What Is Real Estate Syndication Deals – And How To Find Them
What Is Real Estate Syndication Deals – And How To Find Them
One of the reasons I created the Passive Investors Circle is to educate doctors and other high-income earners about their passive real estate options.
After joining, the first step is to have a brief discussion regarding their financial goals and answer their questions.
As you can imagine, I get asked lots of questions such as:
What is real estate syndication deals and how do we go about finding them?
Investing in real estate is a big deal and you SHOULD have all of the answers and ask ALL the questions you can think of.
Furthermore, real estate syndications aren’t broadly popularized, so, not only will your friends probably not have any answers to your questions, but they likely will have no idea what you’re even talking about.
This is one of the reasons why the rich are rich and pay little to no taxes.
For this reason, it’s important you find a trusted, knowledgeable resource to get your questions answered and do plenty of your own research.
In an attempt to make this easier on you, I’ve addressed 4 big questions:
- What types of properties can I invest in using syndications?
- What downsides are there to syndications?
- Where and how do I find syndication deals?
- Can I invest in a syndication online?
Once we address each of these in detail, I feel you’ll have a better grasp on what these types of deals entail so you can do your due diligence and make smart investment decisions.
Let’s get going…..
What Are The Different Types Of Real Estate Syndications?
Real estate syndication deals are available in:
- multifamily properties
- manufactured home parks
- land development
- student housing
- commercial real estate
Some real estate syndications are for ground-up construction and others are for buy-and-hold (i.e., buy an asset that’s already stabilized, and hold it for a number of years).
A great example of a value-add multifamily deal is an apartment community whose units haven’t been updated in 10+ years. The kitchens are all dated, the carpets are worn, and the landscaping needs some work.
By making those improvements, the property management can increase the rents, which increases the income of the property and thus, the overall value.
What Are The Risks Of Investing In Syndications?
As you’re probably aware, ANY type of investment is a risk. Syndications aren’t immune to risk either.
Business plan execution
One of the biggest risks lies in the execution of the business plan. Many times before the deal, sponsors send out glossy marketing packages to potential group of investors and attempt to answer their questions.
However, when the rubber meets the road, the sponsor team needs to be able to execute on the business plan in the face of unforeseen circumstances.
Proven track record
Real estate investors that invest with sponsors who have a proven track record and prioritize capital preservation helps ensure that they will protect your investments and do what they say they’re going to do.
Changing market and economic conditions are always a risk. No one can predict what market conditions will be like at the end of a project’s hold time.
For instance, if the projected hold time is 5 years, check to make sure that the loan term is for at least that long. Ideally you’d like to see it longer than 5 years.
Why? So there’s a buffer in case sponsors need to hold the property longer than intended.
What about liability?
At the end of the day, as a limited partner passive investor, you’re concerned with your personal liability. The good news is your liability in real estate syndication is limited as you’re in a limited partnership with others.
At worst, you could lose your original investment capital, but you could not lose more than that (e.g., you can’t lose your house).
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Where Can I Find Syndication Opportunities?
The only publicly advertised real estate syndication deals are for accredited investors only. So, how does a “normal person” find real estate syndication deals?
You can do a Google search, but how do you know that the opportunities that pop up are legitimate ones, put together by experienced teams with strong track records, who will safeguard your money over a period of several years?
The best way to find real estate syndication opportunities is to get out there and talk to people in the real estate syndication space.
This community is quite small, and once you get connected, you’ll easily be able to find sponsors and real estate syndication opportunities that fit with your investing goals.
Note: This is one of the main reasons I started this site. To find and locate trusted sponsors to work with that I also personally invest my money with too.Join the Passive Investors Circle
How Do Private Real Estate Syndications Compare To Real Estate Crowdfunding Sites?
Occasionally you’ll hear about someone claiming to have invested in a passive real estate deal for just a few thousand bucks.
This is because recently, real estate crowdfunding sites like RealtyMogul, RealtyShares, and Fundrise have helped make it possible for millions of investors to invest passively in real estate with decent rates of return.
Real estate crowdfunding sites can be a good place to find real estate syndication offerings. However, there are a few things you should keep in mind.
First, most of these platforms require that you be an accredited investor in order to invest in their real estate syndication offerings.
Some of these platforms do offer REITs (real estate investment trusts) as an alternative for non-accredited investors. Typically, you can invest in these REITs with a low minimum investment (you can invest in Fundrise’s eREIT for just $500).
Just be aware that REITS are not real estate syndications. Rather, it’s a fund, which is likely what your friend actually invested in.
When you invest in a REIT, you’re investing in a company that buys real estate; you don’t have direct ownership of the underlying asset yourself, like in a real estate syndication.
You’d likely still get a good preferred return due to investing in several assets rather than a single one. But you have to realize that you wouldn’t get the same tax benefits as with a syndication.
Regardless, if you’re just starting out, you should definitely check out some real estate crowdfunding sites, to see what they’re all about.
All in all, it’s important to understand the risks, the terminology, the options available, and how to find the deal that fits your goals and investing style best.
Real estate syndications aren’t for everyone, but they can be a fabulous addition to an investment portfolio.
Now that you know more about how to find and passively invest in real estate deals, that’s one more box checked and one less barrier to entry.
Are you ready to start investing in syndication?
Join the Passive Investors Circle to get started.