What Is Real Estate Syndication And How Does It Work?

Real estate syndication is an investment method that allows investors to pool their money and share in potentially massive profits. At some point in your life, you may find it hard to generate more cash flow on your own. This could be when real estate syndication comes into play.

When a group of real estate investors comes together to partner up and take on a large project, it’s called a real estate syndicate. In real estate syndicates, there are usually two parties involved: the sponsors and the group of investors.

Commonly, the sponsors put in around 10-20% of the equity but are in charge of almost every part of the deal. On the other hand, the group of investors need to put up 80-90% of the money in the deal but are otherwise very passive investors.

Real estate syndications used to be closed off to the public. To invest in these kinds of deals, you either had to have money, know someone, or both.

Nowadays, however, real estate syndication is a bit more accessible. There are lots of different platforms and real estate crowdfunding services that allow regular people like you and me to access real estate syndication.

Usually, real estate syndication deals are structured as a limited liability company or a limited partnership. The sponsors act as the general partners (or GPs) and the investors are limited partners (or LPs).

This setup is very similar to that of private equity funds. In fact, there are some private equity funds that focus exclusively on real estate syndication!

Swipe Up

for more finance, business, and real estate advice