Real estate syndication presents a unique opportunity for investors to maximize up-front capital. Investors can pool resources to purchase high-value properties that they otherwise couldn’t on their own. But for syndication to be successful, you must know the best real estate syndication companies.
As a real estate investor, you should find out as much as possible to help you make informed decisions. Real estate investing is great for building passive income with relatively small capital. But finding the right deals can be tricky. You need to know how to recognize suitable investments—or companies, in this case—from bad.
You may be interested in real estate syndication, but you might not know where to start. In this article, I’ll discuss how to know the best real estate syndication companies for your needs.
What Is A Real Estate Syndication Company?
The term syndication means partnership. A real estate syndicate comprises sponsors who partner with investors for large residential or commercial real estate projects. Syndication companies find and underwrite real estate investment opportunities, raise the equity and ensure a profit for investors upon closing.
Therefore, real estate syndication deals involve a general partner who joins forces with limited partners to purchase real estate properties.
A real estate syndication involves:
- Finding and vetting real estate investment prospects.
- Raising capital for the property.
- Ensuring that it is operated effectively for investors after closing.
The Role of A Real Estate Syndication Company
Professional syndication sponsors or general partners run real estate syndication companies. These general partners establish syndicates to find limited partners or passive investors for real estate investments. estate.
A real estate syndication company’s primary role is summarized in a general partner’s duties. Some of these duties are listed below:
- Locate investing opportunities via networking or marketing
- Handle the negotiations for purchasing real estate
- Create business and investment strategies to support syndication deals
- Handle the paperwork necessary to make the syndicate lawful and SEC-compliant.
- Exercise due diligence, including title work, financial audits, and inspections.
- Gather funds from limited partners to invest in property
- Manage the property alone or hire property managers
- Distribute revenue gains to limited partners
A real estate syndicate can invest in rental property, multi-family complex, industrial property, or commercial real estate. It can also purchase raw land to develop any existing real estate properties.
How To Find A Real Estate Syndication Company for Your Needs
A real estate syndication deal gives investors access to all sorts of real estate without needing property management. It’s a great way to improve your investment portfolio and help you increase cash flow while you sleep.
In its simplest form, syndication represents a grouping of investments and reduces some risks associated with private real estate investment. Real estate syndication investment benefits include more significant opportunities and flexible investment options.
Moreover, one of the most crucial decisions you must make when considering a syndication investment is choosing the right real estate syndication company. The right company must be competent and reliable and have experience handling syndication deals.
Unfortunately, finding a syndication company you can rely on may be confusing or challenging. It’s essential to look for one that is reliable, competent, offers a wide range of services, and has enough experience.
We have created a list that will aid you in your search for real estate syndication firms that fit your needs.
By interacting with other professionals, you can learn about the best real estate syndication companies. Making connections with other investors in the real estate syndication industry is the best way to identify companies that offer this service. You can connect with other real estate syndicators and passive investors to determine which syndication companies offer real estate possibilities that interest you.
Furthermore, real estate conferences and events are good places to meet top investors and establish contacts. Additionally, social media provides excellent networking opportunities. Platforms like Facebook and LinkedIn have real estate networking groups connecting agents and investors in the same region and country.
Many public information sites can help you find real estate syndicators looking for passive investors. Sites like CoStar and the 506 Investor Group compile a list of syndication companies that solicit money for residential and commercial real estate investment prospects.
While this process may be time-consuming, it is an effective technique for finding what you need. Accredited investors can find sponsors who own homes and properties they may want to invest in.
One thing to consider is if private individuals or syndication companies hold property. Properties owned by real estate syndication companies typically come under enigmatic LLC names, with the property name coming after 2 or 3 letters.
After finding a list of syndication companies you’d like to consider, the next step is to do your research by looking up the owner’s address on Google. This process will help you find important details and information and vet the syndication company.
One of the best ways to find syndication companies is through recommendations or referrals. Suppose you’ve partnered with another real estate investor at one point. In that case, they could help you meet with other passive investors or syndicators.
Ask for recommendations from successful passive syndication investors. They may know other sponsors interested in syndication deals in a similar or different field.
Recommendations from other accredited investors open up opportunities for you to meet more investors and general partners. It’s easy to trust a company that a trustworthy and high-standing real estate investor recommends.
However, it would be best if you still did your research before choosing a syndication company. While a recommendation from a reliable source is excellent, you may have investment objectives that need something a recommended company doesn’t offer.
How To Find The Best Real Estate Syndication Deals
The investment property sector has become an essential source of long-term wealth building. Unlike stock market prices, property prices don’t go wrong during any significant downturn. Getting good deals in real estate syndication takes time, but you can locate them through online real estate crowdfunding platforms.
Real property is an asset that provides cash flow. Sometimes rental prices are sticky during recessions because the tenant stays on a one-year lease or the tenant is unwilling to renegotiate downward. Further, rents have increased with interest rates falling and partly due to the pandemic.
However, a real estate syndication deal enables real estate investors to increase cash flow without actively participating in property management. Suppose you want to include this asset class in your investment portfolio. In that case, there are many ways to uncover the best real estate syndication options.
Here are a few things to look into while evaluating a potentially good deal:
When dividing up profits and paying investors back, there are many splits. Knowing exactly how profit returns get distributed is crucial for investors.
Taxes, Fees, and Other Costs
It is essential to research each expense at every level of the investment. Before the agreement is signed, determine the fees charged at different points in the deal. Real estate syndication companies typically charge fees for:
- Property acquisition
- Asset management
- Construction management
- Loan Guaranty
Furthermore, networking was once the only way to locate a syndication company. However, this changed after the JOBS Act of 2012. The JOBS Act legalized crowdfunding, and sponsors can now openly promote their investment options to the general public.
The Transition To Online Real Estate Syndications
The 2012 JOBS Act provided enormous opportunities for qualified investors. A new law allows real estate syndications to begin engaging in public solicitations more openly and requires no accredited investors to be accredited.
Many believe these new rules are the start of the e-commerce crowdfunding sector. These new rules make it much easier to find real estate investment opportunities that a passive real estate investor may have never even discovered.
You can find several investment options on real estate crowdfunding sites like CrowdStreetl, Fundrise, and others, which were made possible by the JOBS Act.
You can identify opportunities on social media platforms like Facebook or LinkedIn now that the legislation permits “general solicitation” of investors by sponsors. Suppose you explore the web for real estate investment opportunities. In that case, you might also discover ads on websites that aren’t about real estate.
Even though you can find some of the best investment opportunities online, you must still invest time in researching every prospect you discover on the web. Every real estate syndication company offers different deals, and some of these deals may not work with your investment plan.
Sponsors that take the time to do their research will be open and honest about their background, accomplishments, and investment culture. The best sponsors offer information about themselves and real estate syndication to make an informed choice.
How to Evaluate A Real Estate Syndication Company
After discovering a real estate syndication company, you’d like to work with, vetting the company is a critical step you can’t ignore.
To help you through this step, we’ll list some things to find out before moving on with a syndication company. Below are some of the things to find out:
- Their experience level and the years they have managed and underwritten syndication deals.
- The number of deals they have successfully closed and the kinds of transactions they handled.
- How much profit do you stand to make from investing with them, and what a lousy investment year will be like for you?
- A team of real estate experts will be involved in the deal. A good team should include financial and tax advisors, property management, developers, and legal experts.
Finding a local real estate syndication company has become easy. Decades ago, you would’ve needed referrals or a robust real estate network to have a chance. But today, you can find good investment opportunities with a simple click.
However, accessing a real estate syndication company is merely the first step. Identifying the best company for you is the crucial part. It would help if you had a firm interested in helping you realize your investment goals. You must research and ensure the company’s business strategy supports your financial plan.
Peoples Capital Group can give you all the help you need if you’re a rookie investor and need assistance. Contact us for a reliable investment strategy to help you build passive income.