How to get 10%+ passive income

[Sheri Fluellen]

I’ve been real estate investing for over 15years, acquiring a large nest egg of net worth. The problem is we aren’t getting much cash flow from the portfolio for a variety of reasons and our rentals, flips, and short term rentals are time and energy intensive. I’m considering selling 8 of our least desirable and profitable properties, which would result in profit of $1.4M. Would like to 1031 that into some truly passive investing that can get us at least a 10% return so we can travel abroad with our kids for a year. I am aware of and learning more about LP positions in large multifamily syndications. (Would love to do GP but still working on that). Any other options I’m missing that could meet my needs?

[Dave Foster]

@Sheri Fluellen, As several have alluded to a membership position in an LP will not qualify for 1031 treatment.  It sounds like you're wanting to take a hiatus and travel for a bit.  But you're not ready to drop off the face of the earth and never return.  That can be a great plan.  We took off several years in the middle to raise our boys on a sailboat and have never regretted a minute!!!

But you're going to want your capital war chest intact when you get back.  So starting with the 1031 is key.  selling and paying tax to be able to move into a passive investment where returns may be marginally better than you can get elsewhere with a 1031 may not be your best bet for capital return.

In addition to that you'll want to look at your timeline and the timelines of the syndicators you want to work with (if they can offer you a TIC position to accommodate your 1031). If you're only wanting to take a year or two. But the project window is 5 years then you may end up being frustrated and impatient in an opportunistic market correction with time and desire but no money to start your own things with.

I'd offer (and ready to be flamed :) that a shorter term DST would be a better investment for you. The returns will be generally slightly less than those promised by the syndicators. But the time frames may work better for you. And the difference in going into a DST at 6-7% but paying no tax versus a syndication where you pay the tax up front and get a couple more points of potential return might actually be tipped in favor of the DST.

I'd suggest commercial real estate as the best of all worlds for you as it's passive, you're in control, and leases are much longer.  But again, you buy these to hold and I'll bet after a year or two having fun you'll be raring and ready to do your own thing - perhaps your own LP.