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A Real Estate Syndicate is a body of investors who pool their funds to invest in or develop a property. This Real Estate Syndicate gives investors access to more buying power and larger investment opportunities that they would otherwise not have access to as individual investors.
Legally, Real Estate Syndicate are typically registered as Limited Partnerships (LPs) or Limited Liability Companies (LLCs) in the United States, with the real estate assets being purchased as a LP or LLC on behalf of the group of investors.
Why is Real Estate Syndication Used?
Real Estate Syndication allows individual investors ease of access to real estate deals without having to go through the sourcing process themselves. In addition, Real Estate Syndication also allows investors to invest in real estate without the need to manage the property themselves.
In addition, by pooling funds from multiple investors, the Real Estate Syndicate can acquire deals as a group that typically would be too large and inaccessible to each investor individually, which allows access to a wider range of deals.
While returns are distributed among all members of the Real Estate Syndicate, there is a hierarchy in which each group of members receive their returns. As an incentive for organising and managing the investment, the Sponsor typically charges fees and receives a higher return than other investors in the syndicate.
Read also: Deal Sourcing with AI
What are the Roles in a Real Estate Syndicate?
Syndicator (or Sponsor)
The Syndicator may be a company or an individual, who typically has experience in real estate. The Syndicator is responsible for sourcing, acquiring, arranging financing for and managing the real estate asset. Real Estate Due Diligence should also be carried out by the Syndicator before entering into the investment.
Read also: What is Real Estate Sponsor Promote
Individuals who invest with the Syndicator essentially own a percentage of the property proportional to their investment in the asset and are able to reap the returns and benefits that come with property ownership. However, as investors, they do not share the responsibilities of the Syndicator in having to acquire and manage the property.
How did Real Estate Syndicates Come About?
Real Estate Syndicates have been around for centuries, but the Securities Act of 1933 changed the way these syndicates operated by disallowing public solicitation for unregistered securities. This forced Real Estate Syndicates to go private, raising capital from personal connections or brokers instead doing so publicly.
However, in 2012, the Jumpstart Our Business Startups (JOBS) Act allowed for public solicitation, provided that all investors are accredited, reviving Real Estate Syndication as a viable property investment option.
Online Real Estate Syndication
Today, access to Real Estate Syndication has been made easier with the rise of online real estate crowdfunding by allowing investors to invest across borders, removing the geographical limits that previously restricted investors.
Online Real Estate Syndication works in much the same way as offline Real Estate Syndication. However, the use of new technologies such as investment management tools and automated data collation has increased efficiency and become an important part of real estate investing.
RealVantage is a co investment platform that provides access to deals similar to participating in a Real Estate Syndicate. RealVantage’s real estate experts source property deals and organise all aspects of the investment, releasing it onto the co investment platform for interested accredited investors. Investors can select which deals they want to invest in, with detailed information available for each deal on the platform, and RealVantage will handle the rest.
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Disclaimer: The information and/or documents contained in this article does not constitute financial advice and is meant for educational purposes. Please consult your financial advisor, accountant, and/or attorney before proceeding with any financial/real estate investments.