Turnkey or Syndication Deals

11 Replies

I am a newbie in the Real Estate arena and today I am wondering what the next move should be after acquiring some turnkey rental properties in Dallas 2 years ago. TK real deals are difficult to find (not looking for flipping) so I am evaluating if instead, I should allocate the capital into syndication deals. What would you do in the Texas (Houston/Dallas) market? Thoughts are welcome.

@Omar Gonzalez

Welcome to BP! Fist and foremost, I'd determine what your long term goals are and what type of investing you'd want to concentrate on first. 

It sounds like you already determined that you prefer to be a passive investors and hence looking into TK and syndications. The next steps are to weigh in pro's and con's of each and the ROI in a long term including the tax benefits. And then see which one makes the most sense for you.

As @Alina Trigub said, it depends on your goals. If your goal is to ultimately run a full-time active real estate business, then you probably want to continue to acquire deals on your own. But if you are trying to supplement your full-time income with passive income, then syndications might be a great avenue.

Porque no los dos? aka why see it as an either/or? If you do start investing in syndications there's nothing that says you can't keep buying turnkeys when you do find good deals. You might decide you like one more than the other down the road and focus on that. Or, you might decide you like the diversification and you prefer investing in both.

@Alina Trigub , @Theo Hicks , always good to hear your wise advise. @Taylor L. Tambien me gustan las dos opciones, however my limitation will be the available capital to invest. I am still depending on my day job (for now) and getting good deals with TK SFH is getting tougher, so I am exploring other options and syndication seems attractive.

@Omar Gonzalez I would mix in a syndication into your portfolio and see how you like it. Depending on your risk tolerance, you might like it better than turn-key. That being said, your liquidity is going to be basically non-existent while you're in the deal. That might be a deal killer for a seasoned turn-key investor who refinances to purchase more properties regularly (BRRR method).

@Omar Gonzalez

Biggest positive about TK is the ability use conventional financing. and it's a little easier to grasp as you get started.

Most people find it doesn't scale too well. Typically, an investor that is suited to the Turnkey model is similarly suited for a syndication in the future. They tend to involve the same kind of passivity and out-of-state investment models.

I won't provide a set opinion on the market you should choose. I have an adaptable saying that sounds like: "I would rather have a good operator in a bad market than a bad operator in a good market." This means that GP selection will be the real challenge. I have seen I like in Texas. I have seen things I do not. All a matter of who you get to know and their strategy,

@Omar Gonzalez

Pros and cons to both. With syndications the sponsor will take care of everything. Most syndications aim to sell after a certain period. TK you can sell whenever you want, but keep in mind they are meant to be buy and hold plays. So with syndication you will get some cashflow and proceeds at the sale. But if you want to reinvest, you're going to have to find another deal that may yield lower returns if prices continues to rise. If you buy TK in a good area, you'll prob want to keep holding it and reap increase cashflow. You might also have some equity you can tap into later on. Essentially, it comes down to control. I prefer to directly own my investments rather than rely on someone to make decisions for me.

@Omar Gonzalez  

As @Alina Trigub mentioned, it sounds to me like you prefer to be a passive investor given your past with TK rentals and thoughts of investing into syndication deals. However, the choice is really up to you and your goals. Do you see yourself active or passive in this business? @Taylor L. made a good point. You don't necessarily have to choose. Why not do both?