Control Missing in Limited Partnerships

QUESTION: I have about $40,000 to invest in real estate, but I don’t have time available to manage property. A colleague told me there are real estate investment groups which pool their funds to buy income properties with potential for increased market value. How can I find one of these groups?

ANSWER: Real estate investment groups are called syndications or limited partnerships. The big drawback is the investors vest control in a general partner who makes the investment decisions. But the investors, called limited partners, lose control over the property purchased with their funds.

In recent years, many general partners have lost money for their investors who had little or nothing to say about how the property was mismanaged. I do not recommend group investments because of the lack of investor control.

Amend Returns for Depreciation

Q: Since reading your article a few weeks ago about the income tax deduction for depreciation of apartment buildings, I realized I have not been claiming depreciation on my fourplex. I live in one apartment and rent the three others to tenants. How can I claim depreciation on the rentals for the last eight years?

A: You can amend your income tax returns for the last three years to claim your forgotten depreciation deductions. The pleasant result should be an income tax refund. For further details, consult your tax adviser.