All Forum Posts by: Duke Giordano

In a sense, but a 1031 is transfers proceeds from one property to purchase another, so slightly different.  Whereas, when using syndication deals you are essentially using depreciation/losses from one deal to offset capital gains and depreciation recapture of another.  The goal is to keep doing this indefinitely (yes it requires Capitol to reinvest) so that you don’t pay those Capitol gains/recapture until death (where a step up in basis occurs) or until a more advantageous tax time possibly when your income is lower.

Yes, you can do this in the same year with different deals.  However, as was pointed out when deal #2 plans to exit, you will need deal #3 to offset in a similar way at that time the proceeds from cashflow and refi/sale.  Usual disclaimer this is not tax advice, just what I have done.

@Christine Walthall 

Theres no hard and fast rule.  I have created a few calculators for myself which are helpful, but the gist of it is as follows:

1. Add up you total annual or monthly expenses you want to cover.

2. Subtract out your dividends or amount you would like to periodically withdraw from you stocks/brokerage account.

3. Subtract out you "Cash-Flow" from real estate used to cover your expenses.

4. The difference or delta that left is the amount you need to cover to achieve your goals of retirement.

Equity in a home may contribute to your net worth, but is not doing anything to help with cash flow needs.

Hope this helps.

They key here is DIVERSIFICATION.  Nobody truly knows which way the Fed or the wind will blow.  Not us, and not the economists as it is all truly a guessing game.  Granted, there are degrees to the education level of the guess, but they are all still a guess.  There are things that arise that no one can predict such as COVID, and this is a clear example that looking back will never give us the clarity or the insight we think looking forward.  As investors, we can only control what we can control.

As passive investors, we need to vet the Sponsor, Market and the Deal and in that order.  We then try to form a well diversified portfolio across sponsors, asset class, geography, risk profile etc.  Based on ones financial wherewithal this can be accomplished combining funds vs multiple individual syndication deals or both.  Each approach with its own pros and cons to consider.

Bottom line, we have to decide for ourselves if we want real estate as a part of our overall portfolio, and in what capacity.  Accept that this asset class, as any, involves risk and do what we can to mitigate those risks through what we can control.  The rest is conjecture...

This varies by type of investment and the medium on which the investment s offered.  On crowdfunding sites you may find minimums as small as 1-5K, whereas for many private placement offering the minimums most commonly are in the 25-50K range but some are higher in the 75-100K.  I generally invest the minimum when first investing with a sponsor and then if I feel that the dealings with that sponsor have been positive such as communication, response to questions, deal performance etc. then I would invest more on the next deal for that sponsor.  Hope that helps.

@Rebekah Hitt It can be overwhelming at first to learn how to vet syndication deals.  I have now invested in over ten syndications in the last 4 years, and we are always learning.  The upfront education process as a passive investor is certainly not passive at all but it is worth it for someone who is serious about having a portion of their portfolio focused on passive real estate syndications.  When I first started out I committed to a full year focused solely on educating myself on vetting deals, and learning metrics and qualities to look for such as the sponsor, market and the deal.  There are many resources out there with the primary medium being books such as @Brian Burke Hands off Investor, Blogs and Forums such as Bigger Pockets, and a number of good podcasts on passive investing such as @Taylor L. who has a show called "Passive Wealth Strategies".  Please let me know if I can answer any other questions.  Best of luck.

@David Stelzer, you mentioned "My wife is not working and we are looking to make a business of this and leverage her time/availability." If you are alluding to real estate professional status for your wife, then you would need "active participation" in a real estate endeavor.  I am not a CPA but basically 750 hrs annually and >50% of her time to qualify.  Thus, investing in syndications by itself does not typically qualify you since you are not actively participating.  However, if you are a GP on a deal, or if you couple your passive syndications, with active rentals you own then she may be able to qualify.  Once again, consult a CPA if you are considering this designation.

As an investor I am not a huge fan of funds.  Some pros and cons below from an investor standpoint.  Having said that i prefer single asset deals at this stage.  

Pros:

Diversity - diversify across several properties with a single investment.  Min investment amount goes farther.Although they provide diversity,

Cons:

Multiple K1's - some funds have assets in different states and provide multiple K1's so more tax filing/CPA fees eat into returns.  Even if a fund provides a composite K1, there are some who still recc filing at the state level to track losses.

https://www.biggerpockets.com/forums/32/topics/968175-problems-with-real-estate-funds-today#

Blind - In some cases investors commit (even if not funding yet) without being able to vet the individual property/deal metrics at all. 

Delayed Capitol Calls - In some cases capitol is not called until the deal is found, so you may have a cash drag while waiting for a capitol call since these funds need to stay reasonably liquid to be available, and not many places to gain a return on this type of liquidity while waiting.

For an investor looking for a one stop shop, easy diversity, and not wanting to look at the deal funds many work.  For others who want to vet the deal, more simple/predictable tax treatment and capitol calls timing a single asset deal is a clear winner in the syndication world.

Need to be careful with some long term NNN leases in this current inflationary environment as the asset price, and price of goods and labor increases leases where one cannot raise rent may face some challenges down the road. Hard to predict, but certainly a consideration when looking at NNN eases today.

Annie,

Hard to compare RE investments and stock market at this phase in the cycle. This is an unusual time in the stock market, that is currently sky high but real estate is a point of diversification in an overall portfolio. REIT do not give that diversification from equities. In addition, for high income earners Syndications have a much more favorable tax treatment especially for not increasing ones taxable income when taking into consideration depreciation. I agree with many who said that the ideal is it a bit of both RE and equity investing. I myself as a busy professional choose passive syndication deals as an LP.

Duke