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The 7 Keys to Passive Investing Pt. 5: Type

Considering the Investment Property Type is the Next Essential Step

In our first four articles on The Seven Keys, we hope it’s clear that investment success is attainable. When you make sure that trust, track record, transparency, and team are top-of-mind, you’re on the right track. Accredited investors can realize potentially-high returns on investment by following this advice. Our advice comes from many years of experience as a multifamily investment company. We’ve seen investment properties thrive in Kansas City real estate. We’ve also seen accredited investors make mistakes by working with the wrong firm and fund.

Our goal is to educate you, so you can avoid pitfalls and find success in passive investing. Worcester Investments is the premier Kansas City real estate investment firm. We think you’ll find that you can answer affirmatively to the following questions, related to our first four “keys.”

The First Four Questions You Should Ask Yourself When Getting Into Passive Investing

These questions summarize the basic principles behind each of the first four keys. These keys, again, are trust, track record, transparency, and team. Each of these represents a consideration you should make when deciding whether to work with a multifamily investment company. All accredited investors should try to answer them. Asking these questions leads you to firms like ours, that boast historically-high returns on investment. In our case, these returns come from our investment properties in Kansas City real estate. Although these can be applied elsewhere, we hope you’ll consider a call with us. Our Investor Success team looks forward to it.

Here are the questions you should ask yourself in relation to the first four keys:

  1. Does the company sit right with me, and does the firm seem as worthwhile on paper as they do intuitively?
  2. Does the company have a track record of success that they’ve proven to me?
  3. Is the company easy to get a hold of? Do they offer opportunities for real communication about passive investing?
  4. Is there an accessible team? Does that team work on the entire scope of a project from investment to management?

If you are able to answer yes to these questions about a multifamily investment company, that’s a good sign. It is likely that they’re worthy of your time, effort, and money. However, the funnel toward a firm commitment doesn’t stop there. There are still three more keys to explore: type, thesis, and terms. These last three are some of the most important for passive investing.

Why Type is the Next Step When Deciding on a Sponsor for Passive Investing

Once you have a sense – as an accredited investor – that you’re working with a good sponsor, you can move on to type. You now know that the greetings and pleasantries offered by the sponsor are genuine. You know that the sponsor has a strong track record, is easy to talk to, and you trust them. Now you need to understand what you are investing in. Investment properties are all different. They represent different kinds of risk, whether that’s in Kansas City real estate, or elsewhere. Additionally, their promise of high returns on investment varies.

Even after establishing trust and more, you should continue the process of researching your sponsor. The following questions will make it easy for you to understand the type of investment you’re making with any multifamily investment company.

For any investment property, ask:

  • What is the projected timeline that my sponsor is providing?
  • How does the timeline compare with the potential value of this investment?
  • Is there an expected rate of return?
  • What is my risk tolerance when engaging in passive investing?
  • How logical is the potential value of this investment?
  • Am I comfortable with the risk and potential returns?
  • What are the challenges in the way of this investment’s value?

An Elaboration On Each Question You Should Ask About the Type of Passive Investing Being Offered

For some experienced accredited investors, the questions above might be self-explanatory. However, some investors are just getting started with investing in Kansas City real estate. They may have never worked with a multifamily investment company before. It is important to have a full understanding of what an investment property deal has to offer. Accredited investors need to make an assessment to determine if the high returns on investment they are seeking are possible.

To provide assistance, we’ve elaborated on these questions with clarifying statements below. These will help you make a decision about the type of investment in front of you.

Consider the Timeline, Challenges, and Your Risk Tolerance for Passive Investing

As an accredited investor, you want to think specifically about risk. A fast timeline might mean that a multifamily investment company is taking over the management of an investment property. If the firm you are considering working with has done this successfully, this might be a low-risk, conservative investment. On the other hand, the sponsor may want to rehab and reposition an older building for a state-of-the-art property. A project like this might yield returns on investment, but will take a significant amount of time.

Investigate the Expected Rate of Return with the Sponsor for Passive Investing

Your multifamily investment company should give you a good sense of the expected rate of return. If you’re looking for high returns on investment, you can match this with your own expectations. It may not be worth investing in this particular real estate in Kansas City or elsewhere. Accredited investors who are working with a transparent sponsor will be able to get this information. Remember, if at any point the first four keys have changed for you, you can always shift your priorities. More palatable investment properties for passive investing may be waiting.

Determining Your Comfort Level is Essential for Passive Investing

Accredited investors have to decide whether a deal makes sense to you logically, and if it falls on a continuum that makes sense. We view a continuum like this: you have low risk on one side and high risk on the other. What the sponsor intends to do with the property, moves the investment higher or lower on the continuum in terms of risk. The timeline – and whether that timeline works for you – is another consideration that shifts the investment’s position on the continuum. An excellent multifamily investment company should also be transparent about challenges in the way. There are always challenges when repositioning an investment property. Your comfort level about these challenges also moves the project toward the low or high risk sides of the spectrum. Your comfort level is always essential in passive investing.

If the investment described by the sponsor meets your standards for logic and risk, you can move forward confidently. At Worcester Investments, we believe you’ll feel confident in what we have to offer.

Our Kansas City real estate deals are second-to-none, and we look forward to connecting with you. Find out how our investment properties can lead to potentially-high returns on investment. Get in touch with us here, or call us at 816-759-0901 to schedule an appointment.