Real Estate Syndications

UPDATED: Jul 16, 2023Fact Checked

Get Legal Help Today

Find the right lawyer for your legal issue.

secured lock Secured with SHA-256 Encryption

Jeffrey Johnson

Insurance Lawyer

Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

Insurance Lawyer

UPDATED: Jul 16, 2023

Advertiser Disclosure

It’s all about you. We want to help you make the right legal decisions.

We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.

UPDATED: Jul 16, 2023Fact Checked

A real estate syndication establishes, sells, buys, and operates real estate investments. Typical forms for a real estate syndication are corporations, limited liability companies, and full or limited partnerships. A real estate syndication was a favored tax shelter in the 1980’s, but changes under Internal Revenue Service guidelines and the downturn in the real estate market caused this financial device to lose its popularity.

Understanding the Real Estate Syndicate

In its simplest form, a real estate syndicate is simply the pooling of money from numerous investors and organizing these funds as a whole into real estate projects. The moneys contributed can be used as an equity investment to a real estate project in addition to a commercial loan secured by a mortgage or trust deed to fund the bulk of the cost and development of the project. Investing in a real estate syndicate is essentially investing in a commercial real estate venture. Common examples would be the purchase of land to develop a residential apartment complex or an industrial park for small scale manufacturing of items.

Investing in a Real Estate Syndicate

Investing in a real estate syndicate requires due diligence in looking into the pros and cons of the potential investment. There are never any guarantees that the venture will be profitable. As such, it is highly recommended that individuals considering investing in a real estate syndication do a thorough background search of the individuals involved in getting the project off the ground, and consult with their financial advisors as to the merits of the investment and inherent risks. The benefits of investing in a real estate syndication is that a person can end up owning a small percentage in the real property being offered without having to be involved in the day-to-day management of the project.

How a Real Estate Syndication Makes Money

The person who desires to create a real estate syndication must comply with the laws of the state where the real estate syndication is to be created and operated. The syndicator of such a venture usually receives compensation for locating the property to be purchased, doing the due diligence for its acquisition and intended development, and getting the purchase to close. Investors in the transaction typically pay the syndicator’s fee based upon a percentage of the costs of the transaction when the targeted property is acquired. The syndicator also receives a management fee, typically based upon a percentage of gross revenue on a yearly basis. For instance, if there has been an apartment complex constructed and owned by the syndication, the gross profits for management of the apartment complex would be paid to the syndicator for collecting rental money, maintaining the complex, paying insurance, taxes, and making repairs.

A person can also make money through a real estate syndicate by investing in the project itself, which is typically the case. The investor typically receives a high rate of interest paid quarterly on his investment (7% to 9% per annum), besides maintaining an ownership interest in the syndicated project. Many investors also have the opportunity to sell their interest in any real estate syndication to a willing buyer or even to the syndicator.

Concerns About a Real Estate Syndication

In most states, the Department of Corporations oversees real estate syndications to protect the public as well as potential investors, requiring yearly reporting by the syndicator for each real estate syndication. In the past, many fraudulent syndication projects appeared, where investors lost significant sums of money by investing in purported reputable syndication projects. Investing in a real estate syndication should be done only after a thorough investigation of the people heading the syndication and the project itself. Many real estate syndications over the past four to five years have failed as a result of this country’s poor economy and real estate market.

Case Studies: Exploring Successful Strategies and Lessons Learned

Case Study 1: The Sterling Heights Multifamily Acquisition Syndication

Diamond Real Estate Syndicate identifies an attractive multifamily property in Sterling Heights and forms a syndication to acquire and enhance its value.

Diamond Real Estate Syndicate prepares a comprehensive investment package outlining the property’s potential, financial projections, and the syndicate’s track record. They approach a mix of high-net-worth individuals and institutional investors, including Blue River Wealth Management and Alpha Real Estate Group, showcasing the investment opportunity. Through investor presentations and one-on-one meetings, they successfully secure the necessary funds to acquire the property.

Creating a compelling investment package and targeting reputable investors contribute to successful fundraising. Implementing a well-executed value-add strategy can significantly increase property value and investor returns.

Case Study 2: The Crestview Office Park Development Syndication

Parkside Real Estate Syndicate identifies a prime location for an office park development in Crestview and establishes a syndication to finance the project.

Parkside Real Estate Syndicate collaborates with strategic partners, including Crestview Investments and Summit Capital Group, to form a syndication for the office park development. They develop a detailed business plan, highlighting market demand, projected rental rates, and potential tenant profiles. Through targeted networking events and presentations, they successfully attract high-net-worth individuals and institutional investors interested in commercial real estate opportunities.

Building strong partnerships with strategic investors and industry professionals enhances the syndicate’s credibility and access to resources. Thorough market research and effective project management contribute to successful commercial real estate developments.

Case Study 3: The Harmony Grove Retail Center Refurbishment Syndication

Brookstone Real Estate Syndicate identifies an underperforming retail center in Harmony Grove and forms a syndication to revitalize the property.

Brookstone Real Estate Syndicate conducts extensive market research to identify the potential for the Harmony Grove retail center. They develop a comprehensive plan to refurbish the property, including modernizing the façade, optimizing tenant mix, and enhancing the overall customer experience. They reach out to a network of investors, including Harmony Capital Partners and Grove Realty Trust, presenting the opportunity for involvement in the syndication.

Thorough market research and a well-executed repositioning strategy can breathe new life into underperforming properties. Engaging with strategic investors and leveraging their expertise can enhance the success of revitalization efforts.

Get Legal Help Today

Find the right lawyer for your legal issue.

secured lock Secured with SHA-256 Encryption

Jeffrey Johnson

Insurance Lawyer

Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

Insurance Lawyer

Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.

Get Legal Help Today

Find the right lawyer for your legal issue.

secured lock Secured with SHA-256 Encryption