So, you’re sure you want to invest in a real estate syndication, you do your research, and you lock in a deal. Now what?
After you’ve sent in your funds for a real estate syndication deal, your active participation is done. Now you can sit back and wait for the cash flow to start rolling in.
Depending on the particular deal, you may receive either monthly or quarterly cash flow distributions, and they may start immediately, or not for a few months.
Regardless, you should start receiving monthly updates as soon as the deal closes. These monthly updates will include information on the latest occupancy and progress on the renovations.
Every quarter, you will receive a detailed financial report on the property, and every spring during tax season, you will receive a Schedule K-1 for your taxes, which will report your share of the income and losses for the property.
As your projected hold date approaches, the monthly information you receive may include information about a sale. Once the asset sells, you can expect your original investment capital to be returned, plus any percentage of profit due to you.
Thats great. Tax time and a K1 to offset passive gains further reducing your taxable passive income, that's the benefit of real estate even as an LP. So if its an 8% annual return and the operators are depreciating the assets and use cost segregation, I am curious if anyone has estimates for passive losses on a typical project?
@Joe Archbold The syndication operator should be able to have a good guestimate from their accounting team or firm as to how much depreciation they'll be able to write off on a given project.
@Joe Archbold it is certainly a function of the asset type and the operator. My biggest surprise ever in this arena was learning that the depreciation on mobile home parks with reasonable leverage is well over 100% of the invested equity amount in almost every case I’ve seen. Many other deals we see have 20 to 30% (of equity) bonus depreciation accelerated into year one under the current tax law. Happy investing!
How do people here evaluate a syndicate? What would motivate you to invest in a syndicate today? If you aren't invested in a syndicate, why not?
@Justin G. nice post, I think it is important for the team or GP to make sure there is an open line of communication and be available for the investor whether they have a simple question or a more in-depth one. End of the day they are investing more in yourself than the actual project. Nice meeting you earlier this month at the meet up.
You will receive a K-1 from the syndication reporting your share of income/losses.
If the K-1 is received prior to April 15th, you have the opportunity to file a timely filed return.
if the K-1 is expected after April 15th, you will be required to file an extension for your individual return.
Depending on where the K-1 invests and the amount of your investment, you may be expected/required to file in multiple states.
You may have some tax decisions to make during the period when the syndication plans to exit(normally 5 to 7 years). The decisions you make may subject you to paying taxes or not.
Best of luck!
In replied to your title. I’m assuming the preferred answer would be live happily ever after receiving direct deposit into your checking account while you drink lemonade on the beach. :-)