What Is a Commercial Real Estate Syndication?
Commercial real estate syndication is a way for investors to pool their funds to acquire larger and more stable assets than they could have acquired individually. Because this is an investment offering, real estate syndicates are regulated by the Securities and Exchange Commission (SEC), and all offerings must be filed and reported to the SEC.
The advantages of real estate syndication are:
- Major assets and projects.
- Improved stability by increasing volume and position.
- Less spending out of pocket if you're a syndicator or business sponsor.
- Completely passive real estate investment and cash flow when investing with a sponsor.
- Can support local professional management.
- All tax benefits, mandatory write-ups and write-downs, and real estate investments.
There are two different roles that you can play in real estate syndication, depending on your level of commitment. Investor or Deal Sponsor. The deal's sponsor, also known as the "syndicator" or "general partner" (GP), is an active part in the investment, and the investor, also known as the "limited partner" (LP), is the passive party in the investment.
There are two basic types of syndication in real estate:
506(b) and 506(c). They are often referred to as what investors are generally permitted to invest in.
There are various ways to set up a real estate syndication. I recommend keeping your offer as simple as possible to ensure complete transparency and avoid confusion at any point in the process.
Syndications can be divided into general and limited partners in many ways. This split can be viewed as pure fairness or progress by GP, depending on the group and its goals. Is there any risk in investing in a real estate syndication? Absolutely!
Investing in syndication involves the following risks:
- Increase in vacancies due to rising rents
- Construction costs go out of hand leading to capital calls
- Project getting delayed due to weather, political environment, etc.;
- Banks can cancel loans anytime
- The general partner disappears into the night
However, if you have an experienced deal sponsor with an excellent track record of successful projects, you probably don't need to worry about these scenarios. However, if you are a trading sponsor or an investor, you must exercise due caution and understand the risks you take.
You always hear me say that the first goal of real estate investing should be income replacement. There are numerous ways to accomplish this, which include flips, wholesale, single-family rentals, and commercial real estate. If learning how to syndicate commercial real estate can change my life forever, it can change yours too, and it is something that anyone can do. I cannot strain sufficiently how close we are to changing it and changing your income. With proper focus, you can complete a single deal in 3–6 months. The most powerful tool in your toolbox is RE syndication.
As I illustrated and explained, you must first determine the income or cash flow you want to replace (e.g., $100,000 per year). I can use current syndication deals to show you exactly what the syndicator is getting and how to plan an exit that will keep 100% of deals even after 2-5 years. Like a syndicator, you can syndicate real estate with 100% of your own money. You may have seen what a syndicator gets out of a deal and how only one of their deals can replace your income entirely. Most people get the deal done in 3–6 months if they are focused.
In those first 90 days, I knew nothing about syndication, but I educated myself, landed, and closed the first three properties, totaling 120 units. Yes, even in this "competitive market." If I had to start all over again, and if I could still do it, it would take the same amount of time and energy to land 12 units as 100 or 120 units, so to make a deal large enough to replace your income, use Focus. Decide what income you want to exchange, and find and complete a deal to exchange it! I'll show you how it's done. I'm there for you.