How to find passive partner opportunities in multifamily deals

[Evan W. Jones]

I am interested in using my W-2 job salary to invest in multifamily apartment complexes.  I would like to start out by being a passive investor in a few deals to learn the process.  I would welcome your suggestions on how to find and become involved in this process.

Also, it is my understanding that returns from these deals end up being tax free as a result of depreciation on the property.  True if done correctly?  

Thoughts? Advice?

Best Regards,

Webster

[Joel Owens]

Evan it's about what you want to accomplish and how much you have to invest.

I am doing some sponsor ships now I am setting up with investors but I focus on retail these days as multifamily frothy right now and overvalued in a lot of markets.

I like safer margins with more room to move with future market shifts.

If people want to 1031 into passive opportunities you run into TIC and DST models for the sponsor which are more complex and take more expense to put together for a syndicator.

This is why lot's of syndicators either sell smaller shares at 25k a share from a bunch of investors or they simply have larger investors with cash out in bigger money of 300,500k,1 million that is not 1031 money and is sitting around liquid. The syndicator tells the investor that to simply figure in long term capital gains tax on the exit.

Some people with 1031 money have to use the TIC or DST model because over the years with other properties they have built up a lot of depreciation recapture and capital gains that would wipe out a considerable amount of their wealth that has been accumulated.

A syndicator has to make sure you are accredited. There are some ever changing rules and some crowd funding going on where investors pool money but those platforms take a chunk from the syndicator on the deal and makes deals harder to work.

I just believe in simplicity. When things are simple there is less to go wrong. If you start getting too creative and say if this, and this, and this, and this happens then everything will turn out great is when the SNAFU's clusters usually happen.

For me the smaller amount investors want to do sometimes it is not worth it for me to syndicate. I would rather have larger investors  that can move from syndicated deal to deal without running out of funds.

Example if I put together 100 investors with 50k each to invest that is a logistical nightmare. Just not something I want to do.

There are some syndicators doing smaller properties like building duplexes to quads where a small amount makes up a big part of their raise. For example they might be raising only  200k for a project where a retail center for me the raise might be in the millions for the 25% down and the rest  a regular loan. 

Hope it helps.