3 Minute Read
A less known way to invest in real estate is through a Real Estate Syndicate. A syndicate is made up of two primary parts
First, the real estate Syndicator who is in place to follow a business plan put in place beginning with finding the property. After the Syndicator locates the property to be purchased, they will then arrange the transaction and operate the asset when the property closes. Having an individual with the expertise to acquire, operate and manage the property can make this a hassle-free investment.
Second, the passive real estate investor is the second half of the syndicate. The Syndicator will pool the necessary capital for the purchase of a particular property in exchange for ownership shares in the property. Investors are paid out either monthly or quarterly on the investment equal to the amount of shares owned in the pooled property; beyond monthly or quarterly passive earnings the investor will get a return on their investment when the property sells. Along with the profit potential from investing in a Syndicate, there are also real estate tax benefits that largely mirror those of a primary residence.
Investors in syndicates must be either an accredited or sophisticated investor. The rules that define these investors are made by the SEC. An accredited investor is someone that has earned $200,000 or more individually or $300,000 as a couple for the prior two year period and expects that to continue in the future, yet there are additional rules that the SEC has in place, find them all in the hyperlink above.
● Passive Income paid either monthly or quarterly
● Nothing to manage
● Tax benefits – passed down to investors through K-1 filings
● Appreciation – just like any other property, investors enjoy the advantage of building equity over time.
● Flexibility – Investors choose which properties they want to invest in.
● Diversify – Investors can use their capital in as many real estate syndications as they choose.
● Syndicate Company – No investment is risk-free, the biggest risk an investor may face is doing the work to find the right company for their investment.
● Fees – This may not be a Con as these fees would be expected for any investment in a syndicate…but they will vary from company to company.
Finding the right Syndication company
● Networking – Real estate conferences, Facebook & Linkedin forums
● Online – Sites like 506 Investor Group can help with companies looking for investment capital.
● Recommendations – Tried and true, this will couple with networking.