Suppose you want to invest in real estate but don't want to personally oversee or manage the investment. In that case, you might want to diversify with real estate syndication. Ideally, a real estate syndication would provide you with the benefits of real estate investment, and you wouldn't have to worry about personally being a landlord.
In this diversification strategy guide, we will discuss real estate syndication basics.
A real estate syndication occurs when investors pool their money to make large real estate purchases. Here is a list of some things that real estate syndications commonly invest in:
You can diversify with real estate syndication and enjoy the benefit of your partner's shared expertise and experience.
If you want to learn more about real estate syndication as a diversification strategy, check out our article Real Estate Syndications.
There are two parties in a real estate syndicate: a real estate syndicator and passive investors.
What is a real estate syndicator?
The first party, the real estate syndicator, will:
After your group finds a property for investment, then the syndicate will:
The real estate syndicator handles virtually all aspects of the investment. Their role is to create, execute and deliver a business plan that brings cash flow to you, the passive investor.
What is a passive investor?
The passive investor is someone like you.
A passive investor would provide a percentage of the syndicate's capital to purchase the property. Then the passive investor would receive a portion of ownership in the property.
The ownership you have in the property entitles you to:
There are several benefits to investing in real estate syndications. Those include, but are not limited to:
Another beneficial aspect of real estate syndication is that the property will appreciate over time. When you get ready to sell the property, you could potentially increase your return on investment.
Perhaps the most intriguing aspect of real estate syndication is the ability to control which properties you invest in and the ability to diversify. As a passive investor, you have the opportunity to split your investment across several syndications.
All investments carry an element of risk–investing in a real estate syndication is no different. The most considerable risk comes from finding someone you trust with your investment.
You have to find an experienced, trustworthy, and competent syndicator as the investor. Ensure to do your due diligence and research that company before you invest with a real estate syndication company.
You must be either an accredited or sophisticated investor.
An accredited investor must:
A sophisticated investor refers to an investor who has enough money, investing experience, and net worth to conduct complicated investments. Sophisticated investors must be knowledgeable and have a track record of successfully identifying and evaluating winning investments opportunities.
You have to do a little bit of research to find just the right place for your investment. One thing you will want to do is communicate and network with other investors. As you develop strong bonds with other investors, they will be able to direct you to trustworthy real estate syndicates.
You can also attend real estate conferences to meet other investors, learn more about investing in real estate syndications, and land your first deal.
All in all, you (as a passive investor) will need to find a trusted, successful, and experienced real estate syndicate. Once you identify and invest, the real estate syndicator will do almost all the work, find an investment property, structure the syndication, and conduct the business.
If you want to invest in real estate but don't want to control the day-to-day aspects of owning property, you may want to diversify with real estate syndication.
The benefits of this type of diversification strategy are appealing. You can invest without the hassle of being a landlord, earn passive income, enjoy the benefits of appreciation and real estate tax rules.
As always, you need to ensure that you know about any investment you make. To learn more about real estate syndication and other real estate investment opportunities, Register for FREE Royal Investing Group Mentoring Wednesdays at 12:30 pm.
Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.
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