What You Need to Know About Syndication in Real Estate

Stacking Coins

With all the great ways to make money today, real estate is still a very popular choice. It’s the type of investment that generally doesn’t lose value over the long run. It’s had a tradition of being solid and secure, as well, so it’s not generally as volatile as other types of investments a person could choose from. But there are still options to consider, and real estate doesn’t have to be as straightforward as just being a landlord, or buying properties to fix up and sell. Here’s another real estate concept to consider for wealth-building.

It’s Possible to Essentially Crowdfund Real Estate

A lot of people want to invest in real estate, for the staying power and future potential it has. But they might not have the money to buy the kinds of properties they’re interested in. If you’ve done some research into this frustrating issue, you may have seen people talk about syndicating real estate. But what does that even mean, and how does it work for investors who want to add real estate to their portfolio? If you’re asking yourself what is real estate syndication, you’ve come to the right place.

Essentially, real estate syndication is another term for today’s idea of crowdfunding. The concept has been around for some time, but it’s becoming more popular today. The way it works is that a group of people all go together to buy a property, and they work with a professional who runs the syndicate, finds the property, and purchases it on their behalf. Then they all own parts of properties, as the syndicate buys up more of them. That way, they build up a portfolio without big outlays of money for purchases. They’ll get revenue from the party of the property they own, but it can get them into properties they couldn’t otherwise afford.

Understanding How it Works is Vital

One of the most important things about asking yourself what real estate syndication is understanding how it works. You want to be clear on what you’re getting, how you get revenue from the property you own part of, and other factors. You also want to understand who’s doing the buying, and what kinds of criteria they have.

Someone will have to maintain the properties, and care for them. The properties will need tenants, and someone will have to vet them. There’s a lot that goes on behind the scenes. Understanding what, if any, role you have in any of that matters. So does knowing how to ensure that things are being handled and managed correctly.

Don’t Settle for a Bad Deal

Asking what is real estate syndication isn’t the only question to consider. You’ll also want to take a look at what syndicate you’re considering working with, and what they can offer you. They may not have the best deals, and you might want to consider a different one. You may also want to opt out of certain purchases, even if you like the syndicate you’re part of. Make sure you have the option to do that, if you’re going to be part of a syndicate that’s buying up real estate. Otherwise, you might get stuck with some properties you really don’t want to be a part of.

Make Sure the Paperwork is in Order

Don’t just rely on the person running the syndicate to handle everything, while you hand them your money. Asking what real estate syndication also comes with asking whether it’s being done right. Even if you’re going in with a group of investors to buy real estate, you may still be investing a sizable chunk of money. You want to be sure the paperwork is done right, so you know you’re part of the deal and your investment percentage is accurate. Don’t be afraid to ask to see the documents. It’s your deal, too.

You May Have a Say in the Purchases

You might have more say in the purchases the syndicate makes than you think, but you want to find that out before you get too involved. If you’re not going to have any say, or there’s not even a vote, then it might not be the right option for your needs. Still, you can focus on finding out how the process works with the syndicate you’re considering, so you can make an informed choice for the future.

Work Only With Trusted Investors

If someone starts up a syndicate, and they don’t have any idea what they’re doing, they may not be the right choice to work with. Answering the real estate syndication question should be easy for them. They should also have prior investment experience, and be well-versed in the local market. By working with investors you can trust, you’ll likely have a better — and more financially sound — experience.

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