1031's and Syndication

[Garrett Smith]

Backstory:  I'm in the process of selling a property that has had a significant amount of appreciation.  It was purchased as a primary residence and I "house hacked" it for several years before relocating with work and it has remained as a full rental unit ever since.  However, due to the fact that there is no cash flow from the property and a significant amount of equity tied up (should net ~$250-300k), resulting primarily from the appreciation and essentially earning no return on that "new" money...along with the archaic laws/rules Seattle has/is enacting that will remain long after COVID ends, I decided to sell.  Fortunately the tenant was amenable to this (in Seattle you can not force them to leave, even to sell...even if their lease ends - not sure how that's even legal but that's a whole different post) and actually decided to leave earlier than their lease date.  Unfortunately, I haven't lived there for 2 of the past 5 years so my best option is to defer tax payment via 1031 as far as I can tell (if anyone else has a different take, I'm all ears). Also note, I did look into rate and term as well as a cash out refi to put some of the equity to use and/or enable the unit to cash flow and reduce the interest rate but ultimately the current state of Seattle, their rent freezes and anti-small landlord doctrines forced my hand.

Question (finally...I apologize): Is it possible to 1031 gains from a sold property into an interest in a syndication if you're a passive investor and not the sponsor? Also, as a passive investor, can anyone give me the broad strokes of any tax benefits they may also be entitled to similar to a solely owned piece of real estate or are those deductions pretty much off the table? I'm looking to find a good investment for the gains I should make but the $ amount is larger than I'm used to handling, my time is limited as I have a full time day job (that I enjoy and am not ready to part with), and I'm not opposed to purchasing another property (I have 3 SFR out in OKC) - preferably a larger Multi family or small apartment complex at this point. But due to time constraints and needing to role the funds from the future sale of the Seattle property relatively quickly, I thought syndication may be a good avenue. Any input would be greatly appreciated and again I apologize for the long winded "story" to preface my situation. Thank you in advance.

[Brandon Bruckman]

@Garrett Smith you can use syndication for a 1031 exchange, but it needs to be structured differently than most deals in the marketplace. Most deals are structured to make passive investors limited partners. That won't work for 1031 exchange. So you need a tenant in common (TIC) structure.

This is possible, but it’s harder to convince a syndicator to build a deal that way.

Another option is Delaware Statutory Trust (DST). Basically DST is large scale syndications built for 1031 exchanges.

Of course you can always buy direct and get a 3rd party manager. But it sounds like that would be time consuming trying to deal with your sale at the same time.