The Technical Side to Investing in Real Estate Syndications - Your Questions Answered
Whether or not you have a background in real estate investing, commercial or residential, is irrelevant. There are just things you need to know about syndications that are different from any other type of deal you’ve likely been involved in or had exposure to.
Your grandpa owned a few properties? Cool. Your dad used to flip homes for profit? Cool too. Now you’re interested in approaching real estate a little differently? Awesome. So, it’s natural to wonder about the returns, minimum investment requirements, taxes, and more when it comes to real estate syndications.
What are the different types of real estate syndications?
Real estate syndication deals are available on multifamily properties, self-storage, manufactured home parks, land development, hotels, student housing, warehouses, and more. Some real estate syndications are for ground-up construction and others are for buy-and-hold (i.e., buy an asset that’s already stabilized, and hold it for a number of years).
What are the risks of investing in real estate syndications?
One of the biggest risks lies in the execution of the business plan. Before the deal, you’re wooed with glossy marketing packages, and the sponsors will answer your questions with lofty ideals.
However, when the rubber meets the road, the sponsor team needs to be able to execute on the business plan in the face of unforeseen circumstances. Investing with sponsors who have a proven track record and who prioritize capital preservation helps ensure that they will protect your investments and do what they say they’re going to do.
At the end of the day, as a limited partner passive investor, you’re concerned with your personal liability. The good news is your liability in real estate syndication is limited. At worst, you could lose your original investment capital, but you could not lose more than that (e.g., you can’t lose your house).
Where can I find real estate syndication opportunities?
The only publicly advertised real estate syndication deals are for accredited investors only. So, how does a “normal person” find real estate syndication deals?
You can do a Google search, but how do you know that the opportunities that pop up are legitimate ones, put together by experienced teams with strong track records who will safeguard your money over a period of several years? You don’t.
The best way to find real estate syndication opportunities is to get out there and talk to people in the real estate syndication space. This community is quite small, and once you get connected, you’ll easily be able to find sponsors and real estate syndication opportunities that fit with your investing goals.
How do private real estate syndications compare to real estate crowdfunding sites?
Maybe one of your friends claims they invested in a syndication deal for just a few thousand bucks. This is because, recently, real estate crowdfunding sites like RealtyMogul, RealtyShares, and Fundraise have helped make it possible for millions of people to invest passively in real estate.
Real estate crowdfunding sites can be a good place to find real estate syndication offerings.
However, there are a few things you should keep in mind. First, most of these platforms require that you be an accredited investor to invest in their real estate syndication offerings.
Some of these platforms do offer REITs (real estate investment trusts) as an alternative for non-accredited investors. Just be aware that REITS are not real estate syndications. Rather, it’s a fund, which is likely what your friend actually invested in. When you invest in a REIT, you’re investing in a company that buys real estate; you don’t have direct ownership of the underlying asset yourself, like in a real estate syndication.
All in all, it’s important to understand the risks, the terminology, the options available, and how to find the deal that fits your goals and investing style best. Real estate syndications aren’t for everyone, but they can be a fabulous addition to anyone’s portfolio. Now that you know more about how to find and passively invest in real estate deals, that’s one more box checked! At this point, what are you waiting for?
I’d love to share upcoming deals with you, but first, we need to talk so I can hear about your investing goals. I have a couple deals with different tier structures and would be happy to help direct you toward the one that will move you toward those goals more efficiently.
Apply today at Nima Equity Doctors Investing Club to get the “inside scoop” on our past and upcoming deals. Once you apply to join the club, I’ll get on a call with you so we can see if we’re a good fit to invest alongside each other on any future real estate syndication deals! I can’t wait!