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You're not gonna be on those phone calls
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with the property manager.
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You won't get those
phone calls from tenants
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or be able to screen
those tenant applications.
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In fact, you won't even get a vote.
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You have to put all of your trust
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into the sponsor team, the operator team,
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who's going to be running
the asset day-to-day.
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And so, those are my top four reasons
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NOT to invest in a real
estate syndication.
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Your money's gonna be illiquid,
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you're not gonna be able to pull it out.
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You got to invest a lot
of money to get into it.
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It's gonna be a very different process
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from what people traditionally think of
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as real estate investing.
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And you're gonna have to put
your trust in other people.
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So, if those sound like deal
breakers for you, stay away.
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(laughs)
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Real estate syndications are
definitely not for everyone
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and so that's why I wanted to
share these top four reasons
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not to invest in a real
estate syndication.
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Well, that's it for now.
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Until next time.
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Have a sunny-side-up day.
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