WHAT IS IT?
The term syndication may sound complicated and intimidating, but it’s really just a classic real estate investing term. It is defined as a group of people or entities that pool money together to fund the purchase of investment property. In other words, it is crowdfunding before crowdfunding existed.
HOW DOES IT WORK?
Now while the overall approach from an investor standpoint is fairly easy and straightforward, it’s not as simple for the sponsor. Without getting deep into the weeds, there is an awful lot of work that goes into a project to make it worthwhile. For all the work in putting together the project, operating and managing and eventually facilitating the sale or trade of the property, the sponsor is rewarded by sharing in the profits based on escalators. This means that the better the property performs the more profit for everyone.
IS IT FOR ME?So why would someone want to participate in a syndication instead of just buying an investment property on their own? The answer is two-fold; first, participating in a syndication only requires funding your share and signing some legal documents. From there is a matter of sitting back and collecting quarterly distributions and a share of the profits. There are some regulation stipulations on qualifying to participate, but they include exceptions to allow participation from individuals that the sponsor already knows or has a relationship with. Check our website for more information on this. Buying a property on your own not only requires the time and effort to identify a property, but will also require getting a loan, and managing or finding a manager to handle all of the ongoing leasing and maintenance tasks that come along with it. Add in the accounting work and tax filing requirements and you end up with a part time job. Not only is the time and expertise required much greater, but the economies of scale multiply at a much greater rate the larger the investment.
THE BOTTOM LINE…The bottom line is that there are many ways to invest money, and just as many ways to invest in real estate, but the reality is that real estate returns are far more accessible than investing in the stock market or retirement funds that you can’t touch until you’re 65 or older. And a real estate syndication is one of, if not the easiest methods to access investment property without having to get another education to learn how or spending your nights and weekends being a landlord. Stay tuned for an actual case study that resulted in an investment that doubled in just over 3 years.