WHAT IS A SYNDICATION?
A real estate syndication is the pooling of funds from many passive investors to purchase large real estate assets that would otherwise be impossible to acquire individually. By being in a syndicate, investors can share in both the risks and the potential returns.
What are the PROS of a syndication?
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Completely passive real estate investing, while still receiving cash flow, appreciation, and equity.
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Simple way to diversify your portfolio
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Access to large opportunities
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More stability due to higher unit counts.
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Management by experienced asset managers.
Who can invest in a syndication?
Most syndications are available only to accredited investors, which is an investor with a net worth of at least $1,000,000, excluding the value of your primary residence, or have income at least $200,000 each year for the last two years (or $300,000 combined income if married) and have the expectation to make the same amount this year.
What are the main roles in a syndication?
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The General Partners ("GPs" or the deal sponsors) are the active partners that are hands-on managing the property.
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The Limited Partners ("LPs" or passive investors) invest money, sit back, and receive distributions.
What are the CONS of a syndication?
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The money in the investment is illiquid until the property is sold and profits have been distributed.
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With the investment being passive, you give up control over the property.
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The hold time for a syndication can be a drawback for some. A typical hold time is 5 years.
What are my risks?
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There is no guarantee of distributions, but your total potential loss will not exceed your investment.
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Market volatility can decrease the property value, but apartments are historically more stable than stocks. Be sure to choose stable markets.
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The property may not be managed to your liking. Ensure you know, like and trust your sponsors.
You should only invest in real estate if you can afford to lose your investment and are willing to take on these risks.
