Did you know investing in real estate syndication can be a much smarter choice than having a Roth IRA? Leaving your money to languish in an IRA means it doesn’t have the opportunity to build as much wealth as it could.
Plus, there are considerable real estate syndication tax benefits. Don’t miss out on these benefits as you plan your investment portfolio.
What Is Real Estate Syndication?
Real estate syndication allows you to join a group of investors who are making money on a large property, typically one that’s too large for each person to pursue alone. You’ll work with a sponsor who orchestrates the deal and puts in most of the day-to-day legwork.
The sponsor bears the responsibility of finding the property, raising capital, and managing the value-building efforts that increase the overall value of the investment. Individual investors put in money and wait to reap the benefits.
Real estate syndication comes with a wide range of benefits, including:
- Pooling the resources of multiple investors
- Investing in large, profitable projects
- Using the sponsor’s expertise and experience
- Benefiting from professional connections
- Building positive cash flow
- Continuing to build value over time
- Portfolio diversification
- Minimizing risk
- Tax benefits
- Upgrading properties in the community
- Providing others with business space and housing
New investors often wonder whether real estate is a safe and low-risk way to invest their money. The answer is yes — if you do it correctly, with the help of a good sponsor.
Investors minimize risk by working with a sponsor who has plenty of experience managing successful projects. An experienced sponsor has seen it all and knows how to avoid common mistakes that limit financial success.
This is an enormous advantage over other time-intensive approaches, like being a landlord or flipping houses. With real estate syndication, you can focus all your energy on other things in your life while your real estate investment builds value in the background.
What Are Some Real Estate Syndication Tax Benefits?
Investing always comes with certain tax implications. There are many real estate syndication tax benefits, and it’s important to discuss these with your sponsor to ensure you’re getting the most out of your investment.
Tax factors involved with real estate syndication include:
- No taxes paid on quarterly or annual distributions during the holding period
- Taxes are paid only when the property is sold or refinanced
- 0% capital gains tax for investments under a certain amount
- Low capital gains tax on larger investments
- Low to no tax option for building a retirement fund
Of course, you should always discuss the tax implications of any investment with a tax professional. Your real estate syndication sponsor isn’t necessarily qualified to provide comprehensive financial advice beyond your real estate investment.
Why Is Real Estate Syndication Better Than an IRA?
Investing in a real estate syndication usually brings higher returns than having a Roth IRA. In the average year in the U.S., a typical Roth IRA delivers between 7% and 10% annual returns.
Compare this to real estate syndication. Sponsors typically pursue projects that deliver minimum returns between 8% and 15%. Although the amount might hover between 8% to 10% the first year, it could increase steadily over five years and even bring a 40% to 60% profit at the point of sale.
That’s a level of value you’re unlikely to see from a Roth IRA during the same period. In fact, it’s a strong case for using your IRA to invest in real estate and ensure you’re truly putting your money to work building wealth.
How to Learn More About Real Estate Syndication
If investing in real estate syndication sounds like the right fit for you, contact Life Bridge Capital. We’ve helped many people transition their investments from Roth IRAs to profitable syndication projects. You can also learn more in our whitepaper, A Guide to Passively Investing in Commercial Real Estate.