Most investors begin their real estate investment career to generate passive income. But, truthfully, most landlords have no desire to answer emergency phone calls from tenants at 3 am or handle other similar emergencies. As such, even if an investor starts as an active investor, they usually eventually transition to passive investing in one way or another. Notably, many investors will start to look into investing in apartment syndications or real estate investment trusts (REITs). However, investors should keep in mind several differences between the two, some of which we will discuss below.

What is an Apartment Syndication?

Apartment syndication is a partnership between multiple investors who use their skills and resources to purchase properties. Investing in apartment syndications allows investors the opportunity to invest in pricier real estate deals that they usually would not be able to afford alone.

What is a REIT?

A real estate investment trust (REIT) is a business that invests, manages, and oversees income-generating real estate. Specifically, REITs invest in all types of real estate, including multifamily apartment buildings, using multiple investors’ funds. Investors who participate in REITs receive their income/profit in the form of dividends. Below, we will compare and contrast apartment syndications and REITs to help you determine if either is a fit for your investing goals and your risk tolerance.

Ownership Structure

When you invest in a real estate investment trust, you technically acquire shares in a company, similar to purchasing stock. As such, you do not directly own a percentage of the asset. Instead, you own shares in the REIT that owns the actual asset. On the other hand, with real estate syndications, you are investing directly in an investment property. Additionally, you will own a percentage of the Corporation or LLC that owns their investment property. In other words, you and other investors have direct ownership of the asset.

Assets

As previously mentioned, investing in a REIT means investing in a firm that owns an investment portfolio comprised of various properties in different markets. However, the portfolio will generally focus on one asset class, such as apartment buildings, healthcare facilities, shopping malls, etc. Therefore, when you invest in a REIT, you do not have the luxury of selecting a specific property or location. On the other hand, when you decide to invest in apartment syndications, you typically invest in one property in a specific market. Therefore, before committing to a deal, you will receive all the necessary information to make an informed decision. Specifically, you will know where the property is located, the projected financials about the property, the sponsor’s business plan for the property, and so forth.

Manner of Investing

REITs can be bought and sold on major stock exchanges similar to other public stocks. REITs are publicly available, and investors can find them easily. For example, investors can invest through mutual funds, enabling you to invest in a REIT in the next 30 to 45 minutes. Investing in a real estate syndication is quite different. And for the most part, it can be more challenging than investing in a REIT. Specifically, the real estate investments are governed under SEC regulations, and most offerings are not allowed to be publicly advertised. Therefore, to take advantage of a real estate syndication, you must have a relationship with a firm or individual offering such investments. Such as Vestus Capital. Connect with me to learn more

Liquidity

REITs can be investments with liquidity as they are listed on the major stock exchanges, similar to stocks. Specifically, you can invest in REITs anytime that you want. On the contrary, investing in apartment syndications is an illiquid investment. Think of syndications the same way as purchasing a home. You can’t just click a button and sell a home. Even the quickest sales will typically take at least 2-3 weeks to complete. In any event, when you invest in syndication, you can expect your money to be tied up for five years, if not longer.

Returns

Before comparing the various tax benefits between REITs and Apartment Syndications, you must first understand how investors receive their income. Specifically, investors in a REIT receive their divided earnings from the net income, which typically means a lower payout. On the contrary, syndication investors receive their income before depreciation is deducted.

Tax Benefits

The generous tax benefits offered by the Internal Revenue Services are one of the reasons that people invest in real estate. However, when you invest in REITs, you are not investing in physical real estate. As such, you cannot take advantage of the many generous tax benefits. Top Ways TO Lower Your Taxes As A Real Estate Investor

Which is better, a REIT or an Apartment Syndication?

It’s a matter of which investment fits your investing goals, criteria, and risk tolerance. However, the significant tax benefits of investing in real estate syndications are a huge benefit for most investors.

How To Get Started

The first step to invest with us is to fill out our Interest Form. We’ll connect and discuss your goals, then we’ll find the best investments to help you meet these goals. After you invest you can just sit back, relax, and receive quarterly cash flow payments from your passive investments.