Are you looking for a way to invest in real estate much more passively without all the hassle of managing a property and executing on the strategy? A real estate syndication might be the perfect investment option for you. Let's discuss what real estate syndications are and why they're a great choice for passive investors.
In simple terms, a syndication is a group investment in a real estate property. It allows a group of investors to pool their money together to invest in a property (known as limited partners), while one or more real estate professionals manage the property and execute a strategy (known as general partners). Investors who join syndication get to enjoy the benefits of investing in real estate without having to be actively involved in the management of the property.
Because a syndication is a selling of a security, the IRS wants to make sure that things are set-up property. Without going too deep into the weeds, as an investor, you'll fall into 1 of 2 categories - an accredited investor or a non-accredited investor. This is based on the amount of money that you have, your yearly income, and your relationship to the person offering the syndication and how long you've known them (we can get into the details later). There are 2 main types of syndications - a 506b (open to accredited investors and a limited amount of non-accredited investors) and a 506c (open only to accredited investors). In a 506b, the people responsible for setting up the investment are not allowed to publicly market the opportunity. In the case of a 506c, they are allowed to publicly market the investment opportunity.
Passive Investment Real estate syndications are perfect for those who want to invest in real estate without being actively involved in the management of the property. With syndications, you can be a passive investor and let real estate professionals do the work for you. This means you don't have to worry about managing the property, finding tenants, or dealing with any issues that may arise.
Diversification Real estate syndications allow you to diversify your investment portfolio. You can invest in different types of properties in various locations, which helps to spread your risk across different markets.
Professional Management By investing in syndication, you are relying on real estate professionals to manage the property and execute a strategy. This means you can benefit from their expertise and experience, which can lead to better investment returns.
Preferred Returns and Equity Splits Real estate syndications typically offer preferred returns to investors, which means that you earn a certain percentage of the investment annually. You also get a share of the equity when the property is sold. This can result in a significant return on investment over time.
Real estate syndications are a great investment option for those looking to invest in real estate without having to manage the property themselves. With syndications, you can be a passive investor and benefit from the expertise of real estate professionals while still earning a significant return on your investment. The key is finding operators that you know and trust, since they are the ones managing the asset on behalf of the syndication.
If you're interested in learning more about syndications or investing in real estate, reach out and let's chat!