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Real Estate Snydication CoC% vs Stock Annualized Return

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  • Real Estate Snydication CoC% vs Stock Annualized Return

    Can someone help me understand how to best to compare an investment into a Real Estate Syndicate vs annualized return of an ETF? For example, how do I incorporate CoC return (~6-8%) with tax benefits of depreciation, appreciation, 1031 exchange, etc. against the annualized return of for example a large cap growth index fund (~15% over last ten years)? Is that what IRR is meant to do? Is it truly a direct comparison. If not, is there a better measure?

    I’m having a hard time seeing the benefit of putting money into a syndicate even with optimal results and tax benefits when I can just dump it into growth indexes that will almost certainly bring me higher returns over the long haul (I.e 15-20 years).

  • #2
    Originally posted by guptamk07 View Post
    I’m having a hard time seeing the benefit of putting money into a syndicate even with optimal results and tax benefits when I can just dump it into growth indexes that will almost certainly bring me higher returns over the long haul (I.e 15-20 years).
    The benefit (in some people's eyes) is that you are diversifying your assets away from just investing in the public markets. I agree, to a certain extent, what that premise as well.

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    • #3
      I much prefer tax advantaged double digit Cash on Cash returns than counting for a big appreciation event at the end of the hold.

      The reason people diversify into RE is to diversify. Hopefully nobody is 100% RE or 100% index funds.
      ThatOD
      Real estate investor/advi
      Last edited by ThatOD; 11-01-2020, 11:37 AM.
      Real Estate Investment Advisor
      FixedIncomeMd.com

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      • #4
        i briefly looked into them, but wife vetoed. I think she is right. It undoubtedly adds diversification but also some complexity. I am just a dumb doc, thus my “realestate” is my house and some REITs. I suppose if i was going to do it, i would look at some rentals but that seems like a lot of work too (2nd job?). Do your homework; no feee lunch and lots of folks looking for suckers out there

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        • #5
          You shouldn't have to settle on 6-8% CoC. I typically only accept double digit cash flow day one, which is around 17% if you factor in the tax advantaged nature.
          Real Estate Investment Advisor
          FixedIncomeMd.com

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          • #6
            Personally, I don't think looking at the last 10-15 years of annualized returns in large cap funds is indicative of the long term performance. We've had an unprecedented bull run, and valuations are way too high according to many. I don't have the crystal ball, but I would bet these averages settle around 10-11% over the long term.

            RE offers higher returns, plus an investment in a tangible asset that has inherent value (always nice, especially if the gov't keeps the money printer running) due to the scarcity of it. Besides the inherent value, I agree with the previous post: RE provides reliable cash flow on average so you don't have to be speculative.

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