Is it better to buy a SFR/ Townhome or invest in a Syndicate

[Rama Krishna]

Hi All,

Can you please share your opinion on what is the best Strategy for long term :

1) Is it better to buy a SFR/ Townhome.

2) Invest in a syndication where they are claiming to have 20% to 30% return per year over 5 year period based on their track record. And keep doing syndicate investing without directly buying any properties.

I am long distance investor looking for either turnkey or recent construction which doesn't require any big rehab work.

Thanks for your opinion,

Rama

[Todd Dexheimer]

First, this answer will depend on you and your goals. What is important to you? If you have the need for control and being able to hold the real estate in your name, then buying turn key/new will suit you. holding RE yourself can allow for really good returns if purchased/managed right and sold at the right time. If you are able to buy at a 25%+ discount then I think SF's are great. 

Syndication can be of benefit if you want a hands off approach. It can also be good if you plan on doing syndication in the future or buying that asset class in the future. It helps showing experience of 100-200+ unit buildings on your track record when you go to do your first big deal for both lenders and RE brokers. Showing a SF or town home will not help too much. You may be able to get in on the GP side as well if you sponsor the deal, help raise money or maybe some other tasks. 

My bias is toward Multi-family. I like them because of the stability of the asset class and the ability to operate it like a business. I own 50 buildings 1-4 family and see all the inefficiencies they come with. Apartments have inefficiencies, but they are easier to control and correct. 

Lastly, if you are being told 20-30% on your money from a syndication company, then run! 15-20% should be achievable, but anyone telling you much more than that is not being conservative in their approach. Underwriting conservatively in this market in my mind is one of the most important factors for future sustainable success.