Should you invest into a Real Estate syndicate, or should go for REIT?

Updated: Jul 4, 2020

What are the differences between a publicly traded REIT (Real Estate Investment Trust) and a Real Estate Syndication? Find out today on the Passive Cash Flow Podcast. Also why is the cash out refinance the best way to manage your real estate portfolio? We cover that and more today on the Passive Cash Flow Podcast. The Passive Cash Flow Podcast is for beginner or experienced investors. Learn how you can diversify out of the stock market, own a part of an apartment building & start earning Passive Cash Flow!

Peoples Capital Group has been helping passive investors build wealth in NJ real estate for 10 years. Visit to find out if you qualify to start earning passive income and pay less taxes via investing in real estate. IRA's and 401K's are accepted. -- #NJRealEstateInvesting #AaronFragnito #PassiveCashFlow #PCG


Aaron Fragnito: All right, ladies and gentlemen, welcome back to the Passive Cash Flow. This is podcast episode number 13. This episode is about a real estate syndication versus REITs. There's a number of differences we're going to talk about today. We buy apartment buildings here in New Jersey, we manage all the buildings for our investors, they get passive cash flow, they get awesome equity splits and big cash out refinances. If you want to learn more about how you can earn passive cash flow through New Jersey properties, New Jersey apartment buildings go to people' and input your information. We'll get it touch with you. We'll talk to you more about how you can qualify to invest passively in New Jersey apartment buildings. Guys, let's talk today about real estate syndications versus REITs, what's the difference. The difference between a real estate syndication, which we hear a lot about, and REITs. Real estate syndication is when you pull together capital from a number of investors, it would be one to generally 35 investors, and you buy a building or a number of buildings. You can create a fund and that fund can go and buy one building. As we do, we start a small fund for every building. In our situation here at People's Capital Group in our syndication or syndicate we have a new small fund for every building. We do small apartment buildings and we have a new LLC and a new fund. The investors get a share of that LLC and invest in that fund for each building. There's other ways to do it as well. Other companies have one large fund that is then buying multiple properties and selling multiple properties at all times and whatnot and then renovating them. That's another way to do it as well, and perhaps, one day we'll move to that but for now what works best for us is a small fund for each building. There's different ways to do that. I'll probably do another video about how to keep your costs down when creating a small fund. The difference here now, a REIT is a stock. That's a stock that's backed by actual real estate. That's great because you can get in and out of quickly but there's a lot more in benefits I feel to syndication than owning a stock that's backed by real estate. First of all, real estate syndicates offer tax depreciation. At least ours does. There's different ways to set them up, but for the most part, the majority of real estate syndicates mean you own a piece of an apartment building or a piece of real estate generally, commercial real estate, and because of that you get the tax depreciation from it. Because of that when you make cash flow on the real estate you are able to write off that cash flow. In fact, on our buildings that we buy, our investors get more tax depreciation than they do cash flow. They'll have extra tax depreciation, extra tax write-offs, they can go and utilize on other forms of business income, corporate income, LLC income not their W2 income but other forms of business income. A lot of our investors are house flippers. That makes it a $150,000 a year flipping houses. When they flip the house, if they make $100,000, that's great but they owe about 25% of that to the government. Now, if they invest in the building with us and they're making $10,000 a year in cash flow but they're getting $15,000 a year in tax depreciation, well, we're going to be able to write off that full $10,000 of cash flow so they owe no income tax on that cash flow which is awesome. The more money you keep, the more money you make. It's all about not giving your money to the IRS. Also, they have an additional amount, in this scenario, $15,000 of tax depreciation, $10,000 of cash flow. That means you get additional $5,000 of tax depreciation you can go use to write off other forms of business income. That's awesome. That's something you do not get with a REIT. A REIT is a stock. Stocks pay dividends, REITs pay great dividends, they really do. I cannot fight that but at the end of the day REITs, that dividend is taxed. You might be getting a dividend of 1% to 2%, a quarter, that's phenomenal similar to cash flow on real estate but it's taxed. If you're making good dividends that's amazing but if you can make the same in cash flow by owning real estate and not get taxed on that cash flow, you use your tax depreciation to write it all off or get paid dividends and owe 25% of that back to the IRS. Obviously, the better option is to be able to write off all that cash flow coming in or write off the dividends which you cannot do with a stock, with a REIT. Then, let's talk about if your investment grows in value and you want to sell that investment, which is ideally what we want to do with all of our investments, harvest our growth and enjoy that wealth and move that wealth into a different area or just allow that wealth to grow. When you want to harvest that wealth there's two ways to do so. In real estate, when we own a building, we plan on doing a 1031 tax deference. That means we're going to sell the building, we're going to take all the proceeds from the sale of the building and put that in a third party, 1031 tax deference company, and then you have a certain amount of time to identify a similar building and you have the amount of time to close on that building. As long as it's executed properly, then you can do a 1031 tax deference and you can defer any and all taxes owed at that point and defer that and move that forward into a bigger building so it allows you to buy a much bigger building. The 1031 tax deference by selling a building, not owing any income tax at that time, keeping all the proceeds to sale the building, moving that into a bigger piece of real estate, trading up allows you to then leverage that capital four times over as you get a mortgage ideally 25%, 30% down. Now, as you save that money, you can buy a bigger building. Great scenario here would be let's say you sell a piece o