If you have a self-directed IRA (Individual Retirement Account), a good option for you is to invest in a real estate syndication company as a passive investor. One advantage is being able to pool your funds to purchase several properties. This will allow you to have the benefits of diversification in real estate without having to put out huge amounts of money.
Here are some benefits in investing in a syndication company:
The profit generated from an IRA investment can grow tax-deferred until you make a withdrawal. It lets you compound all of the fund’s proceeds as long as you don’t distribute the gains outside of the fund.
For example, if you invest in a syndication where the sponsor is holding an apartment for cash flow, your annual tax exposure will usually be zero or negative – even if you receive thousands of dollars from the property’s cash flow. This is due to the interest payment write-offs, depreciation and expense write-offs.
When the property is sold, the investors will pay taxes based on the gains they received from distributions. If your money compounds without paying taxes, it can change the trajectory of your portfolio.
Diversification is beneficial for anyone planning for their financial future. Lots of investors opt to invest in real estate syndications to get better diversification.
For instance, instead of buying one property for $70,000, you invest that money in a group fund where 10 investors will invest $70,000 each. Instead of owning a hundred percent of a property, you’ll get 10% of the profits from appreciation.
Investing like this will diversify your investment and limit your exposure to maintenance, vacancy and miscellaneous expenses of one property.
If the property you own goes vacant, you have no income for that month. But if you own 10% of ten properties and one becomes vacant, you’re still 90% occupied and you’ll receive 90% of the rent. Because you receive cash flow on a monthly basis, it will be easier to pay for unexpected expenses and make your mortgage payments.
Since real estate syndications allow you to pool funds with other investors, you’ll get exposure to this asset class even without a seven-figure investment. Syndicators create the operating agreement that the minimum investment can be as low as $10,000. It opens up the doors for typical investors to invest in commercial real estate.
One of the most beneficial reasons to invest in real estate syndications is having the ability to become a passive investor. You’ll be removed from the management, asset or the operational perspective of the investment, and there will be a fund sponsor who will handle the fund’s performance.
Plus One Syndications offers guidance to first time or long-time property owners and investors in managing their assets. You’ll get full transparency of the process to ensure its success.
For inquiries, call us today at 206-278-4500 or fill out our online form.