All Forum Posts by: Lane Kawaoka

@Nathan Lacey Syndications and private placements, are basically deals that are more geared towards accredited investors where a GP sponsor takes the wheel of the deal - typically they are a professional. I personally got into it when my net worth hit around half a million dollars back in 2015. At that time, I had 11 rental properties, but I realized it wasn't really scalable, especially as your net worth grows and have more assets, you become a bigger target for litigation. That's when I started exploring the option of being a limited partner (LP) and a passive investor in syndications and private placements. It just made more sense and was a lot more scalable. Plus, I got to meet a ton of other passive investors in that space and moved away from the DIY (do-it-yourself) world.

Sure, there's a potential to make more money by doing those "buy, rehab, refinance" deals, but boy, is it risky! There is a paradigm shift that occurs when you're making a decent income, maybe a hundred or a couple hundred thousand dollars a year at your day job, and you become more aligned with being an accredited, passive investor.

It's different for those who are below that threshold or need to build up a portfolio of rental properties or investments to achieve that same level of cash flow plus their day job income. But eventually, everyone reaches a point where time becomes more valuable than money, and you shift away from the DIY route and embrace a more passive approach.

Haha! 

I totally agree with what's been said here. It's no secret that some people hop onto forums just to boost their stats and get attention with a flashy signature line. Honestly, I never really thought about it that way, but I guess it makes sense to keep answers concise to boost ones stats just for the vanity metrics.

But you know what bugs me? It's when people ask the same old questions or ones they could easily find answers to with a bit of research. You've probably seen it too, like those posts asking about turnkey rentals or whether to buy a house next door without doing any groundwork.

There's a famous saying that goes, "The quality of your answers is directly related to the quality of your questions." And I totally get that, except for questions that have been asked a zillion times before. Still, I think it would be better if we had more back-and-forth discussions here instead of just one-off questions and quick tips. I'll always open to help just as long as someone has done the homework and asking specific questions... the question after the first question basically.

I've been a passive LP investor a few times in this situation, it can sometimes feel like a scene out of "Lord of the Flies." You know, where the kids take over the island and stage a mutiny. In a similar fashion, within the LPs, there's usually a handful of individuals who step up and lead the charge. These leaders often engage a lawyer and start the process of subpoenaing the investor list to then rally everyone to pitch in for the legal expenses. However, I'd like to point out that being one of those ring leaders requires a tremendous amount of effort - which is why I was never that person. Consider if taking on that role is truly the best and highest use of your time and energy. If you're simply looking for representation for yourself, it might be wiser to hang back and wait for the LP mutiny to develop naturally. After all, what can a lawyer really do in this situation other than rack up billable hours? Now, let me be clear—I'm not offering any legal advice here. I'm just sharing my personal perspective. In my opinion, waiting for the LP mutiny to unfold might save you unnecessary expenses and hassle in what sounds like there is not much you can do. What is the reasonable cause other than LP hearsay?

In most cases, the Private Placement Memorandum (PPM) will protect the general partner against gross negligence, which includes cases of regular negligence - possibly applicable here. Ultimately, for your peace of mind, you have to trust that the GP has just as much at stake, considering their position as a key principal or loan guarantor, as well as the potential damage to their reputation. While emotions may be affected now, the GP should still have the best interests of everyone in mind.

Yeah, I totally agree with what some of the folks here have said. Starting with broker dealer sites like CrowdStreet can be a good way to begin your search for investment opportunities - but I would not stay there because those sites are broker dealers essentially middle men. Another option is to dive into the world of podcasts and YouTube channels dedicated to real estate. But hey, I would caution against just randomly picking anyone from there - instead find those tribes and find LPs to connect with than to talk with the syndicator/sales guy. It's crucial to find a reputable company that has a track record of managing over $1 billion in assets. That's a loose guideline to follow.

Funny thing... Once you start clicking on links and exploring social media platforms, it's like opening Pandora's box as Curt said. You'll be bombarded with all sorts of operators, some of whom might be faking it till they make it. It's a real challenge to separate real from fake. That's why I keep emphasizing the importance of building relationships with truly accredited, passive investors. Finding those people can be tough.

When I first started investing in syndications back in 2012, I was in the same boat. I barely knew any accredited investors, as I was still navigating my way into that category myself. I ended up investing with a few questionable characters, but hey, that's part of the learning process for passive investors. It takes time to find your network, your tribe, and the people you can trust.

@Kelly Stanton 

When it comes to finding passive accredited investors, it can be a bit tricky. You see, a majority of these investors prefer to stay under the radar and don't actively participate in meetups or local real estate clubs. They're usually in their late forties, fifties, or even older, making it challenging for younger individuals like yourself to connect with them - and they are busy so they are not chilling with a bunch of younger guys at the local happy hour spot after work because they need to go home to their families.

Moreover, many of these investors value their privacy and prefer not to reveal their identities openly. So, forums like this where they can lurk and observe without actively engaging make perfect sense for them.

Engaging in meaningful discussions, providing valuable content, and showcasing your expertise can help attract the attention of potential investors.

Regarding accredited investor status, it's much less of an important factor than you might. The truth is that the majority of deals, around 90-97%, accept non-accredited investors - these are 506B offerings. You just need to be connected to the right network of sponsors/operators. It's a common misconception that syndicated deals are only for accredited investors, but that's just the tip of the iceberg you are seeing above the surface that are mass-marketing their deal therefore it must be done as an Accredited only 506C offering. Most deals (506B) are actually accessible to non-accredited investors.

@Tracy Wang 

It's so confusing, and a lot of CPAs out there don't really have a clue. They're just using some commercial version of the intuit tax software too. They plug in the numbers, and if the program spits out the K-1, they file the individual state returns accordingly.

I personally had like 90 K-1s this year. Not too bad they are just K1s and not schedule c/e. I had to send in like five, six, or maybe even seven state returns via paper filings. And when I look at all that paperwork, I can't really find any patterns. Even as a CPA myself, it doesn't always make sense. Each state calculates income differently. It's like they have their own rules. Just one aspect, some include bonus depreciation, some don't, and some add a partial amount. And that's just the tip of the iceberg. Lucky to have computers and software that do a lot of the heavy lifting for CPAs. The software takes care of the calculations and even gives you instructions on what to do and where to mail things off. So, at the end of the day, don't stress too much about it. If your CPA is charging you extra for an additional state filing, it's time to find a new CPA. They shouldn't be charging more because the software does most of the work.

@Michael Hyun

I took a look at your journey so far, and I must say, you're doing a great job. Moving quickly and all. You're probably making good money at your job, so here's my suggestion: why not skip the whole hassle of buying individual rentals and go straight to syndications and private placements? I know it sounds crazy, but trust me, I've been there. I bought a bunch of rentals between 2009 in Seattle and up to 2015, had 11 of them out of state, and let me tell you, it's just not scalable. So many legal liabilities and headaches. I'm just trying to save you from all that trouble - plus its going to hard to be to unload them on RS.

Now, the real challenge is finding other truly passive investors like yourself. It's not easy. You won't come across them on internet forums or local real estate clubs. But once you do find them, it's a game-changer.

Regarding Real estate professional for the tax benefits. I get where you're coming from... But when you have your own direct ownership portfolio, you'll still have to recapture the depreciation eventually. All that hard work you put into it will need to be unwound. Let me know if you would like to chat more.

The first category of investable funds includes "lazy debt equity" in your home, followed by retirement plan funds such as 401(k)s, IRAs, and other investments. The primary focus should be on utilizing the home equity in their primary residence. This equity can be accessed through three main options: a home equity line of credit (HELOC), a cash-out refinance, or selling the property and potentially transitioning to renting.

The HELOC is an attractive option as it incurs minimal fees and only charges interest on the drawn amount. However, it may not grant access to the entire equity of the house. Nonetheless, it serves as a convenient starting point for most investors, allowing them to begin investing within a few weeks. As investors progress, they may eventually exhaust the potential of the HELOC and consider a cash-out refinance, which provides access to a greater portion of the home equity. It's worth noting that cash-out refinances involve associated fees, and some mortgage lenders may increase interest rates to compensate. As a last resort, selling the house and transitioning to renting can be considered, but this is generally a drastic measure.

@Alyssa Raines

Yeah, I totally get what you're saying about long-term investments. When I was buying rental properties, I initially thought I'd hold onto them for decades. But the reality is, as you become a more sophisticated investor, you realize that you tend to enter and exit these investments relatively quickly (3-10 years). It's like the lifespan of these properties is accelerated, kind of like dog years. The main problem with single-family homes is that they age rapidly, and if you own them for more than five or ten years, you'll start encountering major capital expenditure issues that hit you like a tidal wave. So the key is to sell before those big problems come crashing down on you.

With the new omnibus bill limited 2.5x deductions on conservation easements you might look at these other options:

First up, we have investing in oil and gas deals. You see, the tax code has incentives in place to reduce our reliance on foreign oil, and that means these investments come with some fantastic tax advantages. You can deduct your passive income, and on top of that, you can use the losses from the investment to offset your ordinary income. It's a win-win situation, especially for high-income earners who want to lower their overall income without relying on real estate professional tax status or having a high passive income portfolio.

Investments that allow you to take advantage of Section 179 equipment deductions. The beauty of this strategy is that it often flies under the radar of the IRS. By utilizing Section 179, you can generate substantial passive activity losses that can be used to offset passive income or capital gains from other real estate assets, all without the need for a cumbersome 1031 exchange. 

What are conservation easements?  Although these have been under scrutiny lately, many people still find them incredibly useful for decreasing their adjusted gross income, even their ordinary income, by about 30%. When going down this route, it's crucial to work closely with venture operators who are experts in ensuring that the project meets all the necessary requirements. It's a reliable way to reduce taxes without relying on real estate professional tax status or having a high passive income portfolio.