Real Estate Syndication Companies

Real estate syndication (crowdfunding) is one of the most popular real estate investment vehicles in the world. In fact, a study recently published indicates that real estate syndications over doubled in volume from $7bn of equity capital invested in 2019, to $15bn in 2021. The same study shows that individual investors provided 25% of all capital raised for private equity real estate in 2020

 

A separate study shows that investors received a preferred return – the yield on their investments – of somewhere between 7% and 12%, with the most common preferred return of 8%. In an industry where numbers are the most important thing, it is clear that real estate syndication is one of the smartest investment options that investors have access to.

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What is a Real Estate Syndication Company?

 

Real estate syndication companies are a proven investment vehicle for those who want to take part in real estate investing through crowdfunding. At the heart of a real estate syndication is a sponsor, such as Rising, who is also often referred to as a syndicator. As a syndicator, we are responsible for forming individual companies to operate specific assets and for identifying properties that will fit into our portfolio. We work to find opportunities to purchase real estate, generally through existing industry connections that we have formed, and through continually expanding our network of contacts to brokers and owners nationwide. 

 

Once we have found a suitable property for a new syndication, we then take on the responsibility for negotiating the purchase. However, our most important work takes place after those steps are complete. We then create a business plan for how the property will be operated going forward. This business plan must take multiple factors into account, including area demographics, current market trends, and everything else that can impact a potential real estate investment. All the due diligence that is performed on the property is the responsibility of Rising as the sponsor. 

 

Once the proper paperwork has been filed with the SEC (the entity that governs real estate syndications), we then begin the process of inviting individual, passive investors whose funds will be used alongside ours to join us as our partners to purchase, improve, and manage the property according to the business plan.

 

Once the property has been purchased and the syndication’s investors have provided the funds, the sponsor is also solely responsible for keeping those investors informed about what their money is being used for. They will also oversee the improvements, management, and other tasks that are related to maximizing the profits generated by the property. 

 

Finally, as a part of the sponsor’s business plan, they are responsible for creating the payout structure in which the investors will see a return on their investments. Creating the payout structure, which must operate in accordance with the laws set forth by the SEC is crucial. This not only ensures that the syndication is operating legally, but it allows the investors to decide if the investment structure is conducive for their own investment strategy and personal financial goals, while also allowing them to create a personal financial forecast about how they can profit by taking part in the syndication.

 

Is Real Estate Syndication Legal in the USA?

 

Obviously, it is crucial to make sure that any investment opportunity that you take advantage of is a legal one. Real estate syndications are completely legal in the United States, but there is a lengthy process that the sponsor must go through to ensure that they are operating within the framework of the law. For instance, not only does the syndication itself need to be registered with the federal government, but there are other legalities that need to be addressed.

 

For instance, Regulation D is an exemption provided by the Securities and Exchange Commission that allows syndicators to raise funds without filing time-consuming and costly “Registration Statements” with the SEC. Regulation D allows syndications to raise funds from accredited investors, and, in some circumstances, a very limited number of non-accredited investors. Regulation D Offerings are further subdivided into other categories referred to as Rule 504 and Rule 506. 

 

Real estate syndications are most definitely legal in the United States. However, it is the syndicator’s responsibility to ensure that they have filed the required paperwork to have the syndication recognized by the SEC. As an investor, it is your responsibility to make sure that you are investing in a syndication that has taken the steps to operate legally. 

 

How to Find Real Estate Syndication Deals

 

There are plenty of ways to find real estate syndication deals if you are interested in adding this investment class to your portfolio. 

 

Traditionally, the only way to find a syndication company was through networking. This means of finding real estate opportunities to invest in was a result of the Securities Act of 1933 which required both a sponsor and an investor to have a prior relationship before money could change hands. With the passing of the JOBS Act of 2012 and the legalization of crowdfunding this changed and today sponsors can actively market their investment opportunities to the general public.

 

The JOBS Act gave birth to real estate crowdfunding platforms like CrowdStreet, RealyMogul, Fundrise and others, where you can find myriad opportunities to invest. Companies like Rising will list our projects on these sites and, common with other sponsors, we also provide direct access to our investment opportunities via our website.

 

Now that the laws have changed allowing for ‘general solicitation’ by sponsors of investors, advertising is allowed so you will also be able to find opportunities on social media channels like Facebook or LinkedIn. Indeed, you may also find that you will see adverts on non-real estate websites as you search the web and Google’s algorithm identifies you as someone interested in real estate investing.

 

While searching online for opportunities is one of the most important parts of finding success in any area of the real estate industry, there is no substitution for taking the time to research these opportunities when you find them. Diligent sponsors will be transparent in the information they provide online about their background, track record, and investment strategy. Look for sponsors who make every effort to help you make an informed decision based on the educational content they provide both about themselves as well as about real estate investing in general. 

 

As is the case with any investment opportunity, knowledge is power. Not only is it important that you understand how to find the best real estate syndications out there, but it is also important to understand the finer points of what you are investing in and to remain informed about industry trends.

Real Estate Syndication Investment Opportunities

 

All real estate syndication investment opportunities are not created equal. Within the industry, there are multiple investment types, and those that you choose to invest in are largely determined by a number of personal factors. For instance, you will need to evaluate your personal financial status to determine which syndication is the best fit for you. You will also need to thoroughly consider your personal investment strategy and your goals. For example, if you want to take a long-term approach to your real estate syndication investing, you will need to choose an investment that is targeted to the distant future. Conversely, if you want to quickly access the return on your investment, choosing a syndication that provides quick liquidity, you will want to opt for a syndication that plans on flipping properties at a quicker pace. In order to make an informed decision, consider three of the different types of syndications.

Apartment Real Estate Syndication Companies

 

Some syndications choose to focus on apartment complexes. Before the investments are offered to passive investors, the syndicator will do thorough research on the community (or communities) where they are considering investing. They are then responsible for purchasing and managing the apartment complexes that they purchase. Apartment real estate syndications are tailored toward investors who want to enjoy long-term returns on their investments, as liquidating the complex is not generally part of the plan. If liquidation is part of the business plan, doing so does not happen quickly. Instead, investors receive the return on their investments through the rent that the apartment complex generates.

Multifamily Real Estate Syndication Companies

 

It’s important to note that there is a difference in apartment complex and multifamily housing options. While apartments can obviously house multiple families, multifamily housing options include duplexes and other smaller facilities that are capable of housing more than one family. These investment classes are generally aimed toward long-term investors, as they also depend on the rent generated by the tenants of the property. However, multifamily units are often easier to sell than large apartment complexes, so the eventual liquidation may not be as far into the future as it would be with an apartment complex.

 

Single Family Real Estate Syndication Companies

 

Single family real estate syndication companies may offer a wide variety of options for investors. Obviously, the fix and flip model of real estate investing is an incredibly popular one. In these structures, the syndication is not only responsible for overseeing the purchase of the property, but they will also be responsible for contracting and supervising any improvements that need to be made. Once the property meets the standards laid out in the syndication’s business plan, the decision to either rent the properties out or liquidate them is also dictated by the business plan that is presented to investors. In most cases, single family homes are sold in real estate syndications, as a single family paying rent on a home doesn’t provide enough income for the proposition to be attractive to real estate investors. In some cases, the syndication may purchase multiple single-family homes within the same area or get in on the ground floor of a real estate development within a given area (such as a gated community). Single family homes are often quicky liquidated, which makes them a great option for investors who want to see a fast return on their initial investment.

How do I Find a Real Estate Syndication?

 

One of the most tried and true methods of finding a real estate syndication is to use the connections that you already have within the real estate industry. When you network with other real estate professionals, it is much easier to find opportunities that fit your personal strategy and goals. When you discuss real estate syndication investing with industry professionals who you know and trust, you can benefit from their personal experiences.

 

How Can I Find Real Estate Syndication Companies Near Me?

 

Many investors want to work with real estate syndications that are relatively close to them. This allows investors to not only feel more connected to the investment firm, but they can also gain access to information about the subject property without having to make phone calls and sending emails across the country. In the past, finding a nearby real estate syndication company was difficult, but today, it is as simple as going to your computer or using your cellphone to conduct a quick internet search.

 

Finding a real estate syndication company near you is only part of the battle. It’s even more important to find a company that is right for you. Speaking to the people who oversee the company and asking for information about their business plans can help you better understand if their investment strategy is in line with your personal investment strategy and financial goals.

Conclusion

 

There is a reason that successful real estate investors have long considered real estate syndication as one of the wisest investment vehicles in the industry. Understanding how to find and identify real estate syndicates that align with your personal strategy and goals is important. There are hundreds of thousands of real estate syndication opportunities in the United States, and more than 100,00 investors. Finding your spot in this ever-growing industry can put you on the path to personal financial success.

 

POSTED BY

ChrisRising

CHRIS RISING

Chris Rising manages the day-to-day business activities of Rising, while also serving on its Investment Committee.

He received his J.D. Law, Real Estate from Loyola Law School and his B.A. in History and Political Science from Duke University.