All Forum Posts by: Amit M.

I think you mean “syndication is not PASSIVE investment” right?!? It’s active in the sense that you need to do a lot of due diligence to separate the sh!t from the shinola…sort to speak ;)

See this is the reason I personally stayed away from commercial RE, incl. multi family. I always worked with 2-4’s because I could secure long term 30 year financing. It doesn’t sound like refinancing nowadays dried up like 2008-2010, but man I remember how bad banking was those days! Thank god I was with 30 years fixed and just rode out the bad times until 2013 when banks became liquid again. Of course ironically, now I don’t even need the 30 year fixed term, as I deleveraged completely and just own outright. I took my gains and sold my 2014/15 acquisitions in late 2021/early 2022, and repositioned my long term prime rentals debt free.

In the RE game you have to know when to take your profits. I (unfortunately) know people that go boom and bust every cycle! And it’s almost always leverage or untimely refinancing that gets them screwed. I guess I’m just not cut out for that sort of drama, so this cycle I just took my marbles and went home. BTW I’m seeing more and more properties turn in my market from folks who brought in 2019-2022 and are now getting spanked big time. It’s sad seeing a 2021 purchase for $1.8 mil now offered for $1.5, and who knows what it will actually close at. You know that person just got royally f*cked. 

Stay safe and sane out there!

@Jeffrey Zhou the situation you describe is not good. You’re kinda stuck, as you can’t clearly “evict” the tenant…maybe only if there were hazardous conditions. Otherwise the bldg dept, etc. aren’t going to stick their necks out to help you force an eviction. 

But there is a solution….always the solution here in SF. Basically you’ll need to buy out that tenant. And if they have one of those schmucky lawyers (free for the tenant btw….while you’re paying $400 per hour for yours :( you’ll be paying that tenant a lot of money to leave. Could easily run you six figures.

It’s an unfortunate situation.

@Carlos Ptriawan I’m more aligned with your pov. The key issue, in my mind, is that syndications are motivated to *transact deals*, in good and in less good markets. Why are so many decent, seasoned syndicators in trouble now? What they should have done is not brought low cap deals in 2021-2022. Some are even losing money on their 2020 purchases.

I’d like someone to show me syndicators that said, “nope we’re not buying more deals because we don’t think we can make a decent return for our investors.” It’s more like most just keep going and going. But, I don’t fully blame syndicators. I also blame naive LP’s providing the money for these late cycle deals. There is a codependency at play, so this is not just a rant against syndicators. At least not in my mind. 

Basically syndications, and a lot of other office and residential commercial is in real trouble over the next 1-2 years. They’re praying for 3x fed rate cuts this year, to stimulate refi’s and new buyers. But if that doesn’t materialize, or if we hit a recession, it’ll get worse.

My personal advice is, if you don’t already own stabilized real estate, in solid areas, with fixed debt or low/no mortgage…take the 5% return available now for your liquid savings and wait. Cowboys can get in the market now rebuying recent failures at discount, and hoping to ???. But I’ll pass, as I like keeping my early retirement and prefer staying in cash with new money. We’ll see what the future brings.

Best to everyone out there!

Direct real estate worship is passive…haa…haa. As @Jay Hinrichs said, it really depends on the quality of the location, and consequently the quality of tenant you can obtain. I’ll also add that it depends on the real estate cycle you’re in. Everyone was gangsta 2013-2021 when the market was going up, up, up…when there were always tenants looking for rentals…when rates were rock bottom and it was easy to obtain a loan…everything was going your way. Now much of that is reversed (severity is dependent on specific locations) and vacancies are going up too. Syndications are blowing up. So real estate is generally a lot harder now then during that growth phase.

Personally I’d like to see someone systematically track private syndications (as best as can be done). You always hear about them during up markets. And then many promoters get strangely quiet once the market turns. IMO now is the time to put out active info and stats on syndications as well as DSTs. I want to know how they’re doing during difficult markets, and not only in good times.

But getting back to direct rentals ownership, no question it is harder now than a few years ago. And now is the time when one appreciates high quality locations, fixed rates, and not being over leveraged. 
Good luck everyone. 
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my2c

@William Bohan as others outlined, there are several logical options, all with pros and cons (of course.) Another option is to just keep what you have. Do you live in that area? Do you believe in it’s mid to long term growth potential? If you live there you probably have a good handle on the subtle market dynamics.

One significant risk of buying any property out of state is that you have a lot less knowledge and first hand experience with all the nuances of that specific market. You simply can’t ignore the risk of investing in an area that you’re not intimately familiar with. And now with rates being high, plus many areas overbuilt with new apartment buildings, I’d be careful with unknown areas, and also what you read in the media about “hot” areas, up and comers, etc.

I was in a similar situation to yours a couple years ago. In my case I sold off appreciated properties in a location I deemed as having limited future upside, and used the proceeds to eliminate all debt on the better located prime properties I wanted to keep long term. I’m in CA also and paid cap gains on huge profits to the tune of 28%, which included CA state cap gains. I was lucky to split the sales over 2 years, so the first ~80k gain is tax free and 80-480k was at 15%, which I was able to take advantage of twice. (Over 480k was at 20%.) So that helped.

I personally wanted to be more conservative as I pretty much reach “the number” that I needed (note that what “I needed” is different from what “I wanted” or what I was expecting by default.) In my case I was lucky that I still kept half of my portfolio, so didn’t get out of the RE game altogether. But always remember that RE is a risky venture, and you could go through years of less than stellar performance. So think twice before taking any outsized risks, as you already achieved a nice equity base, and you don’t want to end up screwing the pooch by taking unneeded risks ;)

Good luck and keep us posted on your decisions…

syndications

getting

spanked

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carlos 

basically 

right

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diversity

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opinions

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