As you explore the possibility of investing passively in real estate syndications, it’s natural to have numerous questions. Real estate investments are significant, and it’s crucial to seek answers to all your queries. However, since real estate syndications are not widely known, finding friends who can provide answers might be challenging. To help you in your quest for knowledge, we’ll address four important questions today:
- What types of properties can I invest in using syndications?
- What are the potential risks of investing in real estate syndications?
- Where and how can I find syndication deals?
- Can I invest in syndications online?
By providing answers to these questions, we aim to clarify many aspects for you. Let’s dive in!
What types of real estate syndications are available?
Real estate syndication deals encompass a wide range of property types, including multifamily properties, self-storage units, manufactured home parks, land development, hotels, student housing, warehouses, and more. Some syndications involve ground-up construction, while others focus on acquiring and holding existing income-generating assets.
A great example of a value-add multifamily deal is an apartment community with outdated units. By renovating these units, such as updating kitchens, replacing worn carpets, and enhancing landscaping, the property’s rental income and overall value can be significantly increased.
What are the risks associated with real estate syndications?
Investments of any kind carry risks, and real estate syndications are no exception. One major risk lies in the execution of the business plan. Prior to the deal, sponsors often present enticing marketing materials and lofty promises. However, the ability of the sponsor team to execute the plan in the face of unforeseen circumstances is crucial. To mitigate this risk, it’s important to invest with sponsors who have a proven track record and prioritize capital preservation.
Market and economic conditions also pose risks. It’s impossible to predict market conditions at the end of a project’s intended hold period. To safeguard your investment, ensure that the loan term aligns with or exceeds the projected hold time, allowing for potential extensions if necessary.
As a limited partner passive investor, your personal liability is limited. At worst, you may risk losing your original investment capital, but you cannot lose more than that.
Where can I find real estate syndication opportunities?
Publicly advertised real estate syndication deals are typically available only to accredited investors. So, how can “regular” individuals find real estate syndication opportunities?
While a Google search might yield results, it’s challenging to determine the legitimacy of the opportunities presented, including the experience and track record of the teams involved. The best approach is to immerse yourself in the real estate syndication community. Networking and connecting with industry professionals will help you discover reputable sponsors and syndication opportunities that align with your investment goals.
How do private real estate syndications compare to real estate crowdfunding sites?
You might have heard of friends investing in syndication deals for small amounts through real estate crowdfunding sites like RealtyMogul, RealtyShares, or Fundrise. While these platforms offer opportunities to invest passively in real estate, there are a few important considerations.
Most crowdfunding platforms require investors to be accredited investors to participate in their real estate syndication offerings. Some platforms also offer Real Estate Investment Trusts (REITs) as an alternative for non-accredited investors. REITs are funds that invest in real estate assets, offering potential returns but without direct ownership of the underlying assets, as in a real estate syndication. While REITs can provide good returns, they differ from syndications in terms of ownership and potential tax benefits.
It’s recommended to explore real estate crowdfunding sites to understand their offerings and suitability for your investment strategy.
In Conclusion
Understanding the risks, available options, and how to find suitable deals is essential in the world of real estate syndications. While syndications may not be suitable for everyone, they can be a valuable addition to any investment portfolio. With this knowledge, you can remove barriers to entry and actively pursue opportunities. So, what are you waiting for? Take the next step and explore the world of real estate syndications today!