A Beginner’s Guide
We have all heard that real estate sector is always a promising front to invest in and earn huge profits. But if you are new to investing, but you may have investment limitations. If so the real estate syndication may the perfect opportunity for you to do your first deal. Today, a modernized concept of property syndication has evolved, and investors are making huge profits when they invest wisely in the right opportunity. In this blog post, you would learn what is real estate syndication, its basics, and why investing as a limited partner in a real estate syndication investment might be right for you.
What is Real Estate Syndication?
Real Estate Syndication is a process in which multiple investors collect their resources, network, experience, skills, and human capital to buy one or multiple commercial or residential properties which they are unable to buy individually.
Property Syndication allows multiple individuals to come, join, participate, and invest in purchasing property together. These syndicates are special purpose entities structured under Limited Partnerships (LPs) or Limited Liabilities Companies (L.L.C).
Let me simplify it further for you. For instance, you own only $10,000 and you have a next-door property worth $1,000,000. You also have a group of people who individually own the same amount as you. Here jumps in the idea of syndication. You syndicate your amount through syndicate attorney and each of your friends collect their money to invest in purchasing this $1,000,000 property under the cap of LLC.
Typical parties Involved in Property Syndication
Sponsor — is the person who usually sponsors a debt and anybody or a company has to qualify for acquisition. The winning person or company gives the sponsor equity, a different portion of earning or share in return. Those sponsors are sometimes called “General Partners” and other investors are referred to as “Limited Partners.”
Manager / Syndicator (general partner) — A manager is a person who puts a deal together, steers the process, acquires property, executes the strategy, and manages the whole property management plan. A sponsor can also be a manager or play both roles at one time.
Passive Investor (limited partner) — An investor is a person who invests money by the process of buying the shares/equity stake. They are passive investors, unlike managers or syndicators who are referred to as active investors because they do not manage or conduct the day-to-day operations of the partnership.
6 Reasons to Take Your Investing to the Next Level
Reason #1: Safe ‘n’ Stable Investment with Higher Profits The best thing about property syndication is that if you own a limited partnership lesser investment, for example, worth $25000, you can syndicate a property and be a passive investor along with doing your job separately. Your investment would be in safe hands that are used in stable ventures with lesser risk yet higher profits.
Reason #2: Investment Diversification Window In real estate property syndication, you get multiple options to invest your money separately. Someone rightly said, “Never put your all eggs in one basket.” So, this diversification of funds and property management technique empowers you to invest in multiple syndications where you invest in chunks format. For example, you may own $75,000 and you want to diversify your investment. You may divide it into 3 chunks and invest $25,000 in three different opportunities hence resulting in comparatively better performance of your investment for three multiple streams with a lesser risk.
Reason #3: Better Profile in Lesser time When you invest in real estate syndication, there are multiple experienced partners who also invest along with you. Firstly, you learn from experienced partners in case you’re interested, otherwise, you can play a passive role and the other seasoned members (general partners) of the team make the suitable decision for better business growth. This automatically builds your realtor and investor profile along with networks.
Reason #4: Massive Investment Opportunities In real estate syndication, there is no limit and most of the time, investors deal with bigger and commercial projects such as 100+ apartment buildings, etc. Such opportunities offer you a lot many perks and benefits. From learning to return, everything counts your growth big with a no-risk approach. You become a part of the asset class with seven figures profits.
Reason #5: Smooth Cash Flow and Return Syndicated properties are usually commercial buildings that are rented out to or leased including multifamily apartments, business retail/strip malls shops, gaming studios, SMEs, and other businesses including storage units can be syndicated. With this diversification of targeted audience, a safe environment of cash flow is available and you get timely payment/cashflow in turn for your initial investment.
Reason #6: Online Syndication Opportunities With a boom in Information Technology, we can present our investors/partners with multiple credible national and international opportunities for syndication through our investment portals where you can track your money and property details from (A-To-Z). You can even syndicate a property with a couple of fellow investors to earn safely and hugely if you so choose.
In conclusion I’d say if you are wondering whether investing in a syndication opportunity is good idea, as yourself if you are willing or wishing to invest in commercial properties, invest now and earn on-going returns, depreciation, and profits, allow the general partners to manage the day-to-day operations and personally manage your profits through an investment portal. If the answer is yes, then start today to make moves towards investing. If not, that’s ok. Each person’s investing risk tolerance varies. However, it must be said that multifamily investing is the one of the least risky investment types. Not it only a less risky investment, but also returns, profits, ability to passively invest and increased learning opportunity that allows you to you build networks and portfolio while continuing to work a 9-5 job make it worth strongly considering.