All Forum Posts by: Ian Ippolito

Quote from @Tom T.:

I've been learning a lot about real estate investing and am eager to take the plunge. I currently rent, do not own primary residence. I want to learn as much as I can in my first year of investing so I am thinking to try a few different things:

Syndicate: I have some capital that is in stocks that I could put in a syndicate. Get more real estate exposure (none in my overall portfolio). Get better at analyzing deals and learn from professionals to see what they look for in their PPMs/deal analysis. Any syndicate recommendations?

House Hack: once my lease is up in a few months, plan to buy 1-4 unit and live in it and rent out the rest. Get some hands on experience with land-lording. Plan to self manage, but hire out all repairs (e.g., handyman, contractors). Do not want to fall into the pitfall of working "in the business" not "on the business". Eventually move out once it can cash flow (and hire a PM), maybe after a couple years.

Long Distance Rental: look for markets with good cash flow. The minimum bar is that my first deal just won't lose me money. If I can just be break even (with reserves) and have a tenant paying off the mortgage that is good enough. Will of course try for better but may be difficult being long distance & a new investor.

My thinking is to do all of the above within the next year. Since I haven't done any actual real estate investing before, learning is the most important part. I am doing all of these will fast-track my experience as an investor.

Anything you think I should watch out for? How is this plan for a rookie investor? Any syndicate recommendations? Or general advice?

Every investor has a different risk tolerance, comes from a different financial situation, and has different financial goals. So a sponsor that's great for one investor will probably be terrible for another (and vice versa).

I'm a conservative investor, so when I invest in multi-family I prefer sponsors that have at least one full real-estate cycle of experience, little to no money lost, low leverage, and high skin in the game.

And there is a multi-family operator that has multiple real estate cycles of experience (decades) and it's track record claims no money lost in that time. It also regularly puts out deals at low 65% or less LTV, and high 10%+ skin in the game/co-investment etc.

They market under 506B so are prohibited from posting publicly on the Internet and instead function by referrals. So if you're interested, private message me and I can give you their details.

Quote from @Dave Vona:

Thanks @Ian Ippolito.  The one year there were losses from a fix and flip project that went overbudget.  The flip is in a partnership so the loss was reflected on a K1.

The other year, I had some tenant issues and property theft, so the Net Income on my rental property P&L was negative.  

My W2 only reflects income from my job (not real estate related).  If they only use that W2 income, then I would qualify.  I wasn't sure if there was a line on my income tax return that they would look at, such as Adjusted Gross Income (which takes into account the above business losses).  

I've personally never seen a sponsor or platform use just the W2 income and usually they look at AGI. As you mentioned, AGI is more comprehensive and takes into account all income (not just wage income).

Quote from @Dave Vona:

I understand the basic income definition for an accredited investor. It says (for an individual filer): "you must have an annual income of over $200,000 in each of the two most recent years and a reasonable expectation of the same income level in the current year". 

However, if your W2 income exceeds $200K, but there are rental property losses (not including deprecation) and/or a fix and flip losses that bring your income below $200K, are you no longer considered an accredited investor?  

Thank you.

First, there are 2 ways to qualify as an accredited investor.

1) One way is by having at least $1 million net worth.

So if you have real estate losses that also come with a loss of property value (and which is probably the case), then it could affect your net worth and thus your qualification.

2) The other way is by having $200k per year income over the last 2 years ( if filing singly) or $300k if filing jointly/married.

In this case, most sponsors who perform a verification of accredited investor status will look at W2s. And real estate losses will show up there and so this will affect the result.

Quote from @Roy Mitle:

Thank you all. 

This is exactly what I'm looking for -  stabilized real estate syndications or funds where depreciation has mostly phased out.

Unfortunately - most syndications structure deals to maximize tax benefits with cost segregation, so I end up with passive losses.

Any ideas on how to get passive income....

 Roy, that's the opposite of what most people are looking for. But there are a few sponsors who essentially do "buy and hold indefinitely".  So if you purchase an existing investor out (or do it yourself and hold for a while) the depreciation will run out and the distributions will be unshielded passive gains.

Another option is certain real-estate debt funds which generate passive income (since there is no depreciation for these). Not all do though...and you have to ask the sponsor during your due diligence.

Quote from @Tom Grieshammer:

I have 120,000 that I want to maximize long term profits. I’m a full time teacher and swim coach so I can’t go into real estate full time. Should I invest in a syndication instead of buy my own investment property? Can I even invest in a syndication with my relatively low income as a teacher/coach. 

I invest in both syndication/crowdfunding (i.e. passive) and directly on properties (i.e. active).

There's nothing in theory that stops you from investing in syndication/crowdfunding deals. Many of them have minimums of $100k , $50k and sometimes even much less. So you have enough money for that.

However, you're not an accredited investor so you wouldn't get access to the majority of deals. 

And (in my opinion anyway), the vast majority of the nonaccredited investor deals have issues that are personal deal breakers (such as not enough experience, not enough skin in the game, uncompetitive fees and promotes, etc). However a different investor coming from a different place (different risk tolerance, financial situation and financial goals) will disagree with this.

Another real-estate option for you, might be to just invest in a public REIT via the stock market (and it's more liquid than any private placement). You will want to check with your financial advisor on all of this.  Good luck!

Quote from @Roy Mitle:

 I also have a rental property. My rental property generates passive losses from depreciation

If I invest as LP in passive income generating properties then I presume I can cancel my passive losses on schedule E from rental with portfolio income (K1) from these rental properties. Is this correct?

That seems like free money :-)

How does one find fully depreciated assets that are generating passive income. Mostly I see investment opportunities which have passive losses due to depreciations.

I am not a CPA so am prohibited from giving tax advice. Always check with your own accountant before making any accounting, tax or investment decision. The following is personal opinion only and could be wrong.

Yes, you can do that. Specifically you can use passive investments (i.e. syndications/crowdfunding) to generate passive losses and use those to offset other passive losses.

Ideally you want a "super shielder" where the passive investment shields not only all its own income but has left over depreciation that you can use elsewhere.

Also, hopefully you know the benefit is generally only temporary. When the property is sold, depreciation is recaptured and so the benefit is paid back. 

The exception is if you do a series of 1031 exchanges with the passive investment. This strategy is called "defer, defer and die": This allows you to defer paying taxes indefinitely until you die ( and then when your  pass away your heirs inherit a stepped-up basis so do not have to pay tax either).

Quote from @Tom Grieshammer:

I have 120,000 that I want to maximize long term profits. I’m a full time teacher and swim coach so I can’t go into real estate full time. Should I invest in a syndication instead of buy my own investment property? Can I even invest in a syndication with my relatively low income as a teacher/coach. 

I invest in both direct real estate (via residential rentals) and syndication/crowdfunding passive investments. In my opinion, both have their pros and cons and neither is 100% superior to the other. And I feel the ideal portfolio can benefit from the diversification of both.

I feel directly owned properties are great because they give me maximum control and the ability to tweak them exactly how I want. So for example I'm very conservative and don't want any debt on them because I feel this hardens them in case of a severe recession. That's unusual and it would be very difficult to find a passive investment like that.

Also direct control means I know exactly what's going on. And, for those people who have more time than money, they can put in sweat equity into directly owned real estate. This will increase the return above what can be obtained on a passive investment.

The flipside of having the power to control everything is that it can be alot of work (and a full-time job if a person is putting in sweat equity). Not everyone wants that or is willing to put up with that. It also requires gaining a level of sophistication and knowledge that not everyone has the time, inclination or ability to do. And someone jumping into this as a complete newbie can expect that they have a decent chance of making some expensive newbie mistakes.

On the other hand, I feel one of the main advantages of passive investments (via syndication/crowdfunding) is that I can hire a manager who has years more experience than I can ever hope to obtain myself. And once I finish the due diligence, my work is done: it's completely passive. Also, rather than taking a large amount of money and investing into one single directly owned property, I can split it up into much smaller chunks across many different passive investments. This gives much better diversification protection across geographies, asset types, strategies, investment subclasses etc. versus putting all the eggs into one basket.

The downside is that it's not for everyone, and a person has to be comfortable with turning over control to someone else. That means learning how to vet a manager. Not everyone has the time and ability to do that and not everyone feels comfortable turning over control. So I feel it's not a fit for everyone. Also there is a management fee to pay for all of the above. So someone who is looking purely to maximize potential return (and has unlimited time) is unlikely to find this a good fit.

Hope this helps.

Quote from @Nick Volz:

I have been doing some reading and hear all these great things about syndications and getting into and being a part of these big deals. 

-How much to get started?

-Where to find these type deals?

By the way. I'm currently reading a book right now that it is pretty informative called: "Fire Yourself"

Nick, there are literally hundreds of these deals that come out every month.And syndications include crowdfunding deals which are essentially the same thing except they are allowed to advertise over the Internet. So there are websites as well where you can see these deals.

One important thing is that there is a big divide between the investments that are available for nonaccredited investors and accredited. And I'm a conservative investor so others will disagree. But, in my opinion, the nonaccredited offerings are generally pretty poor (sponsors generally don't have full real estate cycle experience, higher expenses, fees and promotes charged to the investors, less or no skin-in-the-game, etc).

Quote from @Spencer Cuello:

Has anyone worked with a multi family syndication company they would recommend? I'm looking for minimum investment sizes on the lower end to start. 

I've invested in a multifamily syndication company that has a rare track record of multiple real estate cycles with no investor money lost. Debt is conservative and usually around 65% loan-to-value or less, generally fixed rate financing. They put major skin in the game at 10%+ and fees are normal/inline (and not inflated).

They market under 506B so cannot advertise on the public Internet and work off of referrals. if you're interested in the details, then private message me.

Quote from @Christopher G Bogle:

Considering fix n Flip around Tampa but found Holdfolio and others.  Invested $40 k there.  Considering 200K more in syndication vs fix n flip.  Any thoughts?

I invest in both direct real estate and syndication/crowdfunding passive investments. In my opinion, both have their pros and cons and neither is 100% superior to the other. And I feel the ideal portfolio can benefit from the diversification of both.

1) Holdfolio isn't a match for me, personally (due to not enough experience, skin in the game, etc). But others investors with different risk tolerances, goals and financial situations invest in the platform.

2) I feel directly owned properties are great because they give me maximum control and the ability to tweak them exactly how I want. So for example I'm very conservative and don't want any debt on them because I feel this hardens them in case of a severe recession. That's unusual and it would be very difficult to find a passive investment like that.

Also direct control means I know exactly what's going on. And, for those people who have more time than money, they can put in sweat equity into directly owned real estate. This will increase the return above what can be obtained on a passive investment.

The flipside of having the power to control everything is that it can be alot of work (and a full-time job if a person is putting in sweat equity). Not everyone wants that or is willing to put up with that. It also requires gaining a level of sophistication and knowledge that not everyone has the time, inclination or ability to do. And someone jumping into this as a complete newbie can expect that they have a decent chance of making some expensive newbie mistakes.

3) On the other hand, I feel one of the main advantages of passive investments (via syndication/crowdfunding) is that I can hire a manager who has years more experience than I can ever hope to obtain myself. And once I finish the due diligence, my work is done: it's completely passive. Also, rather than taking a large amount of money and investing into one single directly owned property, I can split it up into much smaller chunks across many different passive investments. This gives much better diversification protection across geographies, asset types, strategies, investment subclasses etc. versus putting all the eggs into one basket.

The downside is that it's not for everyone, and a person has to be comfortable with turning over control to someone else. That means learning how to vet a manager. Not everyone has the time and ability to do that and not everyone feels comfortable turning over control. So I feel it's not a fit for everyone. Also there is a management fee to pay for all of the above. So someone who is looking purely to maximize potential return (and has unlimited time) is unlikely to find this a good fit.