REAL ESTATE SYNDICATION FAQs
What is a real estate syndication?
Real estate syndication is an effective way for a group of investors to pool their financial and intellectual resources together to invest in properties and projects much bigger than they could afford or manage on their own. Over 90% of large multifamily purchases are made through a syndication.
The parties at the forefront of a syndication deal include the sponsor (also referred to as the general partner, operator, or syndicator), the limited partners (or passive investors) and the property management team. There are plenty of other team members involved that make the deal work behind the scenes, including, but not limited to, a commercial broker, a team of attorneys, CPAs, and lenders.
How long is the holding period?
The holding period typically lasts for a minimum of five years but can last for up to ten. As an investor, you can enjoy several benefits throughout the holding period, including steady cash flow and depreciation.
What are the risks?
Aside from a large-scale financial recession the most common risk is the ability to execute the deal. Properly running a property is complex and requires numerous steps, including rebranding, maintenance, renovations, and marketing, to name a few. The best way to lower the risk is to work with experienced professionals who have a proven track record.
What are the drawbacks to syndications?
The most common drawbacks include a lack of liquidity and a lack of control. Sponsor teams decide when they want to refinance, sell, and decide on day to day decisions. However, despite the drawbacks, there are numerous advantages, including minimum investment, cash flow distributions, above average expected returns, depreciation and being completely passive.
How do you renovate with residents living there?
When taking over a large property there will be a handful of vacant units even if the occupancy is 95 percent. Those units are the first we begin to renovate. Next, as leases expire, we introduce the residents to the newly renovated units and begin renovating the outdated ones. It's a process that we continue to repeat until we've improved the entire property.