We all know real estate investing is no simple feat! It requires time and lot’s of work to invest in real estate, considering all the decisions that contribute to the process.
Real estate syndications provide an option for those wanting to put less energy into real estate. If you have a career you want to focus on, or new family obligations, or are simply busy, real estate syndication could be a good option for you. Let’s dive in.
What is a real estate syndication?
Syndication is a partnership which provides investors the opportunity to place their capital with operators who search out and then manage the investment. Typically, several investors combine their resources and skill set to accomplish this. If you have the money to do so, allowing an operator to run your capital and use it to invest is a good option. However, it requires a lot of trust and thus there are several questions you need to investigate before you trust a syndicator.
Questions to ask before jumping in:
Who are you and what is your experience?
Consider the process of scoping out a syndicator akin to that of a job interview. This person will be responsible for managing your investment, so you want to ensure they are experienced and will be able to run the show. Here are some sample questions you may ask:
● What is the value of the assets you manage?
● How many deals have you acquired?
● How many deals have you completed similar to this one?
Ensure they have the experience needed to do a good job for you! This way, when unexpected obstacles occur, they can handle them.
Some More Questions We Suggest You to Ask Before You Sign in:
What does your team look like?
Usually, there won’t just be one person managing a syndication. Typically the operator will include:
● Property management team
● General contractor
● Leasing brokerage
● CPA firm
Sponsors often bring in a team and oversee to ensure everything runs smoothly. The players may be different depending on the type of investment, but either way you should get to know not just your principal syndicator, but also everyone they will bring on board as part of their team.
How do you handle updates and distributions?
Because you won’t be involved closely in the daily operations of your investment project, you need to understand how you will be kept in the loop. Ask your potential operator how they intend to manage operations in terms of how they deal with updates and reporting, and how they will distribute returns to investors. These are technicalities that you want to determine in the beginning to avoid any confusion or trouble during your project.
What is the investment strategy?
This answer will depend on many things including the type of investment, location, and the economy. Each type of investment and strategy comes with a set of risks and benefits. That is why you need to understand the investment strategy and the potential for return before committing.
What will help you to determine which strategy and type of investment to dive into is if you consider your own goals first, which brings us to:
What are the long-term goals?
Goals and strategy will go hand in hand. If your goal is to renovate and refinance a property quickly and then flip it, you will be looking at a short and fast timeline. That will be very different than if you intend on buying and holding an investment for a long period of time to build value over time.
Think about these aspects and find an operator whose vision aligns with yours. Think short term and long term because someone you are on the same page with today, may not be someone you agree with tomorrow. During this process of selecting and getting to know your syndicator, discuss these things in detail so you are sure that it’s a good fit.
Syndication is an opportunity that provides a chance to the average person to get involved with real estate by placing your trust with professionals. This is a great way to grow your wealth without spending too much time or energy.
Now that you know what aspects to consider as an investor before diving in with a syndicator, good luck! If you need identifying investment alternatives we are here to help. Feel free to reach out to us.