Turnkey SFR vs Syndicated CRE

	A	B	C
1	Passive Investing
2	Turnkey SFR vs CRE Syndication
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4		Turnkey SFR	Syndicated CRE
5	Truely Passive?	Good	Excellent (no mortgage, property tax, insurance to manage)
6	"Accredited" Investor status	Does not matter.	Required for majority of investments
7	Speed to Invest/Deal Flow Opportunity	Moderate	Very Good (IF Accredited)
8	Debt financing terms	Excellent (long term, low fixed on first several loans for first 5-10 loans)	Excellent (usually very good rates for expected hold period, sometimes Interest Only in early phase)
9	Debt-personal liability	Weakness: Full Recourse Loans. Personally Liable for full purchase price, including debt	Excellent: No Personal liability beyond invested capital
10	Flexible Investment Amount	Good (flexible by house cost and count)	Excellent (flexible in increments of $1000 after minimum investment threshold, often $25K - $50K minimums)
11	Depreciation Expense benefit	Good, straight line 27.5yrs	(potentially) Excellent. These larger deals can justify a cost segregation study & application of bonus depreciation. Those strategies alongside adequately debt leveraged asset can create EXCELLENT depreciation. Often times creating passive losses that can be utilized to offset other investment income or carried forward to future tax years.
12	Other expenses: Interest, Insurance, Taxes, PM, etc	Good: reduces taxable income	Good: reduces K-1 taxable income
13	Appreciation	Somewhat Speculative-Turnkey provider already realized forced appreciation from improvements. Passive investors remaining hope for appreciation dependent on local market comp trend direction.	Somewhat Predictable-Usually, passive investor joins BEFORE the "forced appreciation" improvements, therefore has opportunity to participate in this equity appreciation. And since CRE values are most often "calculated" based on NOI and CAP rates, there is more CONTROL of asset value than in single family properties.
14	Cash distributions and total ROI	good. varies by deal	good. varies by deal, but comparable, up to slightly better
15	Liquidity	moderate, but some cost to sell or re-fi	Little, at the whims of sponsor and larger market
16	Disposition Tax deferrals	1031 provided opportnity to defer capital gains tax by reinvesting in another property.	Typically, will not qualify for 1031 Exchange. [but could reinvest in another syndication doing cost seg w/bonus depreciation in the same calendar year in order to offset capital gains]
17	Investor Decision Control	Yes, has some decison control	Little, at the whims of sponsor
18	Recordkeeping	Good: Annual statement from turnkey PM helpful part of it. plus taxes, insurance, interest expenses.	Good: K-1 document, but may get into non resident state tax filing requirements.
19	Diversity	Good (can diversify across markets or even different turnkey in same market)	Excellent: Easy to diversify across geography, sponsors, asset types.
20	Operating Income or Capital Gain	deal specific, but usually generates more recurring passive income, which is taxed as ordinary income tax rates	deal specific, but may generate more capital gain which is taxed at lower capital gains tax rate
21	Full investment cycle return	My calculations and assumptions, using debt leveraging on a 10yr hold and exit with sale is 15% annual average return.	Projected IRRs in high teens to low 20s, depending on deal and assumptions of sponsor.
22	conclusion:	An 8% cap rate on SFR is near equivalent to 8% preferred retrun on CRE syndication. Any appreciation of value over the hold period is not within investors control on Turnkey SFR, but it is somewhat within control (value-add forced appreciation) on CRE and subsequent capital gain is typically shared between Sponsor GP and the LP passive investor. Significant depreciation is possible in CRE syndication if cost segregation and bonus depreciation are used. Other profitability areas are near equal, like benefit of debt leveraging and principal paydown. For an Accredited Investor, CRE syndication is overall most attractive. For Non-accredited, Turnkey SFR is a very good option.
23		WINNER for Non-Accredited	WINNER for Accredited
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