Originally posted by @Corey M.:
Hi,
I'm wondering why people choose turnkey over syndicates? From what I can tell, Syndicates tend to have a much larger return and are completely passive, just like a turnkey.
Would love some feedback.
It also depends on the type of syndication. The ones I looked into were large apartment complexes. They are few and far between decent opportunities. You could be looking for a year or longer before the right one comes along for you. But you have to be "connected", that is, know people who will bother to contact you because they know you qualify, have an interest and can perform.
Something most people don't think about is the term. Most financing for syndications run about 5 to 7 years. It isn't 30 year money. That means when the note comes due in 5 years on the apartment complex, you have to hope there is either a market to sell the syndication or available financing to refinance. If the market takes a dive, and sometimes it does, then financing and selling become very difficult and you don't control that.
The success of a syndication is also dependent on the primary people being knowledgeable, experienced and making the right choices. You generally have no choice in the level of improvements made or the time of selling. I've read of a couple of syndications that made no money just because of things like not "scoping" the sewer system when purchasing and it was very expensive to replace all of the plumbing and sewer lines and was a time waster. Most syndications require that your money is in the syndication for a minimum period of time and you can't access it if you need it. Sometimes syndications have "frozen" investor's redemptions based on the need of the syndication's requirement for capital. Most people don't actually read the prospectus and that is a big mistake in itself. Syndicators tend to be "pie in the sky" and overly optimistic, so you need to know actual market conditions of your target zip code.
For most investors Syndicatons are passive, hands off, and bragging rights that they "have 500 doors" even if it's only fractional doors. ;-)
Turnkeys on the other hand are all about you. How do you want to invest, when do you want to refinance, when do you want to sell, it's far easier to get into Turnkeys both by investment and by sheer quantity. Do you want to improve the property and sell, have renters or a little of both. Turnkeys put the control button in your hand.
I picked Turnkeys in Phoenix instead of Syndications simply because I like to control my destiny (or as much of it as I can get away with) and for me the numbers in reality, have worked out far better than the Pro Formas I saw for the Syndications I analyzed.
That doesn't mean I won't buy into a syndication in the future, I just don't think the timing is now.
Your mileage may vary.
