All Forum Posts by: Jay Yoo

@Jerel Ehlert  Thanks Jerel for your thoughtful response! Actually none of them are my specific cases but I would like to be informed incase I get these questions from any passive investors in the future. I could simply say "please talk to your CPA" but instead I would like to say "by no means, I'm not a CPA, but just my opinions here are general ideas,,,," 

First of all, thank you 🙏 much for your time in advance helping me understand the tax implications for multifamily syndication deals.

I would like to be informed as much as possible so I could answer any questions for my potential passive investors in the future. I know I dont need to know everything but that doesn’t make a good excuse since passive investors/ limited partners trust in you first before the deal itself.

Ok, thats too long for intro.

Sorry for multiple questions. I could find consistent answer from google as tax questions can be complicated.

What does a limited partner have to know about tax implications in a real estate syndication in general?

1. What are the returns for LP tax exemption at the sale or income monthly or quarterly from their pref return?

2. At the end of investment, capital gain from the sale will be taxed at 15%-20%. How could a LP avoid? 1031 exchange?

3. Plus the NIIT of 3.8% if applicable. E.g. Married filing jointly, $250,000 for those tax bracket 32% high income passive investors?

4. LPs will also pay depreciation recapture tax (up to 25%)

5. Does the return on investment deck prepared by operators usually include these tax implications on the return?

@Jay Hinrichs yes I agree with you sir.  “All MF is safe from the market correction” could be a false statement. Nothing is guaranteed to be safe from a recession. However it is my belief that MF properties properly analyzed and researched with the right team members could be resilient in recessions. 

CBRE research source

@Minna Reid I also watched Ken’s videos and be mindful of what’s coming however no matter what conditions of our economy, today is the best time to invest because the time is the only asset that you can not buy.

I would refer to more realistic data from Robert Kiosaki knowing that we are getting close to the slump phase in many markets.

Reference from Robert’s forum,

“Total US Debt $28 T. Total US Gov spending $8 T. US Gov Tax collection $3.5 T. US Gov short $4.5 T. Biden to spend $1.9 T stimulus. US bankrupt yet stock market higher. Economy sick. Very very sick.”

Type of properties to invest is very important during the market correction (I dont like to call crash because the Feds know the history in 2008)

Single families, brrrr and cash out refi after 6 months would not be a good idea if you play safe during this unknown economy forecast.

Could be a slight off topic but MF properties would play much safer during the market correction because you can still pay expenses and the mortgage while few tenants can’t pay, plus many other benefits and advantages.

@Nick B. Hi Nick, did all LPs and GPs put together funds and purchase the property in all cash? Can you please tell me how many investors in your first deal and what were the splits upon the agreement?

@Alex Babayev Congrats! Btw, I would run the number again for the accurate monthly cash flow. Maintenance, capex, vacancy/tenant turnover, PM unless you manage yourself.

@Sachin Amin Thanks Sachin. That’s the #1 priority to me! 
btw, would you still buy a property if the tenant tends to pay rent late but catch up the payment throughout the rest of month? Good location. Lease expires 6/30/2021

@Sachin Amin Sachin, thank you sharing your thoughtful analysis on turnkey model. I know brrrr method without a doubt will bring the max profit by adding value on distressed properties under market value to comps.

Most of us would agree that higher risk would generate a higher return. Those new investors who are investing out of state thousands of mile, if they use brrrr method, there are huge risk factors as we know. Especially in a highly competitive market, the only way you can buy a property under market value, is deals from wholesalers. Im fairly new but I had to move super quick on wholesaler's deals, and most cases, I am not able to focus w-2 professional job but just signed contract on assignable contract and have to send EMD without my regular DD. Also those deals are usually tenants occupied so you cant even drive by and take a look inside.

So my question to you is

How can a new OOS investor protect themselves to do brrrr when they have not much value to an experienced investor / mentor? No one would look at your chance to be wealthy as is theirs! I am grateful that many experienced investors have advised me and helped me to learn how to analyze a deal, but again, no one would consider as their own deals.

So my humble logistic is

I have to start safely having few properties under my belt, and getting experience “Before” I can speak to experienced / rockstar investors.

I know rockstars are only one getting a spotlight in BP but no one says any of their catastrophic failure here because they left real estate for good.

@Salvatore Lentini Thank you for your contributing your knowledge. This would really help new investors to think again. My factors that have been stopping are that how to wisely invest my capital. I have $100k cash and $300k in pre qual letter.

Should I go with 3-4 Single turnkey properties to start in mid west states that cash flow pretty good or buy two nice single families in a Class B+ nighbordhoods and good school rating areas and wait for appreciation but no cash flow?

My goal is to maintain my DTI good as now as building portfolio so I can continue leveraging OPM.

Thank you

@John Morgan there are diligent property manager who charges half of 1st month. Plus, section 8 is also not a bad idea so qualified tenants with valid voucher tend to stay many years. Again, everyday I learn something new but seems that there are many different solutions to each issue. Covid has impacted many in a negative way but allowed me to join their REIA local meeting thru a zoom to expand the network. Im no good mingling with others but I think that's a big part of REI.