There are many ways to invest in real estate, but one of the most common strategies is syndication, especially for new investors. You can purchase a large investment property that could be worth millions of dollars but only pay a fraction of that value. But if you’re just starting in real estate, you might not know how to find real estate syndication deals.
Syndication deals are a great way to find big profits and build a strong network in the real estate industry. They’re also a lot of work, but that’s where a team of professionals can help you find the right deals for your portfolio.
Are you looking for a deal? I know how you feel. Even though many real estate deals get listed on the market, not all are lucrative. Want to know how to find excellent real estate syndication deals the simple way? You have to act fast because they won’t be around forever.
What Is a Real Estate Syndication Deal?
A real estate syndication deal involves several passive investors (also called limited partners) and a general partner (also known as sponsors or syndicators). In this deal, the passive investors pool resources together to acquire the property they can’t purchase individually.
Furthermore, the general partner is responsible for operating and managing the deal. They will locate good syndication opportunities, source passive investors, and pledge their funds to ensure the deal is successful.
Simply put, when several passive investors come together to purchase investment property under the wing of a real estate syndicator.
How Do Real Estate Syndications Operate?
A Limited Liability Company (LLC) is typically used as the legal form for real estate syndications. However, they can also be a Limited Partnership (LP). The investors are limited partners in the case of an LP, whereas the syndicator serves as the general partner/manager.
Since it operates like an LP or LLC, the business will have a partnership or operating agreement. As a passive investor, you must read the documents and familiarize yourself with the terms and conditions. This document will determine the distribution of voting rights and returns.
Every real estate syndicate consists of two main stakeholders:
- The property syndicator
- The passive investor
The Property Syndicator
Real estate syndicators, popularly known as General Partners (GPs), organize and manage the real estate syndication. The general partner’s primary responsibilities include the following:
- Complete due diligence on the property
- Underwrite deals
- Create an investment plan
- Set up funding
- Find Investors
- Secure the deal
- Manage assets
- Handle negotiations
The Passive Investor
In a real estate syndicate, passive investors provide a fraction of the money needed to buy the property. Passive investors obtain ownership stakes in the property in return.
Passive investors benefit from a syndication deal in many ways. They own a stake in the property and benefit from appreciation, equity pay down, and other tax benefits. They also receive monthly or quarterly passive income distributions from the rental property’s monthly cash flow.
Requirements for Real Estate Syndications
A couple of things are usually required before an investor can be part of a real estate syndicate.
Basic Understanding of Real Estate Investing
Every investor interested in a real estate syndication must have primary real estate investing knowledge and should understand the implications, risks, and expected returns of a syndication deal.
Association
Passive investors must be associated with a general partner to invest in syndication. How you found the sponsor doesn’t matter as long as you trust them.
Accredited Investor
Most real estate investors must be accredited investors to participate in syndication. An accredited investor must make over $250K individually or $300K as a couple every year. Alternatively, they must own at least $1 million worth of assets in addition to their primary residence.
Individuals who meet this predefined annual income or net worth criterion are considered accredited investors. Because they can better manage their financial risk, accredited investors take on less risk while participating in syndicated deals.
Sponsors like certified investors because there are fewer legal snags to work around when trying to include you in their investment initiative. Additionally, it shows that the sponsor owes you less regarding fiduciary duty.
Sophisticated Investor
The Securities and Exchange Commission recognizes accredited and “sophisticated” investors. Individuals who don’t fulfill the SEC’s yearly income requirements are considered sophisticated investors. While sophisticated investors can participate in a real estate syndication deal, it may require more paperwork and higher financial risk on the part of the sponsor.
How To Find The Best Real Estate Syndication Deals
Real estate investing is an excellent wealth-building strategy and the perfect way to build passive income. If you lack the time or experience to handle a real estate investment, then real estate syndication is an excellent alternative. So, how do you find the best deals? Here are a few tips to help you find the best real estate syndication deals.
1. Directly Contacting Syndication Companies
It may seem far-fetched, but you can’t go wrong contacting syndication companies directly. It’s a fantastic approach to discovering real estate syndication deals and gaining access to opportunities that don’t get publicly promoted.
So, how do you find these real estate syndicates?
Contact Property Investment Companies
Most real estate investment companies have connections to syndicates and may be able to give you access to their deals. Pinto Capital is one company that provides strong investment opportunities to secure veteran and active military members financial futures. If you want to steadily grow your capital through lucrative commercial real estate syndicates, get in touch with the experienced and competent investment experts at Pinto Capital today.
Search Online
The internet is always a great place to start. Browse the web for syndication companies in your region and beyond. You can find a suitable option outside your neighborhood. Remember to use search terms that define your field or area of interest, as there are numerous real estate syndicates today.
2. Networking
It’s no news that there are numerous syndication opportunities online. But it’s difficult to determine how trustworthy some of these opportunities are. That’s why real estate networking is one of the best ways to find the best deals.
Finding real estate syndication projects can be done by expanding your network of real estate investors and professionals. You can access a regular flow of projects by building a network of investors and syndicators that share your interests. Due to syndicates’ capital-intensive nature, their success depends on relationships with people.
Trusting and relying on your personal and professional connections in the real estate industry is easy. Most of these people are reliable and credible because of their knowledge and experience in the real estate syndication space. If you don’t have a strong network, it’s a great idea to get in touch with business people familiar with the real estate market and syndication deals.
Prior to participating in certain agreements, seek recommendations from people you know, make sure you do your homework, and do due diligence.
Building A Network With Syndication Investors
If you’re looking to build a real estate portfolio, you’ll need to find the right investors. Syndication investors offer an alternative to traditional real estate partnerships. They can provide more capital and better opportunities, and finding them doesn’t have to be challenging.
On the other hand, if you’re networking with private real estate syndicators, ensure that you pay thorough due diligence by ensuring the individual has the knowledge, time, and expertise to competently handle your investment capital.
Attend Real Estate Events
Participating in events held by real estate investment firms is a terrific chance to learn from and network with experienced investors because these companies frequently host events inviting them to speak.
Attend Regional Gatherings
You should attend regional gatherings for real estate investors to build relationships, learn from seasoned investors, and discover possibilities that most people don’t.
Use Social Media
LinkedIn is one of the best platforms to look for regional investors. Staying active on relevant social media groups is a fantastic method to meet others interested in syndication transactions who may be able to assist you in getting started.
Join Online Communities and Discussion Boards
Joining online communities or discussion boards for investors is a fantastic method to connect with people who can assist you in finding opportunities and gaining access to a wealth of knowledge.
3. Real Estate Crowdfunding Platforms
Crowdfunding is one of the best investments in a real estate syndication. The JOBS Act of 2012 facilitated the rise of real estate crowdfunding platforms, enabling any investor to participate in real estate syndications.
While an excellent real estate network can help you find good deals, you may not find what you need. Your connections might help you secure a few deals, but even accredited investors might need other opportunities to get deals that suit their goals.
Before the transactions arrive on different platforms, crowdfunding marketplaces review each one. Many investors who are unsure where to begin can significantly benefit from this. Real estate crowdfunding platforms are further motivated only to accept the most promising projects.
So, we can say once again that while sophisticated investors can take advantage of this option, accredited investors have an edge.
The Best Crowdfunding Platforms
There are over 250 crowdfunding platforms worldwide, and choosing the right one for you can get quite confusing. Some are good for only accredited investors, while others are great for any investor. If you choose to walk down this path, ensure that the online platform is legitimate and has the right team on board to produce the results they promise.
A good way to do this is by checking reviews and speaking to investors in your circle to learn about the most reliable options. While there are plenty of excellent crowdfunding platforms on the market, certain ones are more dependable than others.
Real Estate Syndication vs. Crowdfunding
Real estate syndication deals sometimes get mistaken for Crowdfunding. But while these concepts have a connection, they aren’t the same.Â
Investors have been participating in syndication deals for decades, whereas Crowdfunding is relatively new. The 2012 JOBS Act opened up crowdfunding opportunities and was modified in 2016 to increase the options for investors.
Non-accredited may participate in real estate crowdfunding projects under Title III of the JOBS Act. Still, there is a limit on the amount of money they can invest in one year.
Sophisticated investors who earn more than $107,000 annually and have a net worth over that sum can invest up to 10% of their earnings (max of $10.7K) in a single calendar year. However, if their annual income or net worth is less than $107K, they can only invest $2,200 or a max of 5% of that amount.
If you’re looking to invest greater amounts of capital into reliable projects managed by experienced professional investors, Pinto Capital is by your side to help you discover investments that will carry you to your financial goals!
4. Real Estate Forums
Numerous real estate investment forums can expose you to other passive investors and possibly sponsors. Investors debate, discuss and share knowledge and opinions on these forums. It’s the perfect opportunity to gain knowledge and network with other experienced investors with skin in the game.
Finding real estate investment forums isn’t tricky. Below are two ways to find the best forums for you.
Participate At Community Gatherings
Investors can benefit from joining forums and attending seminars and conferences in their community. These forums are a brilliant place to start if you want to learn how to find real estate syndication deals. Ensure you link up with investors with similar interests and investment objectives.
Websites for real estate events in your community can direct you to meet-up groups where you can search for real estate syndication investments. Additionally, you can have in-person meetings with other professionals and grow your real estate network.
Take Advantage of Social Media
Social media is a fast and reliable way to connect with other investors. Many social media websites have groups where investors and other real estate professionals discuss and share ideas. Facebook, Instagram, and LinkedIn are the three best platforms for this particular purpose.
Look it up online
Once again, the internet is a beautiful, ever-present option. You can find the proper forums using search terms related to your area of interest. Since there are numerous real estate groups and investment forums today, you might want to start with your neighborhood or region.
It’s easier to blend in when the opportunities are available locally, especially if you’re a new investor. With time, you can search for more opportunities across many regions.
Before getting into any private arrangement, remember that you must have a high level of trust among your partners because your sponsor’s competence bears a significant portion of the risk for your financial security.
Benefits and Drawbacks of Real Estate Syndications
Real estate syndications offer an effective way to invest in real estate, but it’s essential to understand the risks and rewards before you jump in. If you’re considering getting into this line of work, you might wonder if real estate syndication is for you.
While it’s undoubtedly a good way to make money, it’s not for everyone. Since every investment comes with risks and rewards, we will examine real estate syndications more closely.
Benefits
Greater Real Estate Investing Potential
The whole idea behind a syndicate is gathering enough resources to invest in a rental property that individual investors can’t take on alone. By combining your money with other investors, you have the opportunity to get profitable real estate projects that are financially demanding and high yielding.
Diversification
Investing in real estate significantly benefits portfolio diversification if you already have equities, bonds, and other investment assets or securities. And what’s better than a syndicated deal (especially for up-and-coming investors)? What’s better? Successful investments in the real estate market have lower tax consequences for capital gains than successful stock market investments.
Variety
Real estate syndications provide a variety of investment options for an investor. While multifamily syndications are the most common syndication investment option, investors can also invest in a business and commercial property. Syndicates provide investors with a passive income by giving them equity in a tangible product that will increase in value over time.
Drawbacks
Higher Minimum Investment Requirements
Real estate syndications frequently have more significant minimum investment requirements than bonds, equities, and mutual funds. Options like REITs and ETFs also have lower investment requirements. While you can find lower entry barriers on the market, most real estate syndications require between $30k and $50k minimum.
Less Control
The investment is not under your control if you are a limited partner. You may not even get a vote. You must trust the syndicator because they are in charge of daily investment management and execute the deal successfully. That’s why its critical to seek expert professional investors with proven experience to lead your syndicate.
Split Earnings
Since many passive investors are in a real estate syndication deal, your returns – while reliable – may not be as high as you’d want them to be. In most cases, you’ll get an 8% preferred return followed by a predetermined split between passive investors and the general partner.
Final Words
Real estate syndication provides a unique avenue to find lucrative real estate investments; with some help, you can learn how to find deals. If you’re searching for the perfect real estate investment opportunity but aren’t sure how to find the best deals, you’re not alone. There are many options, but you want to find the best ones.
Luckily, you have a great online option and can learn how to find real estate syndication deals to build a powerful portfolio from the comfort of your own home.
At Pinto Capital Group, we hone our combined expertise to guide investors through various real estate opportunities. Contact us today to discover a robust real estate investment portfolio roadmap to secure your financial future the easy way!
