One of the most important reasons people do not make a bet on Real Estate Investments, especially commercial real estate, is the overwhelming experience of the hard work involved as well as direct participation in the analysis of potential investment opportunities, creating the proper team and, of course controlling the building. If this is your notion of what being an investor in commercial real estate is all about, then you’re right to a degree. There are many other options to acquire huge multifamily properties, one of which is to become an active investor (aka Limited Partnership) in the real estate syndicate. This is a different method that lets you stay away from the day-to-day running for the building. This means that you’ll rely on professionals to handle the work and you’ll be able to take advantage of the profits. If you want to become an investment that does not require any effort There are a few important things to keep in your mind. As with all investments the ability to manage your risk is a major priority. Most of the time, this is an issue of age or income as well as savings that are based on where you’re in life , and where you’ll be in five, ten or 20 years. If you are more confident with risk, feel in the face of risk, greater chances you’ll have to take advantage of new Real Estate Investment Opportunities.
Understanding the Basics of Real Estate Syndications
An easy way to describe an Real estate Syndication is to imagine it as a train ride. The entire bus will be going to the same destination, however certain passengers are enjoying the ride in the back, while the rest are the drivers in the front of the bus (also enjoying the journey). Bus drivers are the patrons of the syndication, and the passengers are passive investors. An indicator, also known as a sponsor as well as an investor group who pool their resources in both financial and intellectual together to purchase properties that are more expensive than they can manage by themselves. Over 90% of purchases for large multifamily properties are made by syndicated purchases.
If a syndicated deal is completed there are the following persons included:
- Sponsor (also referred to as the syndicator, operator, or general partner)
- Limited partners (also known as passive investors)
- The Property Management Team (third party or a member of the team of the sponsor)
In nearly all cases there are other individuals who are members of the group too as they assist in closing deals behind closed-doors. These comprise but are not restricted to:
- Securities and real estate Attorneys
- Lenders and or Mortgage Brokers
- CPAs are certified public accountants (CPAs)
- Commercial brokers
Of all the individuals involved with the deal, the person who is the syndicator or sponsor is thought to be the most important because he’s responsible for various tasks, such as:
- Beginning the syndication
- Identifying market
- Securing financing
- Identifying investment opportunities
- Insuring the deal
- Leading the renovations as well as the business plan
- Maintaining a healthy relationship with investors
- Manage an asset in real estate
For the passive investor or limited partner, it could be a person or a group of individuals who will offer the private equity funding for the purchase. The role of investors in real estate syndication is easy since they put their funds in the venture that the syndicator is responsible for and oversees. They then earn some of the profit in accordance with a set arrangement. Investors who meet the requirements have the opportunity to profit from investing in these types of real estate investment. Here are a few reasons why syndication is the best way to be an investor who earns money:
Diversification
By diversifying investors are able to reduce their risk exposure as they spread their investments across various property types and even different sponsors. In this way, they are able to balance the rewards and risk of their portfolios.
Opportunities
With syndications, investors have access to huge opportunities for investment, especially commercial properties. With a purchase price that ranges between $5 million and $500,000, syndications give investors the opportunity to pool funds together with other investors. There’s no requirement to provide a seven-figure amount. Participation The most important advantage of syndication is the possibility of becoming an investor who is passive. When investing in this way the investor is removed from the asset in totality. The investor also has no connection to the operational aspect and administration of the asset. This is because the owner or syndicator is responsible for all aspects of the transaction, which includes hiring a property manager dealing with investors, and searching for an investment property that is profitable. For a small fee one can lay back and relax while receiving payments every quarter or month. Forced Appreciation the Commercial Real Estate market is valued based on its Net Operating Profit, or NOI. Through physical and operational enhancements, the value of the property is increased through the increase of the NOI.
Lower Risk
Because syndicating involves investing with an experienced real estate operator with a track of success which means the risk is considerably decreased compared to trying to deal with commercial real estate with an individual investor. With syndication that involves an investor sponsor, there is an additional layer of protection for the investors and all liabilities due to debt obligations or the administration of funds. Real estate syndication is a great way to make long-term wealth since investors earn a steady stream of income in the process. While this strategy isn’t for everyone, it definitely opens an opportunity for many seeking to dive into investing in real estate by working with other investors as well as experienced real estate professionals who are able to be the ones to lead the way.
Vairt is a Crowdfunding Platform for Investing, tokenizing and liquidating real estate assets through Block chain. Once you are ready to make an investment, you can make an investment in less than 2 minutes. Sit back and relax as your property gets funded. Vairt analyzes Property Investment Opportunities using a 100-point proprietary screening tool and independent third-party market data to assess the investment attractiveness of each property. We give you the Opportunity to Invest in Real Estate for as little as $5000. All properties on our platform are listed for 30 days to give investors ample time to raise funds.
