Investing in commercial multifamily real estate is one of the most consistent, predictable and secure ways for people to earn passive income. With many large cities growing and changing rapidly, syndicators are looking to take on new properties and investments. This is great news for investors looking to invest capital and save on their tax bill. While syndicators are looking for the right property, in the right market to take down and improve – passive investors are looking to be as hands-off as possible.
This means, as a syndicator, it’s important to maintain that peace of mind for investors and support them in their time as a limited partner in the venture. This goes far beyond emailing updates and sending documents for them to sign. What separates an average syndicator from a great syndicator is the ability to serve their investors; to be a true fiduciary.
Why? Because not only does it show you understand they have placed trust in you to protect and grow their money, but also that you don’t just care about your own success and put focus on their pathway to making profit and succeeding in their investments. If you are trying to serve your investors, you’re more likely to have investors that follow you from deal to deal until you’re ready to hang up your hat.
We took time to consider what would bring additional layers of value to LPs as well as resources they might need while doing business with you. So, what’s most important?
Educate your Investors and Protect Them from Tax Liability
If your LPs are new to investing in real estate, there is a great opportunity for you to introduce your LPs with resourceful financial planners and tax specialists within your network. They should educate your LPs to protect their returns from the high taxes that can come with capital gains
Financial planners are essential to this formula can also help bring awareness to potential investment vehicles. The great ones will help you look at self-directed IRAs, 401(k)s and insurance policies to ensure there is no liability with your source of investment dollars.
Protecting your assets is not just about protecting you and your investments, it’s also about protecting your LPs. Here are four recommended creative asset protection strategies to have in place to protect both yourself and your assets:
- Insurance: There are lots of types of insurance – and you’ll likely need a few different policies to cover all the bases. However, at the very least you’ll want some life insurance to make sure all of your debts, liabilities and businesses can continue in the event you pass away. There are some really great advanced strategies for using an insurance policy as a savings account that is called Infinite Banking. It’s basically what the bank does with your money when you deposit into your savings and checking. You can do that same thing and make money through multiple investments at the same time. We will go deeper on this in another post – but for now, check this out.
- Using an LLC – One of the simplest ways to protect your assets is using an LLC for your investment. This will protect you personally from becoming liable for the LLC and depending on the state you live in, but it can also serve as order protection in the case that you are sued individually so your LLC can be protected from liability, too. When this is structured correctly you’ll get your income passed straight through so there is no concern for double-taxation (make sure to talk with your CPA about the right way to do this!).
- Keep it in the family – Set up trusts that make your assets and your estate impenetrable to tax and legal liability when you pass on.
Financial Planning and Education
Overall, supporting your investors can also just look like basic financial literacy, education and planning. Putting yourself in the shoes of investors as they are entrusting their money with you as the syndicator: How can you help them plan for tomorrow and for a rainy day or a disaster? Do they have enough coverage in the event of a disaster? What if they lose their active income or a family member becomes ill and unable to work?
Financial planning will help investors evaluate and process their financial progress and implement their own financial growth strategies and manage risks. In the end, it really is about risk management and while that might sound like simply managing the risk of the asset they are investing in, it can also be an opportunity to help investors manage their own risks and future finances.
To learn more about Investor Deal Room’s software, book a demo with us here.