A 2019 Bankrate study found real estate to be most Americans’ top choice for long-term investment. In fact, it’s been that way for years. If you’re like many, though, you’re interested in real estate investing, but it can be tough to manage the entire process on your own. Enter real estate syndication – an opportunity to achieve the benefits of real estate investment without the stress this kind of investment can cause. But what is real estate syndication? In this post, we look into why so many people are excited about it as an investment opportunity.
What Is Real Estate Syndication?
It may be easiest to think of this kind of investment as crowdfunding a property. You’ll pool capital with others to purchase a property. It could be one single apartment or an entire mobile home park. It could even be a piece of land or something more commercial like self-storage units.
Either way, you’ll have both syndicators and passive investors involved in the process. In a syndicate, the syndicators are general partners, and they’re the ones who are responsible for structuring deals and operating the syndicate itself. They typically have to underwrite the deal, complete due diligence, negotiate with the seller, build a business plan, then arrange the financing from investors. After the property is purchased, they work with a property management team to look after the investment and work with the investors to ensure things are flowing smoothly.
Passive investors in this process are just that – investors. Their entire role is to provide the capital necessary to make the purchase. In exchange for that capital, they get an ownership share in the property and passive income distributions. Once the investment is sold, they’ll get a return on that investment as well. Hopefully, that answers your what is real estate syndication question. Now let’s look at how you can get into it.
The Real Benefits of an Investment Like This
For passive investors, benefits abound with this type of investment. After all, how much time do you have on your hands to search for the perfect property and underwrite the one you want? Working with real estate syndication gives you the deal flow you desire in real estate investment but with the ability to invest almost hassle-free.
Moreover, you gain access to passive income in the form of monthly or quarterly passive income distributions. There are also some tax benefits that you’ll quickly realize in your K-1 filings. In syndication, you have more control than you do with a Real Estate Investment Trust since you decide which properties are right for you.
Real estate has some serious opportunities. After all, real estate tends to appreciate more reliably than any other investment, and it’s diverse enough that you can spread your capital across a number of different syndications.
The Drawbacks
Real estate syndication is not without its challenges though. Typically the biggest challenge with real estate syndication is choosing the project itself. You want to select a syndicator who is trustworthy. There are those who simply aren’t experienced enough to help you get the reliable investment you want, so look carefully before choosing.
Are You the Right Investor?
Is real estate syndication the opportunity you’d like to add to your growing portfolio? Most syndications will require you to be an accredited investor, which means you have an annual joint income of at least $200,000. A net worth of at least $1 million may also qualify you to be part of a syndicate. In fact, depending on the SEC offering, you may only be able to qualify if you’re accredited.
Some syndications, though, are available to sophisticated investors who have a deeper experience of the market itself, and you can often find those chances by networking with other investors and building relationships that will help you find the recommendations you need. What is real estate syndication? Opportunity.
As you search for the right real estate investment firm, look to Roy & Company. We offer access to nationwide partnerships and decades of experience with investments like real estate syndication. Learn more when you reach out to our team today.
