Financial Freedom Through Passive Syndication In Real Estate Investing

Financial Freedom Through Passive Syndication In Real Estate Investing

Real estate syndication is an effective way for a group of investors to pool their capital in order to invest in larger properties and projects than they could as individual investors. This structure allows investors to invest passively while the fund operator or «sponsor» handles the management aspects and day-to-day duties of the project. One of the great benefits of investing in syndications is that it gives investors the opportunity to leverage other operators’ expertise with their capital. This can open up doors to new asset classes, which helps diversify investors’ holdings, while delivering high returns.

Let’s say you have a background in flipping single-family properties in Melbourne CBD. You may have the vast majority of your portfolio allocated to that asset class in that specific market.

Here’s how it works…

Usually, the preferred return will range from 8-12%. The real bulk of how sponsors should be making money in real estate syndications is through the equity and cash flow participation split. The size of the split will depend on the track record of the operator, how much of his expertise is necessary for the performance of the fund, and how profitable the opportunity will be to investors. That way, both the sponsor and the investors’ incentives are more closely aligned for the fund’s performance.

Let’s look an example where a syndication structure would be beneficial…

Let’s say that the self-storage operator, Self-Storage King, has located a 100-space property that can be purchased for $9,000,000. Because of the Self-Storage King’s track record, the operator is able to secure a loan for 65% of the purchase price.

Here is a breakdown of a typical structure…

There will be a $25,000 minimum investment. There will be an 8% preferred return to investors. Above the 8% preferred return, there will be a 70/30 split to the investors from proceeds from cash flow and equity.

Side Note

We are constantly sourcing high quality deals so that you have a consistent selection of high-quality multifamily/apartment investments to choose from. For most investments, you don’t need to be an accredited investor, and the minimum investment is typically $50,000. So start small and grow with us over time. Join now to check out some of our active investment opportunities. 

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