Sponsors

A real estate syndication is a partnership between sponsors (GPs) and passive investors to acquire a real estate asset which includes, but not limited to, multifamily residential, industrial, self-storage, mobile home parks, etc.

The sponsorship team combines their skills and resources to buy a property that a single individual would otherwise be unable to purchase. They execute their business plan and operate the property for 5-7 years. There are several parties involved in a syndication, including real estate brokers, property managers, CPAs, lenders, attorneys, passive investors and the sponsor, or general partner (GP) who puts it all together to acquire and operate the project.

Passive Investors

The passive investors, also known as limited partners (LP), are completely hands-off and are not involved in operating and managing the property. Investors receive tax benefits, cash flow distributions and shares of the profit after capital events (i.e. if the property is refinanced or sold). They do not have any voting rights or active responsibilities operating the property. Typically, a minimum investment amount is between $25,000 to $50,000 and cash flow distributions are made to the passive investor every quarter. These distributions are calculated upon how much was invested and the ownership percentage (which we will discuss in a later lesson).

The Team

Investing in syndications is a great way for individual investors to invest in real estate without the hassle of direct real estate ownership. Compared to owning a single family home as an investment (house, apartment etc), participating in a syndication means you don’t need to worry about getting a mortgage, managing tenants or general maintenance - this is all handled by the sponsor and their team. It is important to assess the skills, expertise and integrity of the team prior to investing - no single element is as important to the outcome than the team players.