In the real estate industry, a syndication is simply a legally structured partnership between a Sponsor (General Partner) and a group of investors (Limited Partners) with the goal of real estate investment.
The Sponsor, or General Partner, is charged with finding the right investment, raising capital from the right investors, and executing the business plan. The Sponsor manages the asset and syndication throughout the lifetime of the investment.
The investors, or Limited Partners, enjoy an investment in a hard asset without the hassle of having to manage a property. Essentially, investing in a syndication is an investment in a security (in this case, a security backed by real property).
Upon completion of the business plan and exit from the investment through the sale of the property, the investors are paid as detailed in the original legal agreement.
When implementing a value-add strategy, the goal of the business plan is to bring value to the property through improvements and lower operating expenses.
Commercial Property Values are based off market rates and Net Operating Income. We increase the Net Operating Income—and consequently, exit at a higher price. Buy low, sell high.
Real estate investment using syndications can be a great diversification from common stock market-based investments. Passive real estate investment allows you to diversify and scale with an investment in a real asset, without the hassle of having to manage it.
By investing in a syndication, investors can rely on the net worth, experience, expertise, and established relationships of the syndicators. This gives passive investors access to larger deals they could not acquire otherwise. These factors, among others, present an opportunity for investors to acquire larger properties, with leveraged returns.
Real estate investment can be a great diversification from common stock market-based investments. Diversify your portfolio and scale with an investment in a real asset, without having to deal with management.
Time is valuable—and traditional real estate investment takes a lot of time. But time and interest in the asset class are often barriers to entry that can be mitigated through a syndication. Spend your time and energy where it serves you the best.
By leveraging the sponsor, you can gain access to investments and scale while at the same time lowering exposure. A syndication has a manageable business plan and a defined exit strategy—all executed to scale with little effort from the passive investor.
