Avoid a Costly Mistake When Investing in Real Estate Syndication Deals

CPAs Amanda Han and Matthew MacFarland worked alongside real estate investors for years, helping them save on taxes.

However, working with investors and actually investing are very different, as the accountants learned the hard way.

The California-based couple has built an impressive real estate portfolio that includes rentals and syndication deals outside their CPA day jobs. But, early in their real estate investment careers, a mistake cost them about $100,000 worth of retirement savings.

“I think each of us lost like $50,000 in our 401(k),” MacFarland told Business Insider of the failed deal they invested in back in 2008.

“We were very prevalent in the industry of people talking about self-directed IRAs and using your retirement accounts, and so we happened to use our retirement accounts to invest in a syndicated real estate deal,” he explained. “In retrospect, the timing was horrible.”

It wasn’t just bad timing. Han and MacFarland forewent a critical step: due diligence.

Real-estate syndication is a way for a group of investors to pool their capital together and purchase a single property managed by a “syndicator.” Once the investor contributes capital, their role in the deal becomes completely passive, as the syndicator is responsible for finding the deal, executing the transaction, and, ultimately, delivering returns to the investors.