There are many different investment options available in the diverse real estate market. However, you need to understand the significance of every one of them if you want to advance in the real estate industry. If we talk about passive real estate investing, then we can’t miss these two terms REIT and Multifamily Syndication, they both are the wheels of passive real estate investing.

To start with the battle between REIT and multifamily syndication, first, let us understand both these terms to get a clear picture.

REIT (Real Estate Investment Trust)

An organization that owns, manages, or finances real estate that generates revenue is known as a Real Estate Investment Trust (REIT). By pooling funds from numerous investors, REITs acquire and manage properties, offering shareholders the opportunity to invest in real estate without the hassle of direct ownership. Similar to mutual funds, REITs allow investors to buy shares representing ownership in a diversified portfolio of properties.

Multifamily Syndication

Investors can participate in real estate projects through multifamily syndication and have direct equity in the property without worrying about day-to-day operations. Syndicators, who are frequently experienced real estate professionals, locate and manage multifamily buildings by combining the capital of several investors. Through multifamily syndication like Sunbelt Equity Group, investors can participate directly in particular real estate transactions, possibly earning larger profits and more control over their money.

To help you choose which passive investment is best for you, we will now compare and contrast both previously described options.

Control and Acquisition

In Multifamily Syndication, you can select which acquisitions are the right fit for you based on your specific investment criteria and goals. In addition, since you are purchasing the property through a group of investors, you will have direct ownership of it once you have invested in multifamily syndication.
Whereas, in REIT investing, you have no say in the types of properties REIT will fund with your money. You are simply just buying the shares in a company without any ownership in the property purchased by the REIT, which implies that you do not own any underlying real estate property after investing in REIT.

Returns

While both types of investments can be profitable, Multifamily Syndications often outperform REITs in terms of returns. They have to provide their investors with an explanation for each acquisition and go through a thorough due diligence process to ensure profitability. As a result, Multifamily Syndication usually focuses more on pursuing fewer properties but puts more effort into securing discounted purchases with significant upside potential

Unlike, REITs which manage investors’ money over a broad range of properties. Furthermore, many layers of management fees are associated with REITs with large assets, which can reduce your profits.

Tax Advantages

Investors who directly participate in property ownership through Multifamily Syndication are eligible for several tax benefits, including depreciation. Investors can write off the value of their investment over time with this deduction. As a result, multifamily syndication has the potential to both provide passive income and significantly reduce the taxable portion of investors’ regular income.

Investing in a REIT, on the other hand, usually yields ordinary dividend income, which is liable to higher tax rates. Investments in REITs do not provide the same tax benefits as direct property ownership, such as depreciation deductions, as in multifamily syndication.

In REITs, investors can’t benefit from a 1031 exchange. A 1031 exchange allows investors to defer taxes by reinvesting profits from one property sale into another. Many syndications offer this option, enabling investors to continue growing their investments while deferring taxes.

Liquidity

While Multifamily Syndication usually involves longer-term commitments with set periods, it frequently presents chances for longer-term returns that are higher than short-term liquidity.

Conversely, REITs function similarly to mutual funds by providing investors with significant liquidity. Because of this distinction, compared to Multifamily Syndication, REITs offer higher liquidity, enabling investors to turn their capital into cash faster. It’s important to keep in mind, though, that this liquidity may have a drawback: buying and selling REITs frequently may result in poorer returns because of transaction fees and market timing concerns.

Conclusion

To sum up, real estate investment trusts (REITs) and Multifamily Syndications provide unique benefits to investors based on their investment preferences and financial objectives. When choosing between the two, take into account aspects like the amount of the investment, the time frame, and the accreditation status. Over an extended period, Multifamily Syndications have the potential to yield larger returns than REITs, despite REITs offering greater liquidity and accessibility. In the end, the decision comes down to your priorities when it comes to investing. Whichever way you decide to go, real estate investing is still a very effective way to grow wealth in today’s market.

For additional information on the syndication opportunities that Sunbelt Equity Group might offer.