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What is a Real Estate Syndication?

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Acquiring a medium to large commercial building or apartment complex takes a team effort. Syndications are the most common way these investment deals are done. But what are they?

Real estate syndication is a method through which multiple investors pool their financial resources and expertise to invest in larger real estate projects that would typically be out of reach for individual investors.

 

In a real estate syndication, there is usually a syndicator or sponsor who identifies the investment opportunity, structures the deal, and manages the property.

The syndicator will organize a legal entity (a partnership or limited liability company) for the sole purpose of purchasing and operating the income producing real estate, and distributing profits.

Investors can participate in the syndication by contributing capital to the project. In return, they receive ownership shares in the investment entity, which entitles them to a portion of the income generated by the property (such as rental income) and any potential profits upon sale.

THE STRUCTURE

A real estate syndication consists of one or more General Partners and multiple Limited Partners.

The General Partners include the sponsor and may also include additional experienced investment partners who financially and legally participate in the setup and operation of the deal.

These additional general partners may provide management expertise, high personal net worth to guarantee loans, or access to a network of potential limited partners to fund the deal.

The Limited Partners are the passive investors who contributed capital to the deal but do not participate in the day-to-day operation of the deal. Their limited position provides them a higher degree of legal protection than the General Partners and their risk of loss is limited to the money they invested.

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THE BENEFITS

Real estate syndications allow investors to diversify their portfolios, access larger investment opportunities, and benefit from the expertise of the syndicator and general partner team.

If you would like to learn more about investing in real estate to build wealth using your savings, HELOC, or 401k/IRA funds, feel free to contact us. We would love to talk about investment  strategies and share our experience to help you leverage your resources to achieve financial success.

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