There's an old saying in the personal finance business:
"When you want a new car, buy a house."
Another way to think about that is: when you want a new car, invest in a real estate syndication deal.
The thinking is this: if you want a shiny new car, don't go out and spend your money on a car. Invest the money you have first in real estate, wait a few months for the cash flow to start, then go buy your car. Use the cash flow from the real estate to make your car payments. Once the car note is paid off, then you have both the car and your real estate investment.
Let's break down this old saw and apply it to the real estate syndication market. You start with $50,000 cash. Sure, you could plunk that down for a nice new car. You can get a pretty snazzy car for that much money. Let's call that car a slick new BMW. You drive it off the lot feeling pretty proud of yourself.
But there's a better way.
Suppose you take that $50,000 and invest it in a real estate syndication instead of buying that new car. You can look on our directory of syndicators, all of whom have been nominated by an LP. Vet your syndicator, vet your deal, review the deal documents, and wire your cash. Voila--you are now a real estate investor.
In reality, many syndications take a bit of time before they start to pay the preferred return. Some will promise a 9% return right away to "Class A" investors who just get the preferred return and no upside in the deal. That could work for you here: you could just take the $4,500 per year and put that into paying for a car. But for this example, let's imagine you choose the "Class B" option that pays 8% preferred return and offers you a chance at upside in that deal. That means you should receive something like $333 per month in cash flow. Again, in our experience it can be a few months to 18-24 months before the cash flow begins after you make your investment. But once it does...
Go to the dealership. Get yourself the car. Let's imagine you find a car you are happy with that has a low interest rate resulting in a car note of $333 month. How about a 2022 Subaru Impreza? CarsDirect.com puts that at a loan term of $294 per month over 72 months--so you've got a few bucks left over for gas or insurance.
Fast forward six years. You've had the enjoyment and use of a reliable Subaru. You now own the Subaru free and clear. You also have the equity in the syndication--and after the six years, the sponsor tells you they have great news: time to sell! The property has doubled in value. You are getting a $100,000 return for your initial $50,000 invested over those six years.
Route #1: you just invested the $50,000 in the luxury vehicle (BMW). You got a fancier car, owned outright with your $50,000, and at the end of the six years, you have the fancy BMW--with six years of depreciation and dings--and no cash.
Route #2: you invested the $50,000 first in a real estate syndication then you bought a car with the monthly cash flow. You had a less fancy, just as reliable car (Subaru). At the end of the six years, you have the Subaru (yes, also depreciated and dinged) owned outright plus you have $100,000 less any taxes owed.
Would you rather route #1 or route #2? Your call. But at least think about it before you head straight to the dealership. And note we did not offer a route #3 whereby you lease the car and have nothing at the end of the six years to show for it.