Designing a ‘Win-Win’ Partnership
What is Real Estate Syndication? Real estate syndication is simply the pooling of investor money together and partnering with a private real estate company to acquire large commercial properties such as apartment buildings. In this mutually beneficial partnership, the investor provides the equity and the private real estate company provides the expertise to acquire, reposition, and increase the operational efficiency of the property. This allows an investor to invest passively, receive a sound return, and retain the benefits of real estate ownership.
Real Estate Syndication Lifecycle
As a passive investor, you can generally expect the real estate syndication road map as shown below:
1
General Partners (GPs) identify an asset and begin due diligence.
2
GPs present investment opportunity to passive investors.
3
Investor pool together funds to purchase the asset.
4
GPs reposition and increase the operational efficiency of the property.
5
Passive investors receive periodic distributions, pass-through tax benefits & more.
6
At sale of the asset, investors receive their initial investment & share of the sales profit.
Frequently Asked Questions
Typical minimum investment amounts range from $50,000 – $100,000, though each deal is unique.
Investors may invest as an individual with a checking or savings account, or with an entity such as a LLC, trust, or Self-Directed IRA, Solo 401(k), or Qualified Retirement Plan (QRP) account.
An accredited investor, as defined by the Securities and Exchange Commission (SEC), must satisfy at least one of the following:
- Have a net worth of more than $1 million, excluding the value of their primary residence;
- Have an annual income of $200,000, or $300,000 for joint income, for each of the last two years, with expectations of earning the same or higher income this year
While some deals are only limited to accredited investors, there are also deals that accept non-accredited investors or what the SEC define as sophisticated investors. By definition, sophisticated investors must have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment.
The frequency depends on the investment, some are monthly, some are quarterly. There is usually a short wait period before distributions are made to give the new management company time to build up some additional cash reserves and stabilize the property after the acquisition.
The business plans for most investments is to hold the property for five to six years. The initial investment cannot be withdrawn, but you may receive regular distributions during this time.
Ready to Sit Back & Relax?
Ready to try a different way of real estate investing? Invest passively with a team you can count on, so you can reap the benefits of real estate ownership without lifting a finger.
