The structural advantages that come with real estate syndicates are imperative and something you need to know about! The perks of real estate investing are vast and varied. Entrepreneurs in the making often choose to forego the traditional 9-to-5 work model in pursuit of the cutthroat world of real estate investing for various reasons– an uncapped salary, flexible hours, and autonomy.

We all, to some extent, recognize the would-be financial rewards you could earn from embarking on such a career path. While it’s clear that there are many pros of investing in real estate that far outweigh the cons, securing your financial freedom for the long haul might require more money than originally anticipated.

Real estate syndication presents a solution to this dilemma and is a process in which multiple real estate investors pool their capital together with the intention of purchasing a property that is more expensive than any of them could have paid for individually. Syndications are also ideal since each investor can allocate a smaller sum to each deal, and therefore, effectively spread their risk across multiple properties.

You could think of it almost like crowdfunding real estate, similar to how Kickstarter or IndieGogo campaigns present a product and other “backers” support it. While there are some real estate crowdfunding softwares out there, syndicates pose a more traditional approach by good, old-fashioned networking.

Like most investments, there are no guarantees that the venture will be profitable, but syndications are structured in a way that the sponsor is motivated to make sure the overall real estate investment performs well for all individual investors.

These structural advantages help position real estate investing as an attractive alternative to stocks and bonds. However, the tax benefits available – which go largely unrecognized by investors when comparing returns by asset type – are perhaps even more attractive.

Different deals can yield different outcomes, so learning about the various tax ramifications early on can benefit you in the long run.


A mortgage interest deduction allows property owners to reduce their taxable income by the amount of interest paid on the loan.

Investment Property Debt Utilization

  1. Investment properties can utilize debt to obtain larger properties and shield current income with interest payments.
  2. While principal payments are not deductible, the bulk of a mortgage payment in the first 10 years will be allocated to interest that can be utilized to shelter the property’s income. “Paydowns” are payments made on the interest and/or principal on a loan.

Asset Appreciation

Asset appreciation refers to an increase in the price or value of an investable asset over time. The increase can occur for a number of reasons, including increased demand or dwindling supply, or as a direct consequence of changes in inflation or interest rates.

Real estate investments can greatly appreciate during your lifespan. The goal is to keep overall costs down and generate positive cash flows. These preferred returns can be deducted using depreciation.


Real estate investments can greatly appreciate during your lifespan. The goal is to keep overall costs down and generate positive cash flows. These preferred returns can be deducted using depreciation.

Portion of Property’s Depreciable Basis is Deductible

Real estate owners are permitted by the government to deduct a portion of their depreciable basis from cash flow. However, real estate doesn’t deteriorate at such an accelerated rate. If you factor in maintenance, many properties outlast their respective depreciation schedules.

Property Depreciates at a Slower Rate

The schedule for deducting depreciation is contingent on the type of investment in question. For example, the depreciation period is 39 years for commercial properties, 27.5 years for apartment buildings, and 15 years for mobile homes.


If your allowable tax deductions for the year exceed your income for the year, you may have what is called a net operating loss (NOL). When more expenses than revenues are sustained during the period, the NOL for the company can generally be used to recover past tax payments. The rationale behind this is that corporations need to have some form of tax relief when they lose money. Applying the NOL to future income tax payments reduces the need to make payments in the future.

Paper Losses

Paper losses are also often used to assess the performance of an investment, which has been known to be a more accurate form of measurement than just realized gains or losses. This is calculated by comparing the market price of a property to the original purchase price. Gains or losses only become realized when the property is sold.

1031 Exchange

A 1031 exchange allows an investor to sell a property, to transfer the earnings into a new property, and effectively eliminate taxes once again.

As you can see, real estate syndicate investing can be a savvy way to grow your capital, especially in today’s fast-paced, competitive market. Over the years, real estate syndications have enabled individual investors to passively connect and combine the efforts of highly skilled real estate professionals who channeled their passion into productive real estate investments. And among its many advantages, it’s an added bonus knowing that tax law could work in your favor.