Real Estate Syndications/Funds and Tax Implications

[Duke Giordano]

Hello All,

I am looking to dabble in the Real Estate arena and mainly looking at syndication deals as well as Funds that have tax benefits. My goal is primarily to diversify from the market more than a public REIT, but also to help with some sheltered income from a tax standpoint as someone who has all W2. As someone who currently has all W2 income 500k+ I am trying to figure out syndications/Funds that are quality, but also wont completely turn my taxes int a nightmare. Believe it or not I still do my own taxes. I was looking at Broadstone, but their 200k min kinda steep, them looked at MLG Fund IV but it appears that with the regular fund you would get like 10+ K1 which would make taxes a pain and their 1099 MLG Fund i think you then lose Depreciation which would be one of the main deductions I get, (Since I dont think I can use pass through deduction at least as I understand it since my income is already over 500k). Just trying to see if anyone has experience/recommendations on high quality syndicators/funds that have favorable tax options in my circumstance?

Thanks in advance

Duke

[Alina Trigub]

@Duke Giordano

There're tons of posts on BP asking for quality syndicators. If you just reverse engineer and search, you'll get busy for weeks reading through it. It will also give you an opportunity to decide who to reach out to based on the responses posted. 

In terms of your tax related questions, syndications is a way to generate passive losses that can be netted against passive income. Investing in a REIT offers ordinary income that is treated at your W-2 rate, and hence not the best strategy (or at least not the only one to rely on) for someone in a higher tax bracket. This is a high level view only. To get a full picture you'd need to consult with a CPA. Note, I'm not an accountant (anymore) and not an attorney, so this is only an opinion and not an advice.

Here're an article that will help you come up with the questions to ask the deal sponsor:

https://www.biggerpockets.com/member-blogs/10850/76728-questions-to-ask-a-syndicator

Here's also a sample of a post that you should look for as I mentioned above: 

https://www.biggerpockets.com/forums/32/topics/720094-questions-about-syndicators

My best!