All Forum Posts by: John P.

I have not found what you say to be accurate regarding the TIC/1031 deals. It is many of the most common syndications. Like ODC for example.

Also, the DST's are fine but the sales costs are heavy which cuts into the returns in my opinion. They are typically in the 3-5% payout range after paying the sales guy his big front load fee. I am invested in many of them so am pretty familiar. I don't hate the DST but it has big drawbacks.

Paul- The 1031'ing to a TIC in a syndication is actually pretty common these days. I have heard of minimums between $500k to $3m so it's not for everybody.

I have no affiliation to this group but they even have a video about the process.  

https://grocapitus.com/1031-ex...

Also, I believe Brandon Turner's company, Open Door Capital, does the 1031'ing to a TIC. I have invested with them but not by 1031 so can't speak to that process with them. However, they seem to be pretty knowledgeable on things from my conversations with them.

There are many others. It's not always highly advertised but I have spoken to several syndicators that do it so just ask the syndicators you like and it might surprise you.

There is a question of who pays the attorney fees to create the tic/single member LLC/other documents. One syndicator I spoke to required $5k up front to do the legal work and another syndicator paid for it out of the investment money.

Lastly, a big issue to look into is what liability you are taking on when you enter into a 1031/tic transaction. Generally, it is my understanding, you are signing on to the loan. Though the loans are often non-recourse loans there are exceptions (the bad boy carve outs) and my understanding is some banks require each TIC investor to be jointly and severally liable. Thus I think there is a fairly high level of sophistication needed before entering into a TIC/1031. I am still in the midst of doing my own due diligence with this process.

 That's surprising because I believe most syndications are taking 1031 money now so the way you describe it would be a problem for all the investors in the syndication. I'll have to research that one.

Thank you. That's helpful. What do you mean by gigantic counterparty risk? My understanding is that I enter as a single member LLC!?

I appreciate the replies. You can definitely 1031 into a syndication. Basically you enter into a TIC as to a piece of the real estate. So you are in the "deal" but slightly different structure than the normal LPs in a syndication. I know that part is possible and actually very common now.

The DSTs are more common but they don't return as well as the syndications. The advantage of a DST might be that they tend to be large companies so it's a bit more like buying into a mutual fund whereas some syndications are people doing their 3rd, 4th or 10th deal... and not their 100th!? Plus, more regulation with DSTs I believe.

My question more is the why not do this?  It seems to me I get much better return without a ton more risk.

I have a number of single family homes. I have sold a few and 1031'd the money into DSTs. I don't love those for a variety of reasons. I have learned recently that one can 1031 into many syndications. This is appealing as the syndications tend to, at least on paper, pay out much better than DSTs... while still giving me what I want which is mailbox money. I am curious why would one not do this? For example let's say I have a house worth $1m only producing $5k a month in gross rent. I could 1031 that into a syndication with a preferred rate of 8% let's say. Downside? I realize there is risk with a syndication but is the risk really that much greater than a SFH? Curious what all you experts have to say!

 As others have said doing due diligence on the syndicator is my priority.  I personally don't get into the numbers that much because the reality is I do not know 1/10th of what any syndicator I invest with knows (hopefully).  I prefer when the syndicator has more of their own money involved but even then they might have borrowed that so who really knows!  Track record and years in business are important to me. The longer the better.

Systems, systems, systems and then refine the systems.  Always sharpening the tool!

 I was a strong "no" until you said: 

Another part to the story is y friends dad has helped with the rehab of this unit as well.

To me that changes the equation and I would say yes but with a written lease, security deposit, etc....

I don't have anything to add but will be interested to hear what people have to offer. I too am interested in this.