The ABCs of Real Estate Syndication Deals
The real estate business offers a mix of opportunities, deals, and proposals, all of which may bear similarities or distinct differences. Since the primary purpose of real estate investment is cash flow generation, it’s common for investors to opt for what they believe suits them best. Fortunately, the list of investment types is endless, from regular commercial real estate to triple net leases.
However, not every investor is wealthy enough to pour in thousands of dollars into a real estate investment with the snap of fingers. Many investors are regular folks who need profitable ways to invest 100k for income and earn passive returns. One of these methods is known as real estate syndication, and it will be our subject of discussion in this article.
What Is Real Estate Syndication?
A real estate syndication is a partnership between a group of potential investors who join their monetary resources together to acquire or build assets that usually would’ve been impossible to buy by a single investor. It is an age-old real estate investment method that generally involves profit on a larger scale than traditional real estate investing.
There are two primary roles in real estate syndication: the syndicator and the investor. The investors playing these two roles have different duties and obligations, explained below.
While the syndicator, who is also known as the general partner, serves as the deal manager, with duties ranging from property/investment scouting to securing, the investor, on the other hand, works to provide most – if not all – of the money required for the investment.
The syndicator thus takes an active role which may come along with a management fee, with the investor taking the backseat in a less busy, if not passive, role. Simply put, the syndicator thus earns money from transaction origination, capital appreciation, monthly rent cash flow, and stipulated management fees.
The above see the investors only earning from rent cash flow and property appreciation. Real estate syndication is an excellent avenue for investing 100k for income.
The Real Estate Syndication Deal
The real estate syndication deal is a signed agreement between investors who have decided to enter a real estate syndication. One of them plays the role of a general partner, and the others serve as investors. The deal dictates how they will share the profits of their venture.
Structure of Real Estate Syndications
A real estate syndication deal involves forming a limited liability company or limited liability partnership between all stakeholders. The selected general partner serves as the managing member of the league, and the investors take limited partner positions. Say each investor pumped in a hundred thousand dollars, they all expect a return on the 100k investment.
Each member of the partnership owns an agreed percentage of the property, with ownership usually split equally among all members. Nevertheless, the syndicator can have a more significant equity share in some partnerships. Each member’s percentage determines how much they receive from the generated profits and returns.
However, it isn’t uncommon to find deals structured to attain a minimum return before the syndicator receives any benefits. The above means that the syndicator will not receive a share of the profits until they reach an inevitable return on investment. This method ensures safety for the involved investors and encourages the syndicator to deliver their best.
Types of Real Estate Syndication
Real estate syndication can take different forms, especially to fit the needs of the syndication members. Syndicators can look into or outside their networks to find willing investors. These investors may decide to operate online, offline, or privately. Here’s how:
This syndication sees the sponsor reaching into their network to get deals. Offline syndication doesn’t require face-to-face interactions as they occur over the phone. However, in-person interactions are common.
Many opine that online apartment syndication deals are almost the same as real estate crowdfunding. This form of syndication allows a sponsor to reach investors outside their connections with the aid of the Internet. Online real estate syndication provides the opportunity to take advantage of an online marketplace’s tools for investment and portfolio management.
From all indications, it is safe to say that private syndication is a perfect marriage of offline and online syndication methods. Involving full access to a branded webpage on a real estate crowdfunding site such as Peoples Capital Group, private syndication eliminates the need to reach into the sponsor’s network to generate investment.
Advantages of a Real Estate Syndication Deal
Apartment syndication deals present numerous benefits to all parties on board, syndicators or investors. From providing a less expensive option to real estate investing to adopting a stress-free investment option, the following are benefits of apartment syndication deals:
Invest in Larger Assets
Real estate syndication is the gateway to investing in significant assets, especially those above your means. With the help of the other investors who form the syndication, you can contribute your percentage of the capital into the investment pool, thus amassing an amount large enough to purchase large property.
No Experience Needed
Real estate syndication is perfect for first-time investors who hope to gain knowledge of the industry as they go. Since the syndicator or managing partner is usually the most experienced and does most of the work, the investor needs not have any previous experience in the business. Syndication presents itself as one of the best investments for 100000 dollars.
Favorable for the Syndicator
The syndicator enjoys the benefit of not providing monetary contributions to the investment. Instead, the syndicator needs to ensure that the investors get great deals to generate good cash flow. It’s crucial to find apartment syndication deals that provide the best as an investor.
Lower Risks for Investors
Since investors aren’t responsible for funding the entirety of the investments, they also don’t shoulder the totality of the risks involved in the syndication. Other advantages include the passive returns the investment method provides, easy management, etcetera.
Tips for Entering Real Estate Syndication Deals
Having read the article up to this point, you’re probably considering entering one or more apartment syndication deals. If you’re, then these tips will be of help.
Pick the Best Role for You
Only you know what will be best for you, a syndicator or an investor. If you are an experienced real estate investor with great contacts and connections, you are better off as a syndicator. However, if you are new to the world of real estate investing, then the role of an investor is perfect for you.
Be Risk Aware
Whether you’re an investor or a syndicator, risks are ever-present, and you must recognize and minimize them. While real estate syndication offers an excellent safety assurance, it is necessary to be cautious about eliminating any occurrence of risks, especially when it involves investing 100000 dollars.
Trust is the backbone of any partnership; thus, your partners must be trustworthy individuals who have their hearts in the investment. Finding a virtuous and able syndicator is also crucial to the success of the investment.
Take the Step Today
Real estate investing is exciting and highly rewarding; little wonder investors are rushing to take advantage of the industry’s lucrative nature. If that sounds like you, then take the first step by reaching out to a trustworthy real estate agent to help you get started with apartment syndication today.