What Exactly is a Real Estate Syndication?
Real Estate Syndications are essentially group investments. Quite simply, it’s the pooling of resources from numerous investors to purchase a property that typically would not be possible for an individual investor, such as a large apartment building, mobile home park, or self-storage facility. You use leverage to purchase a larger asset that you typically wouldn’t be able to purchase on your own.
The investors are passive, limited partners (LP) and the other partner is the General Partner (GP), also called a sponsor or syndicator. The General Partner is the active partner that finds, analyzes and creates the business plan.
When you first begin to consider real estate syndication as an investment option, it can feel lonely, intimidating, or even like you’re blindfolded in risky territory. I personally experienced fears around investing in a property I’d never seen, concern about how I’d get my money back, and doubt around the inability to log into an account and see my money. These fears were addressed head-on through research. Every article I read and every conversation I had, built my certainty until I began to feel confident toward taking the plunge.
If you’re considering your first syndication and feeling hesitant, I recommend doing your research, connecting with other investors, reading through previous deals, and taking your time.
Do Your Research
The best way to build your investing confidence is through self-education and research. Read books, listen to podcasts, and find websites on real estate.
Books:
- Rich Dad, Poor Dad, by Robert Kiyosaki
- It’s a Whole New Business, by Gene Trowbridge
- Multi-Family Millions, by David Lindahl
- Tax-Free Wealth, How to Build Massive Wealth by Permanently Lowering Your Taxes, by Tom Wheelwright, CPA
Podcasts:
- BiggerPockets Podcast
- Mobile Home Park Investing with Kevin Bupp & Charles Dehart
- Apartment Building Investing with Michael Blank
- Best Real Estate Investing Advice Ever with Joe Fairless
- Self Storage Income with AJ Osborne
Ask Questions
Relevant Facebook groups and forums like BiggerPockets can help you learn what questions you should be asking. It’s likely that other people have asked about your same concerns and, just by reading through the forum’s questions and answers, you’ll gain clarity.
Remember, you have the right to be diligent about gathering answers to your concerns.
Connect with Other Investors
A successful investor needs a supportive community, and considering that syndication is a group investment, you’ll want to get networking. Any new investors will share similar anxieties, questions, confusion, and excitement. Experienced investors can provide invaluable firsthand accounts of their experience with various projects and sponsors. Find other investors through online forums like BiggerPockets, local networking events, or by asking sponsors if they’ll connect you to their current investors.
Review Previous Deals
Finding comfort with financial projections, summary data, and investment lingo may feel overwhelming. As you review more investment summaries, you’ll start to understand the flow of the deal packages, how each sponsor communicates, and exactly which investments interest you.
Take Your Time
Each new investment opportunity fills up quickly. This can make new investors panic and start to believe they are missing the best deals.
Remember, there will always be another opportunity. Allow yourself time to complete the steps laid out here, so that when you make your syndication choice, you are confident about every step.
Considering Everything
If you take nothing else from this article, remember it’s completely normal to feel skeptical, anxious, and even timid when making your first syndication commitment. The ability to take action is what separates the successful from those who give up. Try not to get caught up in a paralysis by analysis zone. Unfortunately, I was in this zone and missed some of the most lucrative times in real estate investing.
Your first real estate syndication deal is a huge milestone in your investing journey, and, even though your head might be spinning now, this is a time to savor.