How to Join Real Estate Syndications

Contrary to popular belief, no one is born with an intrinsic knack for real estate investing. It takes a lot of learning and re-learning, and with the right insight, investing can be one of the most profitable endeavors you partake in.

With the quest for alternative income streams becoming ever more prevalent, real estate investing, in particular, has proven – again and again – that it is a viable source of cash flow for savvy entrepreneurs, in comparison to the speculative market of stocks and bonds.

With stock investments, your individual shares represent a certain percentage of ownership for a certain company. Even with the most reliable calculations and algorithms, the stock market can be unpredictable, making investing volatile and risky.

Many investors prefer the tangibility of real estate investments. Property is something that can be physically seen and touched. Furthermore, investment for real estate properties can potentially yield extremely high ROIs. In many cases, returns on real estate investments are higher than that of stocks and bonds and are more stable.

The downside is that big projects require big capital and not everyone has the kind of cash flow to pull from. Luckily, real estate syndication make it possible for an individual real estate investor to pursue these opportunities.

A syndicated property investment is an investment in which multiple buyers pool their money together to purchase a property they would not be able to afford individually.

Types of Real Estate Syndicates

Private

Private real estate syndicates raise funds through a private placement known as a security, or ownership interest in a company or corporation which maintains and operates investment real estate. One of the most common risks associated with this type of syndicate is unanticipated expenses, taxes, and liability.

Investors involved in this type of syndicate should be able to successfully assess property values and negotiate purchase agreements and leases. They also need to be knowledgeable of the insurance policies and documentation needed to organize a cost-effective syndicated real estate deal.

Investors involved in this type of syndicate should be able to successfully assess property values and negotiate purchase agreements and leases. They also need to be knowledgeable of the insurance policies and documentation needed to organize a cost-effective syndicated real estate deal.

Crowdfunded

While real estate has historically been known to be lucrative, but somewhat inaccessible to individual investors, crowdfunding brings a new level of transparency to the game. Crowdfunding syndicates involve raising capital from the masses, a process that often includes utilizing online portals to find deals.

While the perks include minimal investment and potentially higher returns, it does not come without certain drawbacks.

Since investors are not involved in the day-to-day operations, they may lack the motivation or ability to independently evaluate and monitor the ventures in which they invest. They could also potentially be at risk of losing their investment because of the lack of information on the company’s potential.

Investment Sponsor

An investment sponsor is the owner or developer of the asset who is responsible for raising the funds, locating the best deal, and executing the purchase and management of the property. While an individual sponsor may excel in this aspect, teamwork with another real estate investor could prove beneficial in the long run.

Accessing real estate opportunities alongside a quality team of real estate professionals who have the experience to identify and capitalize on appealing business prospects can ultimately drive value and improve your chances for success within a real estate syndication.

Advantages of Investment Sponsorship

Passive Investing

Passive investing is the least work intensive way of accessing the market. With minimal fees and none of the weighty commission charges associated with active real estate investing, you'll be able to reap from the benefits of investing without doing much work. You always know where your money is and how it’s performing, and you can easily remove and reinvest with little to no experience in real estate.

Typically, passive investors invest for the long haul, adopting more of a buy-and-hold mentality. That means resisting the temptation to consistently react to the stock market’s every move.

Consistent Returns

With real estate investing, you’re also able to easily diversify your portfolio of investments even further. Putting your eggs in different baskets is a great way to mitigate risk and can help you achieve consistent returns year-to-year. By investing in different types of real estate listings, you'll be able to reap benefits, even if certain parts of the markets shift.

Full Team Support

As with any other type of investment, it’s important to consult the experts. Garnering as much support as possible from key players in the real estate industry can be a make-or-break factor.

Syndications offer support for many different things, such as day-to-day management of a property, specific expertise on a certain aspect of real estate or networking possibilities.

How to Find a Sponsor

Find an Expert

So, how do you acquire the information needed to accurately evaluate a potential sponsor? Getting in touch with an expert requires some due diligence on your part.

While anecdotal criteria —such as referrals by a trusted source —are important, be sure to also search blogs and educational websites to help you determine if the sponsor’s experience and background are going to be the right fit for you as an investor.

Utilize Network

Actively engage your diverse investor and fundraising network and utilize your business contacts. Be open to e-mails, phone calls, conferences, and everything in between.

Scrutinize Track Record

Gain insight into the sponsor’s experience by performing a full review of their financials, as well as past projects. How long have they been in business? What is the extent of their experience regarding the investment in question? Keep in mind that experience with certain properties doesn’t necessarily translate to knowledge about others.

Interview

If you have the chance to arrange a one-on-one meeting with your potential sponsor, take it. Be sure to maximize your time and come prepared with plenty of hard-hitting questions.

Check References

A legitimate sponsor will be able to site financial or tax advisors, and lenders as references. Other valuable references include the sponsor’s joint venture partners or investors. Find out who their previous colleagues are and let them speak to the character and competencies of the sponsor.

Like most things, joining real estate syndicates is easy, but achieving long-term success is where it gets rocky. But, if you do your research, select the right sponsor, and absorb as much knowledge as humanly possible, the venture will work out in your favor.

Topics: real estate syndication