3 HIDDEN CHALLENGES PASSIVE MULTIFAMILY INVESTORS FACE (AND HOW TO OVERCOME THEM)

Here is What You Should Know

Meet John – a composite of some of our recent passive investment partners.  John is not a real person, but he does express some of the real thoughts and feelings that we heard from our investors.

John had always considered himself a careful investor. After years of working hard and saving diligently, he wanted to make his money work for him without the stress of day-to-day management. 

So, after some research and several conversations with us, he decided to invest passively in our multifamily property. 

On paper, it sounded perfect—steady cash flow, long-term appreciation, and professional property managers handling everything. What could go wrong?

As time passed, John realized that the passive investment journey wasn’t as carefree as it seemed. There were underlying challenges—some that he had anticipated and others that took him by surprise. 

Some call this “buyer’s remorse”.  I know I have bought things that I later wondered if I should have.  How about you?  Something like this can happen with Limited Partners in a multifamily investment.

Let’s walk through John’s three major pain points and how they affected his everyday life.

#1. LACK OF CONTROL

When John made his investment, he was eager to learn how the property would be managed. 

Our team had experience with other properties, and the investment looked good to John. Everything seemed straightforward. However, once the funds were transferred, John quickly realized just how little control he had.

Passive investors are what are called “Limited Partners.”  They are partners, but their control is significantly limited. 

Months into the investment, COVID-19 hit. As General Partners, we had to make many decisions about the property, with many unknowns as the pandemic progressed. As a passive investor, John had no say. The decisions were out of his hands, and he felt a growing sense of frustration.

Every time an issue arose—whether it was the speed of the renovations or the residents who were not paying rent on time—John found himself worrying but powerless to act. 

Every month, we sent a newsletter to John and the other investors, informing them of our issues and actions. As a passive investor, he had invested in the property but had no way to influence how it was being managed. This lack of control started to gnaw at him, turning what should have been a low-stress investment into a source of constant frustration.

We imagine that John’s frustration often spilled into conversations with his wife and friends. He would express his concerns, but they could see that being unable to do anything about the situation was taking a toll on him. Small decisions that should have been straightforward became sources of stress, leaving John feeling trapped in an investment that wasn’t entirely under his control.

Lack of control is a significant issue that passive investors must anticipate in multifamily properties.  They are Limited Partners, which means they have limited control.

Have you thought through this reality, and how comfortable are you with it? Understanding challenges like lack of control can empower you to make informed decisions and confidently navigate the world of passive investing.

#2. THE TRUST ISSUE

John did his research before investing.  He had experience in real estate investing.  He learned about the unique aspects of commercial properties.  He had known the Operators personally for some time and trusted the advice of others who had recommended them.  

But, as time passed, John began to feel uneasy about the decisions. While there was no blatant mismanagement that John could point to, John feared he was not getting the whole picture from us.  John’s suspicions grew. 

He had not actually been to the property, and his worries grew. He called and talked with one of us several times but was nervous about relying on us for the operations and the information he was receiving.

One night, John scrolled through investor forums, reading horror stories about syndicators who had mismanaged properties or taken advantage of their passive investors. 

A pit formed in his stomach. Was he being too trusting? Had he placed too much faith in the Operator? After all, his entire investment relied on their competence and honesty. The realization that he was so dependent on someone else’s management, without having the full picture, kept him awake that night.

In truth, the challenges we faced during COVID-19 and the changes in the market afterward were a concern to us, too.  I, for one, was having trouble sleeping through the night.  Being “in charge” of other people’s investment dollars is a huge responsibility.

John’s unease started to bleed into other areas of his life. He became distracted during his workday, and his evenings, once spent relaxing with his family, were filled with quiet tension. His wife noticed his restlessness and asked him if everything was okay, but John brushed it off, not wanting to worry her. Yet deep down, he was starting to regret how much trust he had placed in someone else.

#3. UNCERTAINTY AND WORRY

At the beginning of the investment, John was excited about the projected returns. Multifamily investments all over the country were doing well, and the returns were above those offered by many other investments.

As the syndicator, we promised steady cash flow, and John had big plans for that extra income—paying down his mortgage, taking his family on vacation, and boosting his retirement savings. We did reveal that we didn’t expect to be able to make payments in year one as we stabilized the investment.

But as time went on, the numbers didn’t add up for John.  Covid and other factors meant that there were no distributions for a few years.

Rental income fluctuated, and the once-predictable returns were anything but steady. Occupancy rates dropped, and tenants were paying late or not at all. These were all real, and John realized many of them were outside the control of even the operators.

John was caught in a cycle of anticipation and anxiety, never quite sure what the next month would bring.

John’s wife noticed how the investment was weighing on him and encouraged him to step back and assess the situation, but John felt trapped, unsure of how to regain control or find stability.

Now, on this particular investment, as the operators, we patiently and persistently turned the property around, sold it, and obtained an excellent return for John and the other investors. 

However, between purchasing and selling the property, John had difficulty dealing with his worry about the uncertainty he was experiencing.

Before investing as a Limited Partner, talk with the Operator and the General Partners.  If they are good, they will raise these three challenges investors face and invite you to explore them before investing. Open communication can build trust and reassure you about your investment.

These challenges don’t have to stop you from investing, but anticipating they may come up will help if you do decide to invest as a limited partner.

FINAL THOUGHTS

John’s story is familiar. Many passive investors experience these pain points—feeling powerless, overly reliant on operators, and anxious about uncertain returns. But these challenges don’t have to be permanent. With the right approach and understanding, they can be managed, and your investment can still be successful.

If you’re facing similar struggles as a passive investor, here are some steps to take:

1. Vet Your Syndicators Carefully: Do your due diligence before investing. Look for a syndicator with a strong track record and prioritizes clear, consistent communication with investors.

2. Stay Informed: Even as a passive investor, stay engaged. Ask for regular updates and detailed financials; don’t be afraid to voice concerns. Knowledge is power.

3. Diversify: Don’t put all your eggs in one basket. Spread your investments across different properties or syndications to mitigate risk and reduce your dependence on one Operator.

4. Manage Expectations: Understand that returns can fluctuate. Set realistic financial goals and have a backup plan for when things don’t go as expected.

5. Remember why you chose to be a passive investor.  You don’t have to spend your time solving issues when they come up.  

If you’re tired of feeling frustrated and anxious about your passive multifamily investments, it’s time to take action. 

CONTACT US TODAY for a complimentary conversation. Let us help you find investments that provide clarity, control, and peace of mind. 

Our team is here to guide you every step of the way, ensuring you’re not just investing but thriving.

John’s story reflects the hidden struggles many passive investors face. By addressing these pain points—lack of control, trust issues, and anxiety about returns—you can reclaim your peace of mind and make your investment journey a positive experience. 

Take control of your investments, stay informed, and build a future where your passive income works for you, not against you.

HELP US GET TO KNOW YOU BETTER.

Attune Investments provides a better return for our investors.  And we make a positive impact in people’s lives and our world.

If you want to learn more about how others are investing with us, we invite you to join our club and talk with us.  See below.

Through the power of a syndication partnership with other investors like you, working with managing partners experienced in apartment complexes, you can own multifamily assets.  

Or you can loan money, get in with a clear return, and get out earlier.  

CONNECT WITH US:  If you haven’t already subscribed to our BLOG, subscribing now can increase your knowledge and comfort with this asset class.  It’s free.  

We publish an article every week.  SUBSCRIBE HERE And take one more step. Become a member of our ATTUNE INVESTORS CLUB in which you have more personal access to us.  JOIN HERE.