If a real estate syndication underperforms or fails, passive investors can lose some or all of their invested capital , but their liability is strictly capped at the amount they invested. Understanding the five real risk categories, what protections actually exist, and how to evaluate risk before you commit is the most important due diligence conversation most investors never have. Here is the honest version.

: A preferred return is the minimum return passive investors receive before a syndicator earns any share of the profits , and it is one of the most important investor protection mechanisms in any real estate syndication deal. Here is exactly how it works and what to look for when evaluating one.