Mon, September 09
What is Real Estate Syndication
By Besides the relatively rare market crashes, real estate can be one of the most stable and secure ways to invest your money
Real estate has been one of the most popular investment avenues for a long time.
Besides the relatively rare market crashes, real estate can be one of the most stable and secure ways to invest your money, knowing that no matter what happens, you will still have a property that will have value. However, for most people, owning more than one property is not an option – investing hundreds of thousands or even millions into a real estate development project is out of reach for middle-class families.
That’s where real estate syndication can be so helpful.
With the help of private real estate syndications, you can pool resources with other investors and reap the benefits of real estate investing without having to put down a large amount of money.
And today, with the rise of online crowdfunding, it is easier than ever to syndicate investment into real estate.
Who Are the Players Involved in Real Estate Syndication?
Now that we figured out what is real estate syndication, we need to understand how the process of syndication looks and who are the main players involved in it.
In most cases, real estate syndication involves three main parties:
· The main syndicator, also known as a real estate sponsor;
· The investors who pool their resources;
· Equity partner who helps to connect the sponsor to the investors.
All three of the main parties play a vital role in the process, so let’s explore their parts in more depth.
The primary sponsor is usually someone who has experience and deep knowledge about the industry and the real estate syndication structure.
He must be able to identify investment opportunities, have the means to acquire them, and know how to manage the properties once they are bought.
This person or group of people will have to earn the trust of investors if they are going to pool enough resources to execute their real estate syndication business plan, so they must have a proven track record and be able to provide a solid syndication deal, showing why a particular investment makes sense.
The investors are a group of people who pool their resources into a specific project and then gain ownership of a percentage of the property based on the size of their investment.
But while the investors gain the full ownership rights and get a share of all the profits from rent and the eventual sale, they do not take part in the acquisition or management of the property.
Finally, the equity partners serve as a link that connects sponsors with investors and can help communicate relevant information, prepare the necessary documents, and perform a range of other tasks.
Online & Offline Real Estate Syndication
The advent of the online business world and crowdfunding has completely changed the way commercial property syndicates are executed.
Not too long ago, the only way for sponsors to find trusted investors was to go through their personal contacts or use a JV/equity partner who had the necessary connections.
But with the help of online syndication marketplaces, sponsors can now gain access to thousands of accredited investors from all over the United States who can invest through the platform and cut out a lot of manual work in transferring funds, tracking information, providing reports, and much more.
The process has become so streamlined that the overhead costs of executing a commercial real estate syndication project have become much lower, not to mention the speed and efficiency with which a project can now be completed, which is beneficial to everyone involved.
Private Real Estate Syndication
As we mentioned before, technological and software advances have made it much easier for investors to crowdfund and take part in larger real estate projects.
But it has also been extremely beneficial to sponsors.
They can not only easily find investors using various marketplaces, but can actually set up their own private real estate syndication platform musing available private-label solutions that can be installed on any website.
This allows fundraisers to keep the entire project in-house and avoid having to use public marketplaces that often take a cut from every transaction.
Why Should You Take Part in Real Estate Syndication?
At this point, you should have a pretty good understanding of what real estate syndication is and how it works.
But now, you may ask yourself – why does it make sense for you to participate?
Well, there are a lot of reasons why real estate syndication makes a lot of sense for smaller investors.
First off, you gain access to lucrative investment opportunities that would otherwise only be available to those who can invest hundreds of thousands or even millions of dollars.
By pooling your resources with other investors, you can get a share of the profits from rent and eventual sale, even if you can’t invest a large amount.
Second, you can use the expertise and experience of the sponsor who will pick the right investment opportunity and arrange all the details, so you can sit back and wait for the investment to pay off.
Finally, by investing in smaller amounts, you can diversify your portfolio and ensure that your assets remain secure and that you maximize your chances of growth.
If you would like to receive professional representation as a landlord or investor in the San Francisco area, Thomas Mensendiek can help – just call 1-415-865-6117, and we will answer any questions you might have