Real estate has long been one of the most reliable vehicles for building wealth. But for most people, the idea of owning property feels out of reach; too expensive, too complicated, too time-consuming. That’s when we like to introduce passive real estate investing.
At LeavenWealth, we work with investors at every stage of their journey. Whether you’re putting money into real estate for the first time or looking to diversify beyond the stock market, this guide walks you through everything you need to know to get started.
What Does It Mean to Be a Passive Real Estate Investor?
Being a passive investor means you provide capital, and we handle everything else. You don’t manage tenants. You don’t fix toilets. You don’t find deals or negotiate loans.
As Chris Pomerleau, co-founder of LeavenWealth, explains, “If you’re investing in the stock market, you’re passive. You can’t control how Apple operates. You can’t control how Nvidia operates. You’re just hopeful they’re doing what they say they’re going to do, and they continue to improve the value of your investment. That’s what we’re asking of our passive investors.”
The Four Pillars of Real Estate Returns
Unlike the stock market, real estate creates wealth through four distinct channels simultaneously:
- Cash Flow: Regular income distributions from rents
- Equity Appreciation: The asset grows in value as improvements are made
- Debt Paydown: Tenants pay down the mortgage, building equity
- Tax Benefits: Depreciation and cost segregation studies reduce taxable income
How the LeavenWealth Business Plan Works
LeavenWealth uses a value-add approach to multifamily real estate. Here’s how it works in practice:
- Buy Undervalued Assets: LeavenWealth purchases properties that were discounted since previous owners didn’t operate them efficiently.
- Invest in Improvements: Your capital goes toward updating common areas, improving operations, and delivering a better product to tenants.
- Increase Income: Rents rise as units are upgraded, which increases the overall value of the asset.
- Refinance Strategically: Once the asset has appreciated, LeavenWealth refinances to return capital to investors tax-free while retaining ownership.
As Chris puts it: “We’re buying something at $6 million that should be worth $10 million today if nothing changes. They just haven’t run it correctly.” This built-in equity cushion is what separates value-add investing from simply hoping the market goes up.
Understanding the Refinance Cycle
Refinancing is a core part of how LeavenWealth creates returns for investors. When done right, it allows investors to get capital back without selling the asset and without paying taxes on those proceeds.
The First Step: Timing
LeavenWealth monitors the market constantly. We track interest rates, stay in touch with lenders, and review asset financials so we can act when the opportunity is right.
Chris states, “If we’re far enough into the business plan where we know we can refinance and fix really good debt, debt we haven’t seen in years, and be locked in for the next 5 or 10 years, we will pull that trigger right now.”
Real Examples of Strategic Refinancing
In Sioux Falls, LeavenWealth refinanced a 77-unit property when we were only 50–60% through the business plan because they saw interest rates rising. We locked in long-term debt and returned 50% of investor capital early.
In 2022, we refinanced two assets within the first two years of ownership, locking in rates in the low 3% range before rates climbed significantly.
What Investors Should Expect
- Refinance timelines typically range from three to seven years, depending on market conditions.
- Partial capital returns (40–65%) are common when timing the market makes strategic sense.
- Refinancing is a tax-free event. Investors receive proceeds without paying taxes on the capital returned.
As Colin Schwartz, Co-Founder and Director of Business Development, notes, “When you receive a refinance, and you receive those funds, you are not being taxed on that cash. So once again, I think it’s wise to reinvest those funds, but when you look at the overall net return, a refinance from an investment perspective makes the most sense because you’re still holding on to the asset.”
How Refinancing Creates Reinvestment Opportunities
When investors get capital back through a refinance, they still own their equity stake in the original deal. That returned capital can then be deployed into new deals; compounding returns over time.
Chris illustrates this perfectly: “We have an investor who’s put in $450,000 total ever, but has refinanced so many times that $450,000 has turned into an equity value of $2.5 million, and they’re cash flowing well over $100,000 a year just off of that first $450,000.” This is the power of recycling capital in a long-term real estate strategy.
What New Investors Can Realistically Expect
Here’s what to keep in mind before writing your first check:
- There’s a ramp-up period. In the first year or two, cash flow may be lower as capital is deployed into improvements.
- Preferred return protections exist. LeavenWealth structures deals with a 7% preferred return, meaning if cash flow underperforms in one year, investors are owed that return in future distributions before operators take profits.
- Patience is essential. This is a long-term play: not a one-year flip. Investors who stay the course benefit from cash flow, equity appreciation, debt paydown, and significant tax write-offs.
How to Qualify: Are You an Accredited Investor?
Most LeavenWealth deals are structured as 506(c) offerings through the SEC, which means investors must be accredited. Accreditation is a legal requirement and a framework designed to protect investors. It ensures they have the financial foundation to participate in long-term, illiquid investments. Here’s what it requires:
- Individual Income: $200,000+ per year (or $300,000+ combined with a spouse)
- Net Worth: $1 million+, not including your primary residence
Common Misconceptions About Syndication Investing
If you’re new to syndication investing, you may have some misconceptions about it. Here are a few common myths and the truth behind them:
“The preferred return is guaranteed.”
It’s not a guarantee; it’s a priority. If the deal earns 5% in year one and 9% in year two, the investor receives all 9% in year two because the shortfall must be made up first. As Chris explains, this structure protects investors far more than a standard stock market investment.
“I need to know a lot about real estate.”
You don’t! That’s the point of partnering with an experienced operator. LeavenWealth handles acquisitions, management, financing, and reporting. Your job is to evaluate the sponsor, not manage the property. It is important investors are sophisticated enough to understand the benefits and risks of investing in real estate, but an investor does not need to know how to operate the investment. They rely on LeavenWealth to do everything for them.
“Real estate is too illiquid.”
Illiquidity is actually a feature, not a bug. It prevents emotional decision-making. Unlike stocks, you can’t panic-sell at the worst possible time.
Chris states, “It’s a less emotional investment. It’s very easy to put money into Bitcoin or Apple, see it drop 10%, and pull all your money out. Had you kept your money in there, you would have made way more money.”
The LeavenWealth VestMint Fund: Built-In Diversification
For new investors, the VestMint Fund offers an easy entry point with instant diversification. Rather than putting all your capital into a single property, the fund spreads your investment across multiple assets. Current fund holdings include:
- 180-unit multifamily property providing steady cash flow from day one, with value-add upside
- 126-unit townhome complex adding bedrooms and bathrooms to increase rents and asset value
- 6 glamping hospitality sites with strong cash flow and value add opportunities
- Private lending position earning a fixed 10% annually, regardless of market conditions
“An investor into VestMint now owns all of the assets above, including all upcoming assets the fund will purchase. It helps really diversify what that investor is doing,” says Chris. Think of it like a mutual fund for real estate, but with the added benefits of depreciation, tax write-offs, and real ownership.
Ready to Build Wealth Through Passive Real Estate?
Getting started simply requires finding an operator you trust. At LeavenWealth, we sign on the debt, we invest our own capital, and we only make meaningful profit after our investors hit their preferred return.
If you’re ready to explore passive real estate investing, schedule a call with the LeavenWealth team today. We’ll walk you through current opportunities, answer your questions, and help you determine whether this is the right fit for your portfolio.