All Forum Posts by: Steve S.

@JP Donoso If you are interested in being a passive investor, I would start by reading The Hands-Off Investor (Brian Burke) or Passive Investing in Commercial Real Estate (James Kandasamy). These books will give you a great foundation on syndication investing. There are lists of syndicators out there. I'll PM you a link. You can also find syndicators on the podcast circuit. I would recommend The Real Estate Guys Radio, Passive Wealth Strategies or Passive Investing From Left Field.

@Pratik Sheth Listen to this week's episode of The Real Estate CPA podcast - Exit 01: How to Reduce Capital Gains Taxes on Real Estate with Passive Losses...  They talk about your situation.  

@Pratik Sheth  First of all, I am not a CPA. But I did hear a real estate CPA talk about a "lazy 1031 exchange" that doesn't involve all of the rules and paperwork of a 1031 exchange.  When you sell your SFHs, invest in apartment syndications that same year so that you can take advantage of the bonus depreciation to offset your capital gains. Virtually all syndicators are doing cost segregation studies to take advantage of this accelerated depreciation. You do not have to be a REP to do this. When the syndication goes full cycle, you will have depreciation recapture, but just reinvest in another syndication in that calendar year and you will reap those tax benefits again. 

@guy idan  It's great to vet the sponsor, but you should also understand the "nut and bolts" of each syndicated asset that you plan to invest in. Most of the passive investors here would recommend reading The Hands-Off Investor by Brian Burke. Also, listen to podcasts that are geared towards passive investors like Passive Wealth Strategies for Busy Professionals and Passive Investing From Left Field. I'll DM you some syndicators that I know, like, and trust. 

@Peter Morgan Some other great books for learning about passive investing in syndications are Passive Investing in Commercial Real Estate (James Kandasamy) and The Definitive Guide to Underwriting Multifamily Acquisitions (Robert Beardsley). Also, listen to podcasts geared towards passive investing like Passive Wealth Strategies for Busy Professionals and Passive Investing From Left Field.

@Monica C. I have invested in a couple of dozen syndications with about 10 sponsors across a variety of asset classes in different areas of the country. I found most of them through real estate podcasts. If I like what I hear, I will go to their website to schedule a call to interview them to see if our investing philosophies align. There are several sponsor questionnaires available online. Always ask for their track record of full-cycle deals. I also ask if they can reduce their minimum on my first investment with them. If I have gotten to know, like, and trust them, I will get onto their deal list and vet their offerings. Ultimately, I would like to invest in more deals with a smaller number of sponsors as I see how their deals (that I have invested in) perform. Good communication before, during, and after a deal has gone full cycle is important to me as well.

Some of the podcasts that I have found to be helpful in finding syndicators include The Real Estate Guys Radio Show, The Passive Wealth Strategy Show, Passive Investing From Left Field, and The Cash Flow Connections Real Estate Podcast.
 

The Hands-Off Investor by Brian Burke is excellent for passive investors but should be read by all syndicators.

"Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1." - Warren Buffett
I agree that capital preservation is of utmost importance in any type of investing especially when you are handing money over to a syndicator. Some of the things I look at when determining if the underwriting is conservative in a multifamily deal (after vetting the sponsor) include the following:
1) Exit cap rate at least 0.5% higher than the entry cap in the pro forma
2) Breakeven occupancy is less than 80% (personally I like to see it below 70%)
3) DSCR of greater than 1.25
4) Conservative stabilized rent growth
5) IRR partition ratio of at least 25/75 meaning 25% of your IRR is coming from cash flow from rental income and 75% from sale proceeds and return of capital. I like to see the ratio at or closer to 30/70. The closer these numbers get, the faster your money is returned to you during ownership of the asset (preservation of capital).

Also, read Brian Burke's book, The Hands-Off Investor and listen to podcasts like Passive Wealth Strategies and Passive Investing From Left Field.

I agree with the others - the most important part is the sponsor. Talk to current investors and and have the sponsor send you a summary of their track record. Experience is huge. Make sure they are responsive to your early communications.