How to Earn “Infinite Returns” on Real Estate Investments

The Big Picture On Earning Infinite Returns Through Real Estate Investment:

• • Infinite returns mean pulling out your initial investment to reinvest elsewhere while still earning on the property. Focus on properties you can renovate and refinance to start building equity fast.
  • The BRRRR strategy (Buy, Rehab, Rent, Refinance, Repeat) is popular for achieving infinite returns in rental properties, but it requires careful planning, especially around managing refinancing costs and market fluctuations.
  • Real estate syndications can offer infinite returns without day-to-day management but keep an eye on potential risks, like debt levels and market downturns, which can affect cash flow.

If you earn $1 on a $0 investment, what’s the rate of return?

What about $100? $1,000?

The answer’s the same: any return on a $0 investment is an “infinite return” since you’re dividing it into zero. You earn something on an investment of nothing.

But how does that actually work in the real world? Doesn’t it “take money to make money” and all that?

Sort of.

What Are Infinite Returns?

When you invest money in real estate — or anything else, for that matter — you ideally earn a return on it. However, real estate has a unique advantage over other assets: you can borrow money against it relatively cheaply at a high loan-to-value ratio (LTV).

Even better, you can force appreciation through property improvements. That combination means you can buy a fixer-upper, renovate it to boost its value and create equity, and then refinance it to cash out that newfound equity. And in doing so, pull your original down payment back out of the property, potentially leaving you with $0 of your own cash invested in it.

Every dollar you earn in returns from that point onward represents an infinite return on your $0 investment in the property.

You can earn infinite returns on direct property investments or through real estate syndications.

Strategies for Generating Real Estate Returns Without Capital at Risk

Strategic positioning is the secret to achieving returns without having your capital tied up long-term. Sounds simple, right? Yep, but it’s not as easy.

Infinite Returns on Rental Properties: The BRRRR Method

The strategy of buying rental properties directly and renovating them is called the BRRRR method.

The acronym BRRRR stands for buy, renovate, rent, refinance, repeat. It works particularly well with 1-4 unit residential properties, but you can also do it with 5+ unit apartment buildings. For residential properties with up to four units, you can refinance with a conventional mortgage or a portfolio loan, typically up to 80% LTV but possibly up to 85%.

It works because the refinance loan amount is based on the property’s after-repair value (ARV), not what you paid for it. You create equity by renovating the property and then cashing out that equity. Try Credible to compare conventional mortgages or Kiavi or Forman Loans for portfolio loans.

Once you pull your money out of the property, it frees you to reinvest it in another property. You can use the same down payment repeatedly to build your real estate portfolio.

Remember that the more you leverage your properties, the lower your cash flow will be. Avoid taking on so much debt that you lose money on your properties each month.

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Being a landlord? Less fun.

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Infinite Returns on Real Estate Syndications

The same model works with apartment complexes, just on a larger scale.

A syndicator or sponsor finds a property that needs updating, which they call a value-added deal. They take out a loan to cover some of the purchase price, and they cover the rest of the costs with their cash and by raising money from private investors (called limited partners or LPs). As an LP, you invest passively in the project and become a fractional owner.

The sponsor spends the next year or two renovating the exterior, common areas, and interior of each unit. This drives up the market rent for each unit, so the net operating income rises. That, in turn, drives up the value of the property since income properties like apartment buildings are priced based on the income they generate.

Once all renovations are completed and the rents are stabilized at new higher prices, the sponsor can refinance the property based on the new higher value. They pay back the passive investors’ capital, but all investors retain their ownership share in the property.

Again, the cash flow will drop based on the new higher debt. However, investors keep collecting cash flow on the property, even though they have already received their initial investment back. As with the BRRRR strategy, you can reinvest that money in more properties or syndications, snowballing your passive income from real estate.

Risks & Challenges with Infinite Returns

Earn real estate cash flow without having my money tied up in properties? What’s the catch?

While there’s no catch per se, there are risks and challenges. The first of those I touched on above is that more debt means less cash flow per property. If you leverage your properties too much, you run the risk of negative cash flow.

You need far more properties for direct property investments to create the same net rental income. That means more labor: finding deals on properties, hiring and overseeing property managers, accounting, etc. The labor gets even more intense if you self-manage your properties.

Some investors rapidly expand their portfolio with the BRRRR method, letting the properties appreciate and generate more cash flow over time as rents increase. Eventually, they sell some of their portfolio to pay off the loans on their remaining properties. That eventually leaves them with fewer properties that cash flow well and require less labor to oversee.

On the syndication side, you don’t have to worry about labor in managing more properties. But you need to find new investments to redeploy your capital as you get it back after refinances. Still, finding good passive investments is far easier than finding good deals on properties to buy directly.

Finally, you do need money to invest in the first place. That initial down payment for a rental property could still cost you $50,000 or more, which says nothing of closing costs or the money you need to put up for the renovation. Sure, most purchase-rehab loans for investment properties reimburse you for renovations, but you still need to pay for each draw before the lender reimburses you. Syndications also require $50-100K as a minimum investment unless you pool funds for group real estate investments (like we do in our Co-Investing Club).

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Want to compare investment property loans?

What short-term fix-and-flip loan options are available nowadays?

How about long-term rental property loans?

We compare several buy-and-rehab lenders and several long-term landlord loans on LTV, interest rates, closing costs, income requirements and more.

How Realistic Are Infinite Returns?

Infinite returns are an incredibly powerful way to build income streams from real estate. You can reinvest the same $50,000 in property after property, syndication after syndication. Each one adds another passive income stream without you having to keep coming out of pocket to invest.

But as powerful as the concept is, it rarely works out in the real world the same way it works on paper. In most cases, you can’t pull out every single dollar you invested in an investment property or syndication. You often get back 50-80% of your initial investment, but not all of it.

That means you rarely earn true “infinite returns” on your investment. Instead, you earn high “cash on remaining equity” or cash on equity, but it’s not infinite since you still have more than $0 invested in the property.

For example, imagine you invest $5,000 in syndication as a member of our Co-Investing Club. After two years, the sponsor refinances the property and returns $4,000 to you. Up to that point, you had earned a 5% cash-on-cash return ($250/year on your $5,000 investment). After the refinance, you still earn $150/year on your remaining $1,000 tied up in the property: a 15% return on your remaining equity investment. Over the next five years, the cash flow gets even better as rents rise, and by the end, you’re earning 20% each year. Then, the sponsor sells the property, and you collect a hefty payout for your ownership interest.

In the meantime, you could reinvest that $4,000 in another deal and earn cash flow from that. You start rolling the snowball down the mountain, adding new sources of income with each new deal you invest in.

Tax Implications and Benefits

One factor that makes infinite returns even more interesting is that the tax benefits are just as impressive as the returns. We’ve talked about pulling your initial investment back through refinancing, right? The IRS doesn’t consider that money as income – it’s viewed as debt. That means you’re getting your investment back without paying a dime in taxes.

Think about the BRRRR strategy. Each time you complete a cycle – buying a property, renovating it, renting it out, and refinancing – you’re not just building wealth. You’re also creating multiple streams of tax advantages. What about property improvements you make? Those renovation costs are either deductible or can be depreciated over time. The interest on your new, larger loan after refinancing? That’s deductible against your rental income too.

Even better, while your tenants are paying your loans and earning essentially infinite returns, you can depreciate the property. This paper loss often offsets your rental income, meaning you might show minimal taxable income while your cash flow remains strong. It’s not a bad deal when you use mostly the bank’s money to build your portfolio.

For syndication investors, the tax benefits work similarly on a larger scale. When that apartment complex gets refinanced and returns your initial investment, that’s not a taxable event. Meanwhile, you get your share of depreciation and other deductions, even as a passive investor.

However, here’s the real power play. As your properties appreciate and you build more equity through tenant-paid mortgage pay down, you can keep doing cash-out refinances to pull out more tax-free money to reinvest. Think about a tax-advantaged ATM that keeps giving while your properties earn returns. This is the closest thing to it. 

Final Thoughts on Infinite Returns

Whether you can pull every dollar back out of a property is beside the point. You can still pull a lot of your initial investment back out while keeping your ownership of each property. That lets you keep reinvesting and growing your portfolio, adding new passive income streams, and adding properties that each appreciate over time.

In other words, you build a portfolio of assets with mostly other people’s money. You get all the investment property tax deductions, the cash flow, and the appreciation, while lenders provide most of the capital. And then your renters pay down the loans for you.

Not a bad investment strategy, eh?♦

Have you ever earned infinite returns on an investment property? What challenges are you encountering in pursuing infinite returns?

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