Syndication Opportunities

 PROS:

  • passive investment with no direct tenant responsibilities yet still get fractional benefits/tax advantages of direct real estate ownership
  • easy to invest with either retirement funds (self-directed IRA, solo 401K) or post-tax money
  • less personal liability/exposure

CONS:

  • less liquidity – exit strategy depends on the management strategy of the sponsor (3-10 years)
  • participation may be limited to accredited investors only
  • sponsor risk – the main risk of the investment rests on thoroughly vetting the syndication sponsor (management team) and making sure their goals are aligned with yours

Who might this type of investment be suited for?

  •  the due diligence on a market or property or oversee the management of that property yet still wants to benefit from direct real estate ownership
  • someone looking to leverage the expertise of other real estate professionals to acquire and manage the best opportunities in a given market
  • someone wanting to diversify their investment or real estate portfolio to include a different real estate asset class than what they are currently investing in
  • someone wanting to invest passively with self-directed IRA funds which require an investment to not be self-managed per IRS requirements

Process

  • get referrals from other investors from your network or by researching syndication sponsors on sites like BiggerPockets
  • talk with the investor relations contact from several syndication groups to get a feel of the sponsor’s investment strategy, typical deal structure, and track record of previous deals
  • ask to speak with previous/current investors the sponsor has and also request to review an offering from a past deal they have offered to investors
  • request to be added to the sponsor’s investor list to keep up to date with their current offerings and have the opportunity to review deals as they become available
  • once you find an opportunity that aligns with your investment goals and think you would like to dive into the details of the investment, you will be sent a copy of the private placement memorandum (PPM) and operating agreement for the proposed property; it is recommended to consult with your own tax and legal advisors on any investment of this nature
  • if you do decide to invest, a subscription agreement and funding instructions will be sent to you to complete
  • once the investment is underway, you will typically receive quarterly updates about the property as well as quarterly distributions mailed or direct deposited into your account; for tax reporting, you will receive tax documents from the sponsor in the early part of each year to include with your yearly tax preparation

Partners