Sfh VS passive with MF

2 Replies

Hi all, I have been a bit frustrated on the performance of several of my SFHs in the past 8 months. Thus, I am looking at passive real estate investing via good syndications. What are the pros and cons of of SF VS Mf passive in terms of: * tax sheltering w2 income (depreciation, expenses, etc) * income tax rates on passive income VS active income * performance and cash flow reliability By selling my SFHs and investing passively,what do I lose? Thanks

@Kris Johnson Full disclosure: I'm a syndicator. 

There is no right or wrong path. I know a ton of people who've made an unreal amount of money investing the SFH route. I would suggest you to not worry too much about 8 month performance (unless things REALLY went south). Short-term under performance shouldn't be a concern if you've bought in a growing market at a low basis.

The biggest advertised advantage (for some people) is they are not active real estate investors. They can enjoy real estate returns without all the hassle that goes into managing a real estate portfolio. Syndications are similar to REITs but, on average, have higher risk as they are chasing lower quality assets. 

Tax specific questions are determined on the nature of the project and the sophistication of the Sponsor. For e.g. in deep value-add projects, the timing of the cost segregation study could make a huge difference in the deductions you are able to claim as an investor. 

Similarly performance and cash flow reliability are again dependent on the market, asset and quality of the sponsor. There is no magic bullet.

A sophisticated Sponsor, like us (shameless plug), should be able to guide you not only through the investment but the tax ramifications as well. They should also be able to talk about their due diligence process in detail to give you a better idea of their operations.