Passively investing in real estate syndications can be a powerful path to financial freedom. However succeeding in this alternative investment strategy requires education, diligence, and community support. That’s the key message from investor Jim Pfeifer in a recent episode of the Truly Passive Income podcast. As a co-founder of the community Left Field Investors, Jim is dedicated to empowering both accredited and non-accredited investors to navigate the world of passive real estate syndication.

In this blog post, we’ll explore Jim’s key advice on how to maximize success as a limited partner (LP) investor, including:

  • The origins of Left Field Investors and why community is so critical
  • Jim’s journey from teacher and financial advisor to full-time passive investor
  • How to properly vet syndication sponsors and identify red flags
  • Strategies for diversification across asset classes, geography, operators, and timelines
  • Common denominators behind Jim’s underperforming deals
  • Opportunities for non-accredited investors through Regulation D Rule 506(b) offerings
  • Using leverage and infinite banking to maximize returns

The Importance of Community for Passive Real Estate Syndication Investing

Left Field Investors started in March 2020, right when the pandemic caused shutdowns across the country. Born out of a small in-person meetup group in Columbus, Ohio, the community quickly moved online and experienced rapid growth.

In Jim’s words:

“My belief is if you’re gonna be successful in passive investing in real estate syndications, you need a community. These are long term, illiquid deals that are totally outta your control, right? So how do you figure out who to invest with? Who are the good operators? What are the good asset classes? What are the good markets? You can’t talk to your neighbors and friends about this.”

Having a network to lean on is critical. Passive real estate investing terms like “syndication” and “LP investor” are foreign concepts to most people. By joining a community like Left Field Investors, you gain access to:

  • Education – A shortcut to avoid common mistakes new investors make. The community transfers knowledge.
  • Network – Build relationships with experienced passive investors pursuing financial freedom.
  • Deal Flow – Access to thoroughly vetted opportunities and operators.

Left Field Investors now has over 1,300 members and continues to grow. But the focus remains on quality over quantity, attracting like-minded individuals to build a trusting community.

From Teacher and Financial Advisor to Full-Time LP

Jim developed a passion for finance at a young age, consistently maxing out his 401(k) and dabbling in stocks. After a career change to teach finance and accounting, he became an accidental landlord.

This real-world real estate experience opened Jim’s eyes, as he explains:

“As I was learning this speculation versus investing, I started putting more and more of my money into real estate, and I always prided myself as a financial advisor that I would invest in the same things as my clients and as a financial advisor, I can’t put my clients into real estate.”

Jim went from a “crappy” active landlord to a full-time passive investor. Now he concentrates completely on real estate syndications, using operators as asset managers so he doesn’t have to actively manage properties.

As host of the Passive Investing from Left Field podcast, Jim shares his knowledge and experience with others. He’s invested in over 95 LP deals across all asset classes, operators, and geographies.

Vetting Passive Real Estate Syndication Sponsors

Early on, Jim quickly realized that attending a conference and handing money to any sponsor you meet is NOT the way to vet operators.

Instead, he recommends:

  • Look for referral opportunities within your community, where trust transfers. If someone you know and trust has invested with a sponsor successfully, that goes a long way.
  • Still do your own due diligence process and ask probing questions. Don’t just invest because someone you know did.
  • Focus on communication above all. How quickly and effectively does the sponsor respond to you? No response or slow response is a red flag.
  • Understand how they handled problems in past deals. Things will go wrong, but integrity and communication set good operators apart when navigating challenges.
  • Get a sense of their experience, but don’t exclude newer operators completely. Look for strong teams to complement less experience.
  • Watch for red flags like guarantees or excessive claims that seem too good to be true. Move on quickly if you sense anything off.

Follow this process to filter for quality and find syndication sponsors you can trust. Don’t settle.

Diversify Your Passive Real Estate Syndication Portfolio

Jim Pfeifer has taken portfolio diversification to the extreme, investing in over 95 LP deals. He diversifies across:

  • Asset classes – multifamily, self-storage, mobile home parks, RV parks, etc.
  • Geography – prefers not to invest in any single market heavily
  • Operators – range from new sponsors to very experienced
  • Investment size – uses platforms like TribeVest to invest smaller amounts into deals through tribes
  • Timeline – balances short-term loans and longer 5-10-year equity plays

This wide diversification served him well in entering 2022’s shifting market. He avoided overexposure as deals slowed down or ran into challenges.

Jim doesn’t plan to diversify this extensively forever. Once he identifies his top-performing sponsors, he’ll likely concentrate more capital on those operators. Spreading out his investments has been advantageous in the early stages of his passive portfolio.

The Common Denominator Behind Underperforming Deals

No passive investor completely avoids deals that don’t meet expectations. When I asked about the common denominator behind Jim’s underperforming investments, he highlighted due diligence issues:

“It was mostly where I missed something that I could have found in the due diligence with the sponsor. An example that happened a couple of times to me and will not happen again is a sponsor is a multi-family operator, right? And they switch and decide they’re gonna go do self-storage now. I don’t wanna be your Guinea pig, right?”

Vetting sponsors properly on the front end and avoiding unnecessary risks would have spared some headaches. Thorough due diligence and community knowledge help prevent mistakes like investing with unproven operators.

Opportunities for Non-Accredited Investors

A frequent misconception is that passive real estate investing is only open to accredited investors. Jim estimates 10-25% of Left Field Investors members are non-accredited.

While Regulation D 506(c) offerings limited to accredited investors are most common, Regulation D 506(b) deals open to both accredited and non-accredited investors definitely exist. Jim shared a creative way they grant non-accredited members access to 506(c) deals:

“We do an open tribe and then we invest through Tribevest. Now we’re writing checks for 250, 500 grand. And there’s some non-accredited people in there. And then our LLC becomes the largest non-accredited investor.”

The power of pooling capital together, even for non-accredited investors, opens doors that would otherwise be closed.

Maximizing Returns Using Leverage

For certain assets like ATMs with rapid depreciation, Jim implements advanced strategies to boost returns. He’ll take out a loan from his whole life insurance policy to fund the investment.

The ATM cash flow quickly repays the loan, leaving the insurance policy intact. The remaining cash flow goes straight to Jim’s pocket completely tax-free.

This arbitrage maneuver takes more work but generates significantly higher returns from the same capital. Passive investors can get creative with leverage when appropriate.

Join the Community and Get Started

This blog post only scratches the surface of Jim’s wisdom. To learn more directly from the source, reach out to Jim and Left Field Investors at www.leftfieldinvestors.com or online at their social media channels.

The full Truly Passive Income podcast interview is also available on YouTube here.

Passive real estate investing offers incredible potential, but education and community provide the foundations for success. I hope these insights from Jim Pfeifer inspire you to take the next step, whether connecting with a group like Left Field or simply starting your research journey.

If you have an interest in investing passively in real estate syndications, be sure to download our FREE passive investor toolkit!

What key takeaways resonated most with you from Jim’s experience? Let me know in the comments. And if you know anyone interested in passive real estate investing, please share this article to spread the word!