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What Should You Know About Real Estate Syndication?
What is Real Estate Syndication?
Real estate syndication is similar to mutual funds in the world of real estate investments. With an individual property investment, much like stock in a single company, the entire investment risk hinges on a single asset.
Like a mutual fund, real estate syndication funds enable investors to buy a portion of ownership in a corporation that holds multiple properties in a single investment entity, spreading risk around to increase stability and portfolio diversification, all while typically enjoying more stable returns. With real estate syndication funds, numerous investors pool their investment capital to buy, build, or even renovate multiple different real estate properties, often commercial, and often larger scale than any single individual could afford.
Real Estate Syndication Isn’t New
An often-cited example of property syndication is the investment group that bought the Empire State Building in the early 1960s. It took approximately 3,300 shares of ownership sold for $10,000 each to raise the $33 million the syndication needed to purchase the 102 stories of the highly desirable Manhattan property. This enabled access to a significantly larger opportunity for the investors than they would have had on their own, and they reaped massive rewards.
The Securities Act of 1933 afforded new ways for real estate investors to collaborate. Certain elements of the Act drove syndication real estate sponsors to create private networks of like-minded investors. These networks usually included individuals who were successful in their communities, along with highly-regarded, and often wealthy, professionals like doctors and lawyers. For a long time, real estate syndications were built largely through quality personal relationships in local communities.
Real Estate Syndication Funds
Real estate syndication funds such as those from Saint Investment Group can provide more robust capital preservation and often far lower risk than investing in individual properties one at a time. Having seasoned investment experts curating the portfolio of properties within a real estate fund frees up your time and energy. Some examples of syndication real estate properties include offices, retail space, industrial buildings, and even student housing on college campuses.
Is Real Estate Syndication a Good Investment?
Real estate syndication has recently earned the favor of accredited investors who have realized they can significantly improve their returns and diversification when investing with a skilled manager on more large scale real estate opportunities.
Access to best-in-class real estate syndication sponsors means it’s now possible for investors to invest in institutional-quality real estate assets across the country.
Benefits Of Real Estate Syndication
- Larger project sizes
- Often Greater stability due to more units and desirable locations
- Typically far less money out of pocket for the type of properties you’re able to invest in
- Passive real estate investment cash flow on performing investments
- Experienced professional management means no dealing with tenants directly
- Numerous tax benefits
Benefits Of Real Estate Syndication Funds
In 2012, a massive opportunity for accredited investors opened up with the passage of the JOBS Act. In this JOBS Act, the SEC was allowed to begin letting syndications engage in public solicitation with fewer restrictions, with the stipulation that each investor must be accredited. This change was the essential major step of the real estate crowdfunding industry, enabling easier access for investors on opportunities they’d otherwise never have access to.
As innovative new technologies connect people more effectively than ever before, real estate syndication investing methods have become more popular, allowing investors increased access to quality real estate asset investments. This, all while enjoying far more transparency than possible before, using robust reporting, and easy-to-access financials to keep a watchful eye on their investment positions. Real estate investors now have a more intelligent, more financially stable, and more secure option to invest in real estate.
A Real estate syndication fund also has the ability to invest in assets across the country, regardless of the investor’s own location. This opens doors for investors to live where they like, and not be forced to live in areas with particularly booming local real estate markets. While certain areas of the country are enjoying multiple times the growth of other areas, this means some markets are a significantly more secure and high-yielding investment than others. Investing in a high-quality real estate syndication fund provides far greater access for investors seeking to mitigate risks.
Getting Into Real Estate Syndication Step-By-Step
What Are The Steps For Investing In Real Estate Syndication?
Typically investors are able to enjoy a role as mostly passive parties in the investment. How do investors get started with investing in a real estate syndication fund?
- Due diligence research to find the syndication fund that’s right for their investment goals
- Deposit capital into the fund that aligns best with their objectives
- Review the performance reporting to ensure results
When it comes down to it, real estate syndication funds make it incredibly simple to invest in real estate syndication compared with forming your own syndication or becoming part of smaller private real estate options that typically involve more risk.
Common Mistakes to Avoid When Getting Into Real Estate Syndication
Investors should be conscious of a number of typical errors when it comes to real estate syndication in order to steer clear of possible pitfalls. One of the most frequent mistakes is not doing enough due research on the syndicator or the particular investment chance. Examine the syndicator’s track record, financial philosophies, and general business practices in great detail. Another error is failing to completely comprehend the investment’s dangers and benefits, including the possibility of capital loss.
Before making a purchase, it’s critical to completely comprehend the terms of the deal and to carefully weigh the benefits and risks. In order to ensure conformance with all relevant laws, buyers should also be conscious of the financial ramifications of real estate syndication deals and work closely with a certified tax expert.
The Beauty Of Online Real Estate Syndication
So what difference does online syndication make for investors? Online real estate syndication enables operators to instantly update reports with performance data that provide deep insight into every deal, as well as the key decisions affecting the fund.
The transparency and reporting made possible by online real estate syndication funds are beyond the old ways of syndication investment, providing more security and peace of mind while boosting efficiency and access to higher-yielding investments.
Stable, Strong Returns On Commercial Real Estate Syndication
Are you an accredited investor who’s looking to diversify your investment portfolio in a stable way with strong returns? Commercial real estate syndication funds are an ideal option. Saint Investment Group can provide you with a solid foundation in real estate syndication. Call our expert investing team today and learn how you can seize the investing opportunities available in the commercial real estate market. Saint Investment Group is here to help you get started with real estate syndication that’s right for your portfolio.
Frequently Asked Questions:
Although no formal education is needed to work as a real estate syndicator, having prior experience and information about real estate investing, such as buying or property management expertise, can be advantageous. A thorough grasp of the different types of real estate investments, including their potential income and return, as well as knowledge about real estate marketplaces, funding, and deal structures is crucial for syndicators.
Finding real estate syndication possibilities can be done in a number of ways, including networking with other real estate experts, going to industry gatherings, and doing internet research. Before investing any money, it’s crucial to conduct your due research on the syndicator and the business chance.
Real estate syndication entails dangers, including the potential for money loss and the chance that the venture will not perform as anticipated, just like any other type of investment. Before making any financial commitments, buyers should thoroughly read the syndication agreement and perform their own due research.
Profits are usually allocated in accordance with the licensing agreement’s conditions. The majority of the time, buyers receive their share of earnings proportionally to the amount they invested. Syndicators might also be compensated with a portion of earnings for their efforts.
Real estate syndication can have complicated tax ramifications that vary depending on the particular business chance and the investor’s personal tax position. The syndicator will typically send owners a K-1 form detailing their portion of revenue, gains, losses, and deductions.
President of Saint Investment Group
Nic is a two decade seasoned expert in investing and capital raising, specializing in Real Estate and debt markets. With Saint Investment Group, he leads large-scale distressed asset purchases and innovative syndications for investors.