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Listen "07. Preferred Returns in Real Estate Syndications: The Good, The Taxed, and The Risky"
Episode Synopsis
In this episode of the Major League Real Estate Podcast, Nathan Sosa and Matt Hamilton explain how preferred returns work in real estate syndications, how they're taxed, and the key details that often get overlooked in fund structuring.
Nathan and Matt walk through:
- What preferred returns are, how they’re typically structured, and why most syndications include them
- Why PREF equity payments are usually not considered guaranteed payments and how that affects self-employment tax
- How capital calls are becoming more common, especially in deals affected by rising interest rates and bridge loan maturities
- The difference between accrued and non-accrued PREFs, and how that changes what investors are owed at liquidation
- When preferred returns are treated as guaranteed and why that’s extremely rare
The conversation also covers how poor deal structuring and vague operating agreements can put GPs at risk of getting paid last or not at all.
Request a free discovery meeting: go.therealestatecpa.com/mlre
Subscribe to the REI Daily Newsletter: go.therealestatecpa.com/mlresubscriber
Get the Ultimate Guide for Real Estate Syndications: go.therealestatecpa.com/mlreultimateguide
The Major League Real Estate podcast is for general information purposes only and is not intended to provide, and should not be relied on for, tax, legal, investing, financial, or accounting advice. Information on the podcast may not constitute the most up-to-date legal or other information. No reader, user, or listener of this podcast should act or refrain from acting on the basis of information on this podcast without first seeking legal and tax advice from counsel in the relevant jurisdiction. Only your individual attorney and tax advisor can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation. Use of, and access to, this podcast or any of the links or resources contained or mentioned within the podcast show and show notes do not create a relationship between the reader, user, or listener and podcast hosts, contributors, or guests.
Nathan and Matt walk through:
- What preferred returns are, how they’re typically structured, and why most syndications include them
- Why PREF equity payments are usually not considered guaranteed payments and how that affects self-employment tax
- How capital calls are becoming more common, especially in deals affected by rising interest rates and bridge loan maturities
- The difference between accrued and non-accrued PREFs, and how that changes what investors are owed at liquidation
- When preferred returns are treated as guaranteed and why that’s extremely rare
The conversation also covers how poor deal structuring and vague operating agreements can put GPs at risk of getting paid last or not at all.
Request a free discovery meeting: go.therealestatecpa.com/mlre
Subscribe to the REI Daily Newsletter: go.therealestatecpa.com/mlresubscriber
Get the Ultimate Guide for Real Estate Syndications: go.therealestatecpa.com/mlreultimateguide
The Major League Real Estate podcast is for general information purposes only and is not intended to provide, and should not be relied on for, tax, legal, investing, financial, or accounting advice. Information on the podcast may not constitute the most up-to-date legal or other information. No reader, user, or listener of this podcast should act or refrain from acting on the basis of information on this podcast without first seeking legal and tax advice from counsel in the relevant jurisdiction. Only your individual attorney and tax advisor can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation. Use of, and access to, this podcast or any of the links or resources contained or mentioned within the podcast show and show notes do not create a relationship between the reader, user, or listener and podcast hosts, contributors, or guests.
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