LP syndication vs buy-it-yourself multi-family IRR
I'm torn between buying a few medium-sized multi family every year or just put my extra $$$ into syndications as Limited Partner. I guess LP in syndication will surely bring lower return than buy-it-myself, but how much of a difference in IRR are we talking about? 50% lower? My estimation:
- for LP in syndications, 20% target IRR (x2 capital in 5y) is the "industry standard" for the last few years, it looks like we are moving towards 15% target IRR for the recent deals I have seen, but no work needed is a really sweet deal to have.
- for people who buy it themselves, I estimate an average 7-cap can brings in ~30% IRR after 5 years assuming 5% annual property value increase and expenses at 50% gross rent.
Beside return, can an average out-of-state investor reliably get a few 7-cap deals every year from a good market without much marketing (using a commercial real estate agent for example)? Is such return too optimistic?