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Are you interested in real estate investing but unsure of the responsibilities that come with it? Investing in real estate can provide you with a steady income, but it’s a lot of work for one person to manage. If you’re not up for the challenge of being a landlord and the headaches that it carries, then real estate syndication is an opportunity you should consider.
What is real estate syndication? Also known as property syndication, real estate syndication is where you team up with other investors to take on attractive real estate projects. This allows allows individual real estate investors, as well as real estate investment firms, to purchase properties they couldn’t afford on their own.
If being a passive real estate investor sounds more appealing than owning and operating real estate directly, read on to learn everything you need to know about real estate syndication.
How Does Real Estate Syndication Work?
The most common type of real estate syndication is one in which a real estate investment firm solicits outside investors to partner with them to acquire large real estate asset(s). While real estate syndication is most commonly offered by companies, it can also be done a single person or group of people.
With real estate syndication, there are two terms you need to know. The first term is syndicator (or sponsor). The syndicator scopes out a property, pitches it to the investors, and collects the capital to fund the project. The second term is investors. Investors contribute the capital, meaning the money needed to close the deal.
Each real estate syndication group may look a different in terms of how they manage their operations, but the fundamentals are usually quite similar.
Typically, both syndicators and investors get to own equity stakes in the properties that are acquired. This means that all parties involved get to benefit from the perks of real estate, including:
- cash flow
- long-term price appreciation
- debt paydown by tenants
- some or all of the tax advantages
General Partners vs. Limited Partners
As mentioned above, real estate syndication involves a syndicator (also called a “sponsor”) and investors. The syndicator is also known as a General Partner (or GP for short), while the investors are called Limited Partners (or LPs for short). So, what’s the difference between the two?
General partners are the leaders of the group, and therefore, the most involved. Being the syndicator means you are responsible for acquiring and managing the property, handling negotiations, fixing issues, and taking care of the paperwork (think reporting and accounting).
In contrast, limited partners operate are behind the scenes of the project. They provide the capital to the real estate syndicators so they can purchase property. With the investors taking a less active role, they normally pay the syndicator a fee for their knowledge and project management skills.
Who Can Invest in Real Estate Syndications?
Unfortunately, not just anyone can invest in real estate syndications. Because of federal securities laws, only people who are accredited investors can participate in certain types of investments, such as real estate syndications.
To qualify as an accredited investor, you need your annual income to be greater than $200,000 per year if you are single or greater than $300,000 per year as a couple if you are married.
Alternatively, you can qualify as an accredited investor by having a net worth of more than $1 million, excluding the equity you have in your primary residence.
What Are the Benefits of Real Estate Syndications?
With any real estate opportunity, there are pros and cons to consider before making a decision.
A few of the pros of real estate syndication are the following:
- It’s an excellent way to earn a passive income
- You don’t have to handle stressful landlord responsibilities
- Investing in real estate offers tax benefits
- It provides a great opportunity to diversify your portfolio
- You have the ability to invest in (or take on) bigger projects
- You’re able to learn from more seasoned investors
- Investor (usually) aren’t subject to the legal risks associated with owning real estate directly
Drawbacks to real estate syndication include:
- Investors don’t get to make active management decisions
- Investors can’t use 1031 “like-kind” exchanges to defer taxes
- Your investment is often illiquid until the property is sold
- Investors owe fees to the syndicator
List of Real Estate Syndicators
If you’re convinced that reaping the benefits of owning real estate without the headaches or hassles of direct ownership appeals to you, here is a list of real estate syndicators that I have personally aggregated.
The companies below are listed in alphabetical order:
- Ariel Investment Management (aerial investment management.com) – Invests in manufactured housing communities, self storage, and apartment buildings.
- Asym Capital (symcapital.com) – Asym’s principle, Hunter Thompson, invests in in mobile home parks, shopping centers, self-storage, and multi-family apartments.
- Buchannan Street Partners, L.P. (buchananstreet.com) – Invests in office, industrial, retail, multifamily, and self-storage properties in the Western U.S.
- BoaVida Group (theboavidagroup.com) – Invests in manufactured housing communities and RV parks.
- Cadre (cadre.com) – Invests in multifamily, industrial, office, and hotel properties.
- Cardone Capital (cardonecapital.com) – Invests in apartments (multi-family properties).
- Chestnut Equity Partners (chestnut.global) – Invests in commercial real estate assets.
- Crowdstreet (crowdstreet.com) – Invests in various types of commercial real estate.
- Crystal View Capital (crystalviewcapital.com) – Invests in mobile home communities and self-storage investments.
- Disrupt Equity (disruptequity.
com) – Invests in multifamily properties (apartments). - Elevation Fund (elevationfund.com/lp-
mhc-1) – Invests in manufactured housing communities. - Feldman Companies (thefeldmancompanies.
com) – Invests in self storage facilities. - Hearthfire Capital (https://hfirecapital.com/) – Invests in self storage facilities.
- Lifebridge Capital (lifebridgecapital.
com) – Lifebridge’s principle, Whitney Sewell, invests in multifamily properties (apartments). - Lifestyle Equities Group (lifestyleequitiesgroup.com) – Lifestyle Equities invests in value-add residential and commercial properties across the U.S.
- Midwest Park Capital (midwestparkcapital.com) – Invests in mobile home communities (MHCs)
- NRIA (nria.net/invest) – Invests in luxury townhomes and condominiums, as well as apartment acquisition and development.
- Open Door Capital (odcfund.com) – Open Door is an investment fund led by Brandon Turner, VP of Growth at Bigger Pockets. It invests in manufactured housing communities.
- Park Avenue Partners (parkavenuepartners.com) – Invests in mobile home communities (MHCs)
- Park Street Partners (parkstreetpartners.
com/fund) – Invests in manufactured housing communities. - Patriot Holdings (patriotholdings.com) – Invests in mobile home communities, self storage, and industrial assets.*
- Progress Realty Partners (https://prp.us/) – Invests in retail and industrial properties.
- Realty Mogul (realtymogul.com/
investment-opportunities) – Invests in apartments. - Reliant Real Estate Management, LLC (reliant-mgmt.com
) – Invests in self storage facilities. - Spartan Investment Group (spartan-investors.
com) – Invests in self-storage facilities through its FreeUp Storage Fund focused on the Dallas-Fort Worth area. - Suncrest Capital (suncrestcap.com) – Invests in manufactured housing communities.
- The Bam Companies (https://capital.
thebamcompanies.com/) – Invest in multifamily properties (apartments). - YieldStreet (yieldstreet.com) – Invests in commercial real estate, art, and other types of alternative investments.
- Ziff Real Estate (ZRP) Partners (ziffcre.com/
investing) – Invest in self-storage assets. - 10 Federal (10federal.com) – Invests in self storage facilities.
What is Real Estate Syndication, Exactly?
Hopefully you now clear on what real estate indication is and why you might take this investment approach. Do you know of any other real estate syndicators that I didn’t include in the list above? If so, share them in comments and I’ll add them to this article.
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*Disclaimer: I am a Board Member of Patriot Holdings, mentioned above. Nothing on this site should be construed as financial advice. Before making any financial decisions, you should consult with professional adviser, such as a financial planner or CPA.