All Forum Posts by: Amit M.

@Jay Hinrichs regarding your point #8, what is interesting going forward is seeing how capital calls play out. What percent of GPs making capital calls will actually manage to minimize losses vs GPs that end up loosing all that money too for the LPs? 

Unfortunately LPs, in addition to being in bad deals are also deciding on capital calls. Personally I think more often than not it will be throwing out good money after bad, but seeing which capital call end up saving the day and which won’t will be interesting. 

Another good question is if the syndication failure rate will be lower or higher than during the Great Recession of 2008-2010. Of course we didn’t have as active of a BP, social media, etc. scene back then. But flipping SFHs was out of control during that time and got a lot of media attention. I think syndications were less known to the general public back then compared to this cycle  

Some interesting post-mortem analysis to be had for sure; I’m just relieved that I’m sitting on the outside looking at all this. But it’s times like this that create valuable investing lessons to be had nevertheless. 

It’s great for legacy investors. Much more challenging for newbies. 

The issue imo with DSTs is that you’re buying into a market where a lot of commercial RE is presently priced high, and some is going down in value too.

You should do a thorough analysis of the tax impact. 
1- definitely try to time sales into two separate tax years

2- I’m unclear why you expect 30% cap gain hit. Keep in mind: For the 2024 tax year, individual filers won't pay any capital gains tax if their total taxable income is $47,025 or less. The rate jumps to 15 percent on capital gains, if their income is $47,026 to $518,900. Above that income level the rate climbs to 20 percent.

But ultimately it’s  personal decision, loaded with plus and minuses. 
let us know what you decide to do!

As 1980’s legend blues guitarist Robert Cary aptly crows…the forecast calls for pain.

I say (objectively) name the syndicators! How else can people know about their winning *and losing* projects? Matter of fact a downturn in the market is a good time to do so. Someone should compile a list of losing projects and sponsors, so their complete track record can be measured. (An entrepreneur could possibly monetize this information, as it’s valuable for future syndication investors ;)

2 observations after reading this thread:

1- lack of transparency on individual sponsors is a major issue. They all like to tout their killer deals, yet it’s usually hard to hear about their losers.

2- syndications (good and bad ones) tend to make easy money during up markets, get a lot of publicity and consequently many investors. And when the music stops it’s usually crickets, as many LPs are embarrassed to admit the losses and the syndicators prefer a hush hush environment (which is why some LPs don’t want to name them.)

Personally I have always found syndications too risky, especially given that I have zero control, other than reading their disclosures and trusting in their accuracy. So if you’re going to invest in them, at least try to get in at the first half of an up market cycle. Of course that’s hard to determine, but I think buying in from 2015-2019 was certainly better than in 2020-2022. And that determination wasn’t so hard to make, even back in 2020-2022 when we knew interest rates would rise, multifam were getting flipped left and right, and cap rates were insanely low.

TLDR: in the real estate game ya gotta know when to hold ‘em, and when to fold ‘em :)

Good luck everyone.

@Norman Schultz hi and thanks for updating us, even though it’s been a disappointment :(

As I asked earlier (2years ago) in this thread: you hear a lot of success stories about DSTs when the market is doing well…and when we're in a downturn…it's usually crickets. And it looks like the institutional quality and low debt features of most DSTs aren't immune to good ole market forces. Numerous DSTs are now curtailing distributions, and I don't think they are even allowed to make capital calls, unless they blow up the DST structure and turn it into a taxable (and very unattractive) syndication.

So I think carefully considering market cycles is still a necessary analysis, even though it’s always a guess or speculation on the investors side. But I know I made the right call when I sold some properties end of 2021/early 2022, and did not 1031ex, but rather paid taxes and eliminated debt on the properties I wanted to keep.

I'm hoping to keep what I have for as long as a I can stand managing them (at least they are nice properties in prime locations…but as I get older my tolerance for hassles diminishes ;) So I don't fool myself for a second acknowledging that there are all kinds of external factors that may compel me to sell. Hence I'm still keeping DSTs as a future option. Without a great next move option like I had before (eliminating debt), paying cap gains to get to a cash position is very expensive. And for what? To dollar cost average into an S&P 500 index fund? Honestly I'd probably end up diversifying sales proceeds into stocks and some into DSTs to broaden my base. I don't think I'd do a STNL NNN property as the cap rates are still quite low, and it's an all or nothing bet…and there have been plenty of formerly "solid" STNLs going dark left and right, and in all sorts of decent markets. Unless you specialize and invest a lot of experience and knowledge into STNLs, I think the risks are just too highly concentrated to dabble in that space. So as of now I'm keeping my select rentals and hoping they make a nice equity appreciation comeback in the future!

Keep in mind, the real estate market is generally in the sh!tter big time these days, so you need to be very careful to not get burned. As we speak syndications are blowing up left and right, so buyer beware. Although DSTs are more conservative, they ain’t doing so hot either. Plus I don’t think DSTs make sense unless you need the 1031ex privilege.

If you want passive RE exposure why not look into REITs? You mentioned generating income, but I’m not sure that you’re better off investing in stocks, bonds and REITs. I wouldn’t solely rely on dividend income, as you’re probably better off applying the 4% (or 2.7% or whatever) rule and sell off to use as income.  But I’d be very careful of syndications right now; high risk in my opinion.

my2c

For better or worse…this is turning into quite the popcorn thread ;)

caught

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