I’ve been thinking a lot lately about how the last real estate cycle completely warped investor expectations.
During the late 2010s and early 2020s, it seemed like every syndication pitch deck had the same promise: “Double your money in five years.”
Compressing cap rates and falling interest rates were pushing property values higher almost automatically. Sponsors could buy a building, slap some paint on the cabinets, rebrand it as “The Kensington at Waterchase,” and sell it two years later for a massive profit.
These types of deals were so plentiful, it became the baseline expectation from passive investors. If the deal wasn’t getting a 2x equity multiple by year five, LPs wouldn’t bother looking at it.
That environment conditioned investors in ways that I don’t think are healthy. And more importantly, it created expectations that just aren’t realistic in a normalized market.
The Cash Flow Problem
My biggest issue with this “flip and double” mentality is that it puts all the emphasis on the big payday at the end instead of generating cash flow during the hold period.
Most of those deals were producing little, if any, cash flow. The vast majority of returns were driven by the sale event in years three to five.
This isn’t much different than investing in stocks, except you don’t get any of the “benefits” that come with stocks (like liquidity, which itself is a double-edged sword). You're still playing a game of number-go-up.
And as I’ve written before: **you can’t eat equity.**
The Redeployment Headache
There’s another problem nobody talks about: what happens after you get that pile of cash back after a sale event?
Most investors come to real estate because they want to own real estate, not flip it every five years. But when you invest in deals structured around shorter hold periods, you’re constantly forced back into cash, hunting for the next deal.
It defeats the whole purpose of why most people invest in real estate in the first place.
Here's What We Do Differently
Instead of structuring deals around that inevitable sale in year five, we focus on a completely different exit strategy: cash-out refinancing.
We harvest the equity we’ve created through a refinance instead of a sale. We take out a larger loan, distribute cash to investors, but we (and our LPs) still own the property*.*
The beauty here is that our LPs get some or all of their initial capital back, but still own the cash-flowing asset. Yes, you might need to redeploy that returned capital elsewhere, but your original investment keeps compounding uninterrupted. You’re building a portfolio of cash-flowing properties, not constantly cycling in and out of deals.
Not to mention, refinances are usually more tax-efficient than sales.
The “Hold Forever” Philosophy
This is why we underwrite our real estate deals assuming we’ll never sell – or at least that we’ll hold for 10+ years.
This completely changes the types of deals we look at. We’re not interested in properties we’d want to flip…we only pursue assets we’d be happy owning for the long term.
It also shifts our entire focus from exit timing and assumptions to operational excellence during the hold period. We want properties that generate strong cash flow from day one, where we can drive a large part of the returns through that cash flow, rather than relying solely on appreciation.
The Bottom Line
Most people who say they want to invest in real estate actually want to own real estate for the long term. But the “double your money in five years” approach turns real estate investing into something that looks a lot more like stock market investing.
So if you’re evaluating syndication opportunities, here are two questions worth asking:
How long is the planned hold period? Shorter holds (3-5 years) often signal a flip mentality rather than true ownership.
Where are the projected returns coming from? IRR can be deceiving when most returns come from a big sale at the end rather than ongoing cash flow.
The hold-forever approach we use allows wealth to compound without the constant disruption of selling and redeploying. You get the tax advantages of holding versus selling, plus protection from market timing risks – we never feel forced to sell into a down market just because the calendar says it’s time.
After watching investors get caught in the flip-and-redeploy hamster wheel for years, I’ve seen firsthand that the sponsors who help their investors build lasting wealth are the ones who think like owners, not traders.