Real estate syndication is formed when a group of people is pooled together with the same investing goal, which is to purchase property. Any type of property can be purchased, residential or commercial: • Houses • Multi Family Buildings/Apartment Buildings • Strip Malls/Shopping Centers • Land/Construction Developments • Hotels/Self Storage Facilities
Since the lending market has tightened up their requirements and ability to lend, real estate syndication is definitely a way to purchase properties fast and without limitations of funds and what type of properties. An initial group can be formed of only a couple of people, but it can easily grow to dozens of investors, therefore providing the possibility to raise a lot of capital for big projects.
A syndicator is a facilitator and organizer for this group of investors: he/she is responsible for: • Finding properties • Analyzing the deals in order to establish if they are suitable for the goals of the group • Supervising construction and maintenance • Selling the properties or secure long term financing • Distribute profits to the group
It is definitely an art about using other people’s money (OPM) and creating profits for the group, including the syndicator. The syndicator makes money in a combination of ways, depending on the particular project and his/her involvement: • Consulting fees • Brokerage fees • Property management fees • Maintenance and construction fees • Percentage of profit at sale or disposition
How does someone become a mediator for real estate syndication? First of all, it is necessary to have some experience in locating properties and analyzing deals. Most investors that are willing to pool their money together in these types of partnerships are individuals who do not want much involvement in the project itself (they have careers or other investments that they are into) and need to develop a trust for the syndicator. Therefore in the beginning by networking with real estate investors and familiar business acquaintances, it should be enough to raise a couple of people with available funds for starting this enterprise. As the business develops a track record, it will be easier to include other members in the group, either by word of mouth or advertising. People, especially if they don’t know the syndicator, do want to see a track record or some type of background of his/her experience in real estate. Another suggestion will be to partner with an established investor and offer to provide expertise in the subject of syndication and day to day management (locating properties, analyzing deals) in exchange for their help in raising members for the group.
Information and Recommendations -
As a Syndicator, form a business legal entity, like an LLC - do not deal as an indivual, in order to protect your interests and assets. Throughout the sample forms included you will see DreamBuilders - that is the registered name that I use under the LLC. You are free to use and register the same trade name in your area.
The real estate forms provided with this course are not specific or complying with the laws of your State or Country. Important Note: No warranties expressed or implied are made regarding the use of these contracts and forms. Have a local attorney review the documents and make specific recommendations for your jurisdiction or area of practice.