THE ULTIMATE GUIDE TO REAL ESTATE SYNDICATION
There are two ways you can be an active real estate investor and invest in your own account, which are going to be limited by your time, expertise, credit, and capital.
Many people start out small and work their way up to making money through investing in real estate, but it’s not a lifestyle for everybody. The second way to become an active investor is scaling your properties by taking on partners. This is called syndication.
Robert Helms and Russell Gray are co-hosts of The Real Estate Guys Radio Show and have trained more than 5,000 individuals in how to successfully syndicate real estate and other investments.
Read on to learn:
What Is a Syndication?
Real estate syndications are a type of investment vehicle that allows multiple investors to pool their money and resources to acquire, manage, and operate commercial real estate properties. For instance, most people can’t afford to just build a large apartment building alone, but forming a syndication with multiple investors to raise capital can make constructing or buying a large real estate development possible.
As long as you meet the status of an “accredited investor” (some who has an annual income of $200,000 for two-plus years or a net worth of $1 million excluding their primary residence), you can join a syndication.
Syndications are often attractive to investors who want to invest in commercial real estate but don’t have the expertise, time, or capital to do so on their own. They can be a good way to diversify a real estate portfolio and provide a steady stream of income through rental payments and potential appreciation in the value of the property.
Who Is Involved in a Syndication?
Syndications are formed when a Sponsor (also called a General Partner, Issuer, or Manager) brings together a group of passive investors (sometimes referred to as Limited Partners, Limited Members, and Token Holders) to finance the acquisition of a property.
The active investor is generally referred to as a Sponsor or General Partner (basically, a syndicator). The sponsors are the people that find the deals, put the deals together, and put the capital to work.
The investors of the syndication are typically referred to as Limited Partners and work as a passive component of the real estate acquisition. Limited partners are usually raising the majority of the capital it takes to syndicate a property. They have limited liability and their risk is limited to the amount they invest in the deal.
Most often, Sponsors will invest their own money to fund a portion of the syndication, while the rest of the capital comes from the accredited investors.
When forming a real estate syndication, the sponsor typically sets out criteria for the property and the investment, such as the type of property, location, target return on investment, and length of the investment period. The Sponsor typically manages the day-to-day operations of the property and makes decisions on behalf of the group, while the investors provide the capital and share in the profits and losses.
The syndication’s operating agreement outlines the rights and responsibilities of the Sponsor and Limited Partners, and details how profits and losses will be shared.
SEC Regulations of a Syndication
These are the types of SEC real estate syndication exemptions that are most often used to create private real estate investment deals:
1) Regulation D 506-b, which allows for non-accredited investors
2) Regulation D 506-c, which requires all investors to be accredited
3) Regulation A, which allows for accredited and non-accredited investors
4) Regulation A+, which allows for accredited and non-accredited investors
5) Regulation CF, which allows for accredited and non-accredited investors
For any deal type, you should have some kind of understanding of the risk and what the expectations and business plan are for the property. This is called being a “sophisticated” investor. If you have prior investment experience, you can also be qualified as a sophisticated investor (if not accredited).
Advantages of a Syndication
There are several advantages to investing in a real estate syndication. One of the main benefits is the potential for cash flow through rental income. Most syndications distribute monthly or quarterly payouts to the investors.
Syndications can also offer the potential for appreciation in the value of the property, tax benefits, and the ability to leverage the investment with borrowed funds.
Since most individual investors don’t typically have the capital it takes to buy larger properties on their own, syndications give you access to more unique real estate deals. Being part of a syndicate also gives less experienced real estate investors.
Risk management is an important consideration in any real estate investment, and syndications are no exception. The sponsor is typically responsible for managing the risks associated with the property, such as tenant turnover and maintenance issues.
Investors should also consider the risks associated with the sponsor, such as their experience and track record in real estate investing.
Related Article: Tokenized Real Estate – Security Token Offerings
Why Choose a Syndication?
Real estate syndications offer investors the opportunity to invest in commercial properties without the need for expertise, time, or capital. They provide the potential for steady cash flow and potential appreciation, as well as tax benefits and the ability to leverage the investment.
Risk management is an important consideration, and investors should carefully evaluate the sponsor and the property before committing to a syndication.
If you are interested in how to successfully syndicate properties or invest in quality real estate easier, look into joining Secrets of Successful Syndication with us, Robert Helms and Russell Gray of the Real Estate Guys™.
The Real Estate Guys™ Radio Show is an investment talk program broadcasting on conventional radio since 1997. The podcast version is heard in over 190 countries as one of the most popular investing podcasts on iTunes. Past notable guests include Steve Forbes, Donald Trump, Robert Kiyosaki, Peter Schiff, James Rickards, Mark Skousen, as well as other notable economists, real estate industry leaders and subject matter experts.
Robert Helms is a professional real estate investor with investment and development experience in nine states and six countries. As a former top-producing real estate agent, Robert ranked in the top 1% of sales in the world’s largest real estate organization. For 4 years, he taught Real Estate Practices & Appraisal at the college level. Robert’s investment and development companies have past and current projects valued at over $800 Million. He is the co-author of Equity Happens – Building Lifelong Wealth with Real Estate and the host of the nationally syndicated radio show The Real Estate Guys™, now in its twenty-second year of broadcast. The podcast version of the show is one of the most downloaded podcasts on real estate and is heard in more than 190 countries.
Russell Gray is co-host and resident financial strategist for The Real Estate Guys™ Radio Show. An avid student of economics, with a diverse entrepreneurial background in real estate, investing, financing and syndication, Russ brings unique and practical insights to help investors grow and protect their wealth and income through real estate and real asset investing.
*Note: Note: Invest On Main LLC (collectively investonmain.com) have made every attempt to ensure the accuracy and reliability of the information provided. Invest On Main cannot not accept any responsibility or liability for the accuracy, content, completeness, legality, or reliability of the information contained herein. The information herein is not considered legally binding legal advice, tax guidance, or financial counsel.
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About the author
Michael Flight
Michael Flight was named the Godfather of Blockchain Real Estate by Forbes Crypto. Michael achieved that distinction by co-founding Liberty Real Estate Fund, the World’s First Net Lease Security Token Fund, creating the Blockchain Real Estate Summit. More recently co-founding Invest On Main (IOM.ai) the Real Estate & Alternative Asset marketplace of the future and AcceleratedLaw a faster, cheaper way to create and tokenize securities offerings!
Michael is a real estate entrepreneur and real estate tokenization pioneer who is an expert in retail real estate investment, redevelopment and real estate on the blockchain. He started his commercial real estate career in 1985, and then co-founded Concordia Realty Corporation in 1990, which continues to partner with some of the world’s most well-known banks, insurance companies, hedge funds and institutional investors in many successful investments.
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