How to Get Into Real Estate Syndications: A Comprehensive Guide

In this comprehensive guide, we'll walk you through the essential steps and provide valuable insights to help you get started on your journey into raising and managing capital from investors to invest in bigger assets. 

GP Flow Team

Real estate syndications have gained significant popularity in recent years as a lucrative investment opportunity. If you're considering entering the world of real estate syndication, you're in the right place. 

In this comprehensive guide, we'll walk you through the essential steps and provide valuable insights to help you get started on your journey into raising and managing capital from investors to invest in bigger assets. 

Whether you're an experienced real estate investor or a beginner looking to diversify your portfolio, this guide will equip you with the knowledge and tools you need to succeed in the syndication space.

What is Real Estate Syndication?

Real estate syndication is a cooperative investment strategy where multiple investors pool their resources and capital to collectively invest in large real estate projects. These projects can range from apartment complexes and office buildings to industrial warehouses and shopping centers.

Syndications are typically organized by a sponsor or lead investor who identifies the investment opportunity, arranges the financing, and manages the day-to-day operations of the project. Investors, often referred to as limited partners, contribute capital and share in the potential profits and risks of the investment.

Real Estate Syndication Structure

Benefits of Real Estate Syndication

Real estate syndication offers several advantages versus individual investors buying and managing individual assets themselves:

  1. Specialization: syndications allow passive investors, general partners and property managers to all specialize in their individual strengths..
  2. Leverage: Syndication enables investors and managers to access larger and more lucrative properties than they could afford individually.
  3. Passive Income: Investors can enjoy a steady stream of passive income through rental returns and profit distributions.
  4. Risk Mitigation: Spreading risk among multiple investors helps reduce individual exposure.
  5. Tax Benefits: Syndication often offers tax advantages, such as depreciation deductions and tax-deferred exchanges.

Getting Started: Preparing Yourself

Before you start syndicating real estate deals, it's essential to ensure you have the skills, experience, and know-how - as well as preparing yourself mentally and financially:

  1. Education: Invest time in learning about real estate syndication through books, courses, and seminars. Nothing beats hands-on experience, and syndicators often come to an adjacent field such as brokerage or small-scale apartment investing. 
  2. Financial Stability: Ensure you have a strong financial foundation and creditworthiness. Access to financing from bigger lenders often requires you to have certain net worth and liquidity requirements, which can be supplemented by bringing in additional key principles into the deal. 
  3. Network Building: Start building relationships with other investors, real estate professionals, lenders, and potential partners. Real estate syndications are a team sport, and you’re going to need a number of allies and partners to be truly successful.

Read our full blog post on “How To Start A Real Estate Syndication”.

Building Your Syndication Team

Successful syndication requires a well-rounded team. Here are some key roles to consider:

  • Syndicator: The leader who organizes the syndication and manages the project.
  • Real Estate Attorney: Essential for navigating legal complexities and drafting syndication agreements.
  • Property Manager: Responsible for day-to-day property operations.
  • Accountant/CPA: Ensures financial compliance and maximizes tax benefits.
  • Broker: Helps identify and negotiate property acquisitions.
  • Investor Relations Manager: Communicates with investors and manages relationships.

Identifying Investment Opportunities

Finding the right investment opportunities is a critical step. 

Real estate is a local game so it's important to specialize in a specific market and develop expert knowledge of the market. 

Considering factors like location, property type, and market conditions will help narrow down your search, and networking with local real estate agents and brokers in the market will help uncover potential deals.

Real Estate Private Equity Investment Strategies

Due Diligence: Analyzing Properties

Due diligence is essential to identify and manage risks. 

This typically involves:

  • Financial Analysis: Reviewing income statements, balance sheets, and pro forma projections.
  • Physical Inspection: Conducting property inspections to assess its condition.
  • Market Analysis: Studying local market trends, demographics, and competition.
  • Legal Review: Ensuring all legal documents are in order and understanding any potential liabilities.

Before securing financing for your real estate syndication, it's crucial to secure the property itself. This involves a series of steps to ensure you're acquiring the right asset at the right terms.

Real Estate Private Equity Due Diligence

Structuring Your Syndication Deal

The structure of your syndication deal determines the roles, responsibilities, and profit-sharing among investors. Common structures include:

  • Equity Partnership: Investors receive a share of ownership and profits.
  • Debt Investment: Investors act as lenders, receiving fixed interest payments.
  • Preferred Equity: Combines aspects of equity and debt, offering preferential returns to certain investors.

Throughout any of these steps, it's important that you consult with a real estate attorney to ensure your syndication adheres to federal and state securities laws. Properly structured syndications often fall under Regulation D exemptions, which allow private offerings to accredited investors.

Your choice of legal structure will also impact how you raise capital, allocate profits, and manage the syndication.

Financing Your Syndication Deal

To attract investors to your syndication, you must effectively communicate your investment opportunity. 

Develop a compelling business plan, create a professional presentation, and utilize various marketing channels, including social media, networking events, and investor meetups.

Real Estate Syndication Financing

You can explore various options, including:

  • Private Investors: High-net-worth individuals willing to invest.
  • Traditional Lenders: Banks and credit unions.
  • Crowdfunding: Utilizing online platforms to raise capital from a broad investor base.
  • Hard Money Lenders: Short-term loans often used for property acquisition.
  • Seller Financing: Negotiating with property sellers for financing terms.
Raising Capital Real Estate Syndication

Closing the Deal

Once you've secured the necessary capital and completed due diligence, it's time to close the deal. 

This involves signing contracts, transferring funds, and taking possession of the property. Your attorney and real estate agent will play key roles in this process.

Updating investors at the closure of the deal is a key opportunity to build trust and reputation with investors - use this magic moment to congratulate investors either over the phone or by email.

Managing and Exiting Your Syndication

After acquiring the property, effective management is crucial to ensure it remains profitable. 

Assuming the existing property management team is staying in place, most syndicators focus on ‘keeping the trains running’ in the first month before undertaking major changes. This is often the first time working together and making significant changes in the process without fully understanding the system can add unnecessary risk.

Once the dust has settled, it is time to get to work on the business plan and meeting the pro-forma projections. Keeping investors updated on the progress is critical to them building conviction in the repeatability of your strategy. 

Conclusion: Your Path to Real Estate Syndication

Real estate syndication offers a powerful way to invest in lucrative properties with the support of a team and diverse funding sources. 

By understanding the process, building a solid team, and adhering to legal requirements, you can embark on a successful journey into the world of real estate syndication. Remember that thorough research, continuous learning, and a commitment to professionalism are key to your long-term success.

About the Author

Andy Crebar

Andy Crebar is the Co-Founder & CEO of GP Flow which is on a mission to unlock the potential of commercial real estate.

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