Single Family Homes v. Syndication
I have a number of single family homes. I have sold a few and 1031'd the money into DSTs. I don't love those for a variety of reasons. I have learned recently that one can 1031 into many syndications. This is appealing as the syndications tend to, at least on paper, pay out much better than DSTs... while still giving me what I want which is mailbox money. I am curious why would one not do this? For example let's say I have a house worth $1m only producing $5k a month in gross rent. I could 1031 that into a syndication with a preferred rate of 8% let's say. Downside? I realize there is risk with a syndication but is the risk really that much greater than a SFH? Curious what all you experts have to say!
Most Popular Reply
As a 1031 investor in a syndication, the deal would almost certainly be structured as Tenants In Common or TIC. Key term to research in this realm. @Dave Foster has spoken and written on that pretty extensively, I'd suggest searching his name, 1031, and syndication. You'll find a ton of helpful information.
Generally speaking, in order to make it worthwhile the 1031 LP investors need to bring a much larger investment than a typical Limited Partner. The exact number will depend on the syndication team. I like $250k and up, but I've seen others not consider anything under $1 million plus.
As with any syndication, you're depending on the sponsor's knowledge and experience.
It's also important to note that syndication doesn't just mean multifamily. There's self storage, mobile home parks, industrial.. on and on! So it's not just comparing SFRs with syndications, it's comparing SFRs with syndicated multifamily, syndicated self storage, etc.