I’ve noticed something interesting over the last few years as a deal sponsor:
The exact same cash-flowing deal might be perfect for one investor and completely wrong for another.
Same sponsor. Same market. Same projected returns.
What makes the difference? I used to think it was risk tolerance. Or maybe familiarity with the market or asset class.
But more often than not, it’s something completely unrelated to the deal.
The Missing Variable
After working with dozens of passive investors, I’ve realized: liquidity often matters more than risk tolerance or other factors when it comes to deal fit.
And almost nobody talks about it.
We’re always focused on the sexy stuff like IRR projections, cash-on-cash returns, and the tax benefits. All important, sure. But I’ve counseled more investors away from deals because of liquidity mismatches than because of risk concerns.
At Big Spring Capital, we love the Robert Kiyosaki definition of an asset: something that puts money in your pocket. It’s why we aim to bring our investors deals with solid cash flow components, ideally from day one.
But a cash-flowing deal with a 10-year hold period can be absolutely perfect for one investor and completely wrong for another. Not because of its risk or cash-on-cash return, but because of when they need their money back.
Your Life’s Timeline Matters More Than You Think
The construction of your investment portfolio should match your personal liquidity timeline.
This usually correlates with life stages, though not always.
Early in your career? Your liquid capital might be limited, but you’ve got time. Locking money up for 7-10 years typically isn’t a big deal. You can handle illiquid deals because the cash flow gives you extra income along the way, and you’re not planning any major capital events.
Hit your peak earning years? Growing family, high income, but maybe you don’t need as much liquidity. What becomes more valuable is generating cash flow to support your lifestyle or reinvest. Longer time horizons make sense here too.
Father of daughters? (I’ve talked to several investors in this boat.) Maybe you’re looking at a wedding or two in the next few years. That means keeping a chunk of change available and liquid.
Helping kids with their first home purchase? Same principle – if you can see this on the horizon, locking up capital for a decade probably doesn’t make sense.
When Liquidity Mismatches Bite
I talked to an investor recently who was early in his career. Good income, no kids yet, long time horizon. Perfect candidate for a longer-hold deal, right?
Then he mentioned he was looking to buy a house in the next couple years.
And the pool of capital for the house and the investment? Same money.
I told him to think really hard about what he wanted more, because he likely couldn’t have both. That 10-year hold would lock up his down payment for a decade.
This is what I mean when I say your life timeline matters more than most people realize.
The Illiquidity Reality
Most real estate syndications are fairly illiquid. That’s just the nature of real estate.
Our most liquid offering is our credit fund, and even that’s a two-year commitment. For a typical real estate deal with a five-plus-year business plan, you need to be very mindful that you’re not going to need all that money back during the hold period.
This doesn’t come down to being conservative versus aggressive. It comes down to whether your life circumstances match what the deal requires of your capital.
You can have a high risk tolerance and still need to pass on a deal because the money’s going to be locked up when you need it for something else.
The Question You Should Be Asking
Most investors understand this conceptually. Then they turn around and write a check without actually running the numbers on their own timeline.
Before you invest in any syndication, force yourself to answer: How does this fit into my near-term and longer-term liquidity needs?
Build your portfolio around your personal timeline, not just around projected returns.
Because nothing feels worse than regretting an investment…not because the deal went south, but because you actually needed the cash elsewhere and forgot to account for it.
The deal might be perfect. But the timing might be all wrong.