All Forum Posts by: Daniel Han

For Ashcroft and other investments, I'm seeing refinancing and sale of the properties. For one refinanced the property, they caught up paused preferred returns and restarted monthly distribution. For the sold property, the overall return is within the expected return range, lower than what I was expecting, but still positive return.

Given that the interest rate and rate cap have been trending down, I expect there will be more properties being refinanced with more permanent debt. and it will change the overall return profile.

For some properties with permanent debts, there hasn't been any disruption in the actual distribution payout.  For some properties, they refinanced and restarted the distribution payout.

for many properties, distribution payout is paused but it's still accruing. 

I don't think this is illegal.... you are basically a silent partner in an apartment business.  If the business is not doing well, you don't get paid.

I don't think that's true. There are some single property deals that I'm on. One had long term debt to begin with. There has been no disruption at all. Another one had recently been refinanced and they caught up all distribution and started monthly distribution. The last one was planning to refinance but didn't work, I believe they are looking for options.

Does it mean that an LLC that sells used goods on Ebay/Amazon with non-accredited investors can invest in syndication as long as it has more than 5mil assets? seems like the "specific purpose of buying securities" is something easy to get around.

I think delays in closing are common. I have a commitment outstanding with a sponsor that hasn't been called for 5 months. It's not something I hold against them knowing that they are being extremely careful with a new deal. It's better to invest in good/conservative deals than to get your funds deployed in bad deals.

I invested in BAM fund 2 last year. The last communication was the final property is to be closed end of May. You might want to drop them an email to see if things are moving according to the schedule.

There are a few models I have seen regarding investment wiring and distribution schedule.

1. distribution starts when the property is closed. investors are expected to wire funds 1-2 months before the closing.

2. distribution starts when the property is closed. investors are expected to wire funds 2-3 weeks before the closing.

3. distribution starts about a month after funds are wired regardless of when the property is closed. if you wire funds early, then there is a bonus/interest paid.

4. investors' money back-fills already closed property. the distribution starts almost right away.

it gets a little tricky to get the timing to work out exactly right.

 Depending on the type of investment, the forced depreciation is about 50-60% first year for MF syndication based on my experience. If you had $200k gain and re-invested the entire $500k a same year, then you will generate $250k passive loss. This loss will offset your $200k gain and the net $50k loss is on balance. This is what people refer to "lazy 1031".

However, as @Dave Foster mentioned, you will have to deal with depreciation recapture when the syndication property is sold. Depending on the syndication return target, you might have to keep investing other money (to generate more passive loss) to defer tax.

I was using Lane's example to see what would happen if there was huge capital gain, to begin with. I think your example and Lane's example make sense to do "lazy 1031".  but I think it might not work for all cases. 

As far as I can tell, there is no syndication investment that generates 100% passive loss. If the goal is to defer capital gain's tax, then there might be a threshold amount that might make sense to explore 1031 even though it might be a big hassle.

let's say you invest the entire $5M into syndication which generates 50% passive loss, don't you still be left with $2M+ capital gain to be taxed?

How would you completely offset the massive capital gain?

@Lane Kawaoka

What if you had $200k passive loss built up, but your 7 SFHs resulted in a $5M capital gain?  Would you still have gone with the syndication route?

Here is my limited understanding.... I'm probably way off but I would like to get some professional input on this.

Let's say that investor used up depreciation and there was good appreciation past 20+ years. Roughly, most of $1.2M would be taxable one way or another. If you invested the entire proceeds in MF syndication which gives you 55-60% passive loss, the investor would still have a decent amount of tax liability.

However, if you find 1031 exchange, then the entire tax liability is punted down the road.

The ideal situation might be the investor liquidates SFH properties and 1031 into an MF run by the syndicator.