Now more can invest in real estate
There are two notably bright spots in the current real estate market for individuals and families that would like to try their hand at real estate investing.
One is a rapidly growing selection of real estate syndication offerings, many of which require only a modest cash investment. The other is a much more favorable set of income tax laws, embodied in the Economic Recovery Tax Act.
Real estate syndications comprise one phase of real estate activity that has maintained steady and substantial growth over the past five years -- a period when real estate market activities generally have been sputtering to record lows. Most of the growth is pegged to the increasing number of small offerings, appealing to first-time investors or others with limited funds to invest.
A family with only $5,000 to $20,000 to invest in real estate in 1982 would have a tough time finding a high-quality opportunity. However, by becoming a participant in a real-estate syndication, that small investment can potentially reap the same basic benefits as are now enjoyed by the big-league investors.
That's the key motivator -- big-money clout and leverage with a small-potatoes cash investment.
''It's those small investors who have played the major role in the growth of syndications,'' according to Kenneth J. Gain, president of the Real Estate Securities and Syndication Institute (RESSI), an arm of the National Association of Realtors.
''The average syndicate investor is probably a home-owning family in the middle-income rang,'' he reports. ''Both spouses work, and both agree that a viable long-term investment program is a high-priority goal even though their initial investment must be modest.''
Mr. Gain, who has been a real estate broker for 17 years, is chairman of a major real estate investment corporation in Anchorage, Alaska.
A real estate syndicate is simply a group of investors who combine, or pool, their resources to carry out a particular real estate transaction or group of transactions. Syndications can be public (registered with governmental agencies) or private (exempted from registration when following federal and state guidelines).
''This year will be considerably better than 1981 for both public and private syndications,'' Gain notes. ''This year public transactions could total $5 billion or more, and private transactions $13 billion or more.''
That reflects a substantial increase over last year's $3.5 billion in public and $5 billion in private syndications. Five years ago (1977) there were a total of 47 public real estate syndications, generating a dollar volume of $293 million. That volume of activity has steadily grown -- and is still growing.
During the first two months of 1982 alone, there were 26 public syndications totaling $564,616,000. That's a 4.7 percent increase over the same two-month period last year.
Another indication of increasing activity and interest in real estate syndications is seen in the membership of RESSI (now 3,200 members). While rosters of other broker groups have been shrinking in recent years, the syndication institute has been growing, despite the doubling of dues in 1981.
RESSI president Gain offers a few tips to persons interested in becoming a syndicate participant. ''Be sure you're working with an experienced syndicator with a success-proven track record,'' he asserts. ''Don't be intimidated. Ask hard questions.
''Ask others about the syndicator and the current offering. Seek counsel from your accountant or financial planner. It's significant to note whether or not the syndicator is a member of RESSI.''
In one sense, syndicates are no different from other forms of real estate investments, according to Gain. You should investigate before you invest, and consult competent advisors on points that are unclear to you.
When the advantages of a professionally structured syndicate are coupled with income-tax incentives offered by the Economic Recovery Tax Act, an outstanding opportunity is opened to even the novice investor.
The new tax law includes provisions that greatly increase deductions that can be taken for depreciation on investment real estate, reduce the maximum tax on long-term capital gain (profit from the sale or exchange of property), and offers investment-tax credits for rehabilitation projects.
Generally, the new tax law simplifies the rules and makes investment in real estate more attractive. However, some of the provisions can be tricky, especially for individuals unfamiliar with tax jargon. It's important to consult with an accountant or tax advisor to be sure the beneficial aspects of the new law apply to your situation.