Author Topic: Savings/investments/bonds Master Thread.  (Read 63212 times)

Offline Thingywingy

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Re: Savings/investments/bonds Master Thread.
« Reply #700 on: March 19, 2023, 11:43:49 PM »
Any thoughts on investing in RE v. the stock market (assume S&P500 index fund or ETF)? RE would be through a syndicatorónot my own time and effort managing. There seems to be two very significant advantages to RE: leverage and tax benefits of depreciation. I understand that the latter is often close to the dull amount of rental income, at least until there is a capital event. At that point, tax can be further deferred via 1031 exchange. Has this been discussed already?
I am sometimes accused of overthinking things. I am still mulling over whether that accusation has merit.

Offline Euclid

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Re: Savings/investments/bonds Master Thread.
« Reply #701 on: March 19, 2023, 11:59:17 PM »
There seems to be two very significant advantages to RE: leverage and tax benefits of depreciation.
You get these benefits even when investing through syndication?

Offline Thingywingy

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Re: Savings/investments/bonds Master Thread.
« Reply #702 on: March 20, 2023, 12:08:43 AM »
You get these benefits even when investing through syndication?
Sure. They finance approx 80% of the deal and deals are generally structured as LLCs where you have a membership interest (and so are entitled to tax deprecation).
I am sometimes accused of overthinking things. I am still mulling over whether that accusation has merit.

Offline aygart

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Offline whacked1

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Re: Savings/investments/bonds Master Thread.
« Reply #704 on: March 20, 2023, 10:32:06 AM »
Any thoughts on investing in RE v. the stock market (assume S&P500 index fund or ETF)? RE would be through a syndicatorónot my own time and effort managing. There seems to be two very significant advantages to RE: leverage and tax benefits of depreciation. I understand that the latter is often close to the dull amount of rental income, at least until there is a capital event. At that point, tax can be further deferred via 1031 exchange. Has this been discussed already?
When you are an LP, its difficult to rely on 1031 unless you are sticking with the GP. RE two major cons; 1) capital calls and 2) your money isnt liquid. The depreciation is great, however, for most it would be limited unless they file as a real estate professional...

Offline ExGingi

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Re: Savings/investments/bonds Master Thread.
« Reply #705 on: March 20, 2023, 10:36:27 AM »
Any thoughts on investing in RE v. the stock market (assume S&P500 index fund or ETF)? RE would be through a syndicatorónot my own time and effort managing. There seems to be two very significant advantages to RE: leverage and tax benefits of depreciation. I understand that the latter is often close to the dull amount of rental income, at least until there is a capital event. At that point, tax can be further deferred via 1031 exchange. Has this been discussed already?

There are obviously major differences (syndication probably should legally be only for accredited investors).

1. Liquidity.
2. Liquidity.
3. Liquidity.
4. Control by single GP vs control by shareholders/board.
5. Ability to invest Tax Qualified money (various types of retirement accounts or HSAs)

There are probably more, but the first 3 are definitely what comes to mind right away (various issues that come to play from the fact that it's an illiquid private investment).
I've been waiting over 5 years with bated breath for someone to say that!
-- Dan

Offline CountValentine

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Offline gozalim

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Re: Savings/investments/bonds Master Thread.
« Reply #707 on: March 20, 2023, 02:51:51 PM »
Any thoughts on investing in RE v. the stock market (assume S&P500 index fund or ETF)? RE would be through a syndicatorónot my own time and effort managing. There seems to be two very significant advantages to RE: leverage and tax benefits of depreciation. I understand that the latter is often close to the dull amount of rental income, at least until there is a capital event. At that point, tax can be further deferred via 1031 exchange. Has this been discussed already?

is the return/structure otherwise very different?

Offline Joe4007

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Re: Savings/investments/bonds Master Thread.
« Reply #708 on: March 20, 2023, 04:03:39 PM »
Any thoughts on investing in RE v. the stock market (assume S&P500 index fund or ETF)? RE would be through a syndicatorónot my own time and effort managing. There seems to be two very significant advantages to RE: leverage and tax benefits of depreciation. I understand that the latter is often close to the dull amount of rental income, at least until there is a capital event. At that point, tax can be further deferred via 1031 exchange. Has this been discussed already?
As far as leverage, depending on the fed's path, that might turn out to be a disadvantage for RE.

Offline Euclid

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Savings/investments/bonds Master Thread.
« Reply #709 on: March 20, 2023, 04:22:01 PM »
There are obviously major differences (syndication probably should legally be only for accredited investors).


5. Ability to invest Tax Qualified money (various types of retirement accounts or HSAs)


On the other hand, for non-Tax advantaged money - RE provides tax benefits that stocks don't.

Offline ExGingi

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Re: Savings/investments/bonds Master Thread.
« Reply #710 on: March 20, 2023, 04:32:42 PM »
On the other hand, for non-Tax advantaged money - RE provides tax benefits that stocks don't.

Correct. Though for a passive investor less so than an active investor (RE Professional) IINM.

Also, 1031s are a trap IMHO. While current tax law gives a get-out-of-jail-free from that trap at death (step-up in basis), it is low-hanging fruit for any significant tax changes (and could distort investment decisions during lifetime).
I've been waiting over 5 years with bated breath for someone to say that!
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Offline Yehudaa

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Re: Savings/investments/bonds Master Thread.
« Reply #711 on: March 20, 2023, 05:25:37 PM »
There are obviously major differences (syndication probably should legally be only for accredited investors).

1. Liquidity.
2. Liquidity.
3. Liquidity.
4. Control by single GP vs control by shareholders/board.
5. Ability to invest Tax Qualified money (various types of retirement accounts or HSAs)

There are probably more, but the first 3 are definitely what comes to mind right away (various issues that come to play from the fact that it's an illiquid private investment).


All really good points. Iíd also add a couple more:

1. Diversification. Unless you have enough capital to invest in a whole bunch of deals in different asset classes and different markets, youíre not going to get much diversification in RE deals.

2. Due diligence. Unless you have the time and expertise, your DD on a syndicated deal is unlikely to be thorough enough.  Unless you hire an objective, trusted third party to do your DD, youíre putting a huge amount of trust in the syndicator and GP. You have to be certain that they have both the trustworthiness to honestly present the opportunity, and the skills to execute on the strategy.

3. Transparency. Depending on the type of deal, financials often don't tell the whole story. Once you invest, youíre more or less limited to whatever the GP want to tell you, so itís hard to know how things are really doing. (Mind you, if you have no liquidity it doesnít really matter because you have no recourse if things go south, but at least you can push people for more info if you have some transparency.)

I think RE deals can be a great investment for people who donít need liquidity, have sufficient capital to be properly diversified, and who can either understand the nitty gritty of the investment, or who have a GP who they trust and has the skills to execute.

Offline aygart

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Re: Savings/investments/bonds Master Thread.
« Reply #712 on: March 20, 2023, 05:25:40 PM »
Correct. Though for a passive investor less so than an active investor (RE Professional) IINM.

Also, 1031s are a trap IMHO. While current tax law gives a get-out-of-jail-free from that trap at death (step-up in basis), it is low-hanging fruit for any significant tax changes (and could distort investment decisions during lifetime).

There are other strategies that can mitigate the tax deferal too.
Feelings don't care about your facts

Offline ExGingi

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Re: Savings/investments/bonds Master Thread.
« Reply #713 on: March 20, 2023, 05:40:46 PM »
There are other strategies that can mitigate the tax deferal too.

Are we going to start discussing the mechanics of NIMCRUTs here?  ;D
I've been waiting over 5 years with bated breath for someone to say that!
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Offline aygart

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Re: Savings/investments/bonds Master Thread.
« Reply #714 on: March 20, 2023, 06:47:28 PM »
Are we going to start discussing the mechanics of NIMCRUTs here?  ;D
That wasn't even what I was referring to, but no need for details here.
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Offline aygart

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Offline yomo

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Re: Savings/investments/bonds Master Thread.
« Reply #716 on: March 20, 2023, 08:25:55 PM »
When you are an LP, its difficult to rely on 1031 unless you are sticking with the GP. RE two major cons; 1) capital calls and 2) your money isnt liquid. The depreciation is great, however, for most it would be limited unless they file as a real estate professional...
What do you mean?

Offline Thingywingy

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Re: Savings/investments/bonds Master Thread.
« Reply #717 on: March 21, 2023, 06:55:56 AM »
As far as leverage, depending on the fed's path, that might turn out to be a disadvantage for RE.
You mean that high rates will cause dip in RE prices?
I am sometimes accused of overthinking things. I am still mulling over whether that accusation has merit.

Offline Thingywingy

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Re: Savings/investments/bonds Master Thread.
« Reply #718 on: March 21, 2023, 06:58:08 AM »
Correct. Though for a passive investor less so than an active investor (RE Professional) IINM.

Also, 1031s are a trap IMHO. While current tax law gives a get-out-of-jail-free from that trap at death (step-up in basis), it is low-hanging fruit for any significant tax changes (and could distort investment decisions during lifetime).
By trap you mean that it may be legislated away?
I am sometimes accused of overthinking things. I am still mulling over whether that accusation has merit.

Offline ExGingi

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Re: Savings/investments/bonds Master Thread.
« Reply #719 on: March 21, 2023, 08:11:00 AM »
By trap you mean that it may be legislated away?

No. I mean that when one has an ever growing tax DEFERRAL it becomes harder to make a move that will cause actual taxation, which could lead to skewed investment decisions (the tax tail wagging the dog).
I've been waiting over 5 years with bated breath for someone to say that!
-- Dan