SYNDICATION INVESTING 101 – HOW TO INVEST PASSIVELY IN REAL ESTATE
In real estate, as in any other industry, there are varying levels of investment. For the average person, buying a home is their biggest investment. And as sweet as buying a home of your own is, almost nothing beats the feeling of buying a house for the price of a car. However, for those who want to put more money to work and see greater returns, a real estate syndication is an option worth exploring. Syndication investing can be done passively, which makes it a very attractive proposition for those who don’t have the time or inclination to become full-time real estate investors. Whether you’re an investor, home-buyer, or seller—MY SMART COUSIN can help. We specialize in real estate investments for aspiring homeowners and investors, with a special focus on Black and Brown folks and women. As your Real Estate Investment Coach, we walk you through all aspects of owning property, from evaluating markets and identifying appropriate strategies, to identifying opportunities and securing financing. Whether you’re seeking to buy a house for the price of a car, our personal favorite way of investing, or purchase higher-end property, we’ll help you develop and execute a strategy that is custom-tailored for you. In this blog post, we will explore what syndication investing is, and how you can get involved without having to do a lot of legwork yourself. Let’s get started! WHAT IS SYNDICATION INVESTING AND HOW DOES IT WORK? Syndication investing is when a group of investors pool their money together to purchase a property. The group will then elect one or more people to act as the property manager. The property manager will be responsible for day-to-day operations, ranging from screening and securing tenants, to addressing maintenance issues and keeping the property move-in ready. As an example, if a group of ten investors is interested in purchasing a $1 million apartment building, with each contributing the same sum of money, each investor would only need to contribute $100,000 to secure a property that would otherwise be way outside of their budget. Syndication investing also can provide passive income for investors, as each investor will receive a portion of the rent collected each month without taking on full-time operation and management duties. While there are many benefits to participating in a syndicate, it is important to remember that it still has risks, just as buying a property as a stand-alone investor does. Before investing, be sure to do your research and consult with a financial advisor to ensure that you are making a wise decision. THE BENEFITS OF SYNDICATION INVESTING If you’re thinking of investing in real estate, you might want to consider engaging as part of a larger group. In syndication, a group of investors comes together to pool their money and purchase a property. This can have several advantages: · First, it allows you to buy a property that you couldn’t afford on your own. · Second, it gives you access to an experienced management team who can make decisions and manage the property through the benefit of multiple perspectives and resources. · Finally, it spreads the risk among many investors, which can protect you if the property doesn’t perform as well as expected, or faces issues that you alone wouldn’t be able to address. HOW TO GET STARTED WITH SYNDICATION INVESTING A real estate syndication is a great way to invest in large-scale projects that require more manpower, time, and money than you can handle on your own. But it can be tough to get started if you don’t know where to begin. Here are a few tips: FIND A SPONSOR A sponsor is an experienced and often well-heeled real estate investor who will help you raise capital, find and purchase a property, and manage the day-to-day operations. Look for someone who has a successful track record and deep industry relationships. CONDUCT YOUR DUE DILIGENCE Once you’ve found a potential project, do your research to make sure it’s a good fit for your pocketbook, timetable, and risk tolerance. You’ll also want to vet the sponsor to make sure they’re experienced and trustworthy, and that you share a common investment philosophy. UNDERSTAND THE COMMITMENT While syndication investing is a passive investment, it is not without any work. Just as with a mutual fund or real estate investment trust, you will want to spend time analyzing the opportunity, both at the front end and ongoing to determine if performance metrics are being met. HOW TO FIND SYNDICATION INVESTMENT OPPORTUNITIES IN YOUR AREA Commercial real estate and large multifamily projects tend to be particularly fertile ground for syndications. The reason is that the amount of equity, debt financing, and technical expertise that must be brought to bear is more than one person has at their disposal in abundance. This means that there is a huge opportunity for those looking to invest in real estate to find syndication investment opportunities in these sectors. There are a few ways to go about finding them: · First is to search online for real estate syndicators, either by region or by property type. This can be done by searching for terms like “real estate syndication” or “property syndication” followed by your target geographic location (a state or region) or target real estate type (shopping center, apartment building, etc.). Online groups provide another avenue for finding syndicators. · Another option is to attend local and online real estate investor meetings. These are often advertised through real estate publications and networking groups. · Finally, you can reach out to accountants and financial advisors specializing in the real estate sector, real estate agents, and real estate brokers, and ask if they know of any syndication entities or upcoming syndication deals. FAQs ABOUT SYNDICATION INVESTING Here are the answers to some frequently asked questions that will help you better understand syndication investing. · WHAT IS A SYNDICATION? Syndication also called a syndicate, is simply a group of investors who come together