How it Works
How does Real estate Syndication work?
How does Real estate Syndication work?
Real estate syndication is basically a team effort. Instead of buying a property on your own, you join a group of investors to pool your money and purchase a larger asset, like an apartment building. This group can be as small as 2-10 people or as large as hundreds of investors.
A real estate syndication comes together when a sponsor team discovers an excellent commercial real estate asset and creates a private placement offering for passive investors. Here’s how it all happens:
The sponsor team handles everything – from acquiring the property to managing investor relations and overseeing property management. Think of the sponsors as the general partners who do all the heavy lifting, while the investors are the limited partners.
As a passive investor, you get to invest your capital alongside the sponsors and share in the returns. The minimum investment amount can vary, but it’s typically around $50,000 or more.
The sponsors take care of the big tasks – acquisitions, underwriting, and asset management – while you, the passive investor, provide your capital and enjoy a share of both the ongoing cash flow and the profits when the asset is sold.
When you join a syndication as a limited partner, your commitment can last anywhere from a few years to over a decade, but the average syndication agreement runs for about 5-7 years.
During this time, the property often goes through a value-add strategy, which could involve anything from making cosmetic upgrades to renovating and adding new amenities. The goal is to boost the property’s value, keep occupancy high, and adjust rents to market rates. Once the business plan is complete, the asset is sold for a profit.
Why Choose Syndication?
Syndication is a fantastic way to dive into real estate investments without all the headaches. You get to enjoy the benefits of owning property, like cash flow, appreciation, and tax benefits, but without dealing with tenants,
repairs, or maintenance.
When you invest passively through a real estate syndication, you don’t have to deal with the burden of tenants, toilets, or termites. Each syndication deal allows you to tap into real estate markets and opportunities that would otherwise be unavailable or unaffordable to you as an individual investor. By combining your resources with other investors, you gain collective buying power.
For instance, buying a large commercial property (like an apartment building) on your own might be impossible, but through syndication, you can be part of such deals for a fraction of the cost.
Expert Management
Syndication deals are usually led by experienced real estate developers or sponsors. They handle everything – from finding and purchasing the property to executing the business plan, which might include renovations, leasing, and increasing rents.
Your role is to provide the capital, and in return, you get a share of the ownership.
Your Benefits
In exchange for your investment, you receive equity units or shares. These units entitle you to a portion of the rental income and a share of the profits if the property is sold.
You get all the benefits of real estate investing – cash flow, appreciation, equity, and tax benefits – without the time-consuming responsibilities of being a landlord.
Strong Returns and Diversification
Group investments in commercial real estate can offer strong, risk-adjusted returns and provide a great way to diversify your investment portfolio beyond the stock market. Typically, investors in syndication deals see a combination of cash flow returns during the hold period (often around 4-7% on average) and a
share of the profits from the sale.
Are Real Estate Syndications
Right for You?
Before jumping into a real estate syndication, it's important to think about your own investing goals. Are you looking for cash flow, appreciation, tax advantages, or a combination of these?
A real estate syndication can offer all of these benefits, which is why they've become so popular recently. But they're not a perfect fit for everyone.
If you have a low risk tolerance, want full control over your investments, or aren't comfortable investing alongside others, syndications might not be for you.
Also, take a close look at the management team before investing. A syndication is only as good as the people running it. You want to make sure you're partnering with a sponsor team that has a proven track record and experience in successfully executing value-add real estate strategies.
If you’re thinking about investing in a real estate syndication and prefer a passive role, you need to do your homework first. Research and understand all the risks involved.
Once you're comfortable with the risks and like the idea of partnering with experienced real estate professionals, syndications can be a great way to grow your real estate portfolio.
Syndications allow you to quickly diversify into multiple asset classes and markets without doing a ton of work, but remember, you won’t have the same level of control as you would with, say, a rental property.
Another thing to keep in mind is that real estate syndications are long-term investments. If you’re looking for a quick flip or fast cash, syndications aren’t for you. It can take years for the asset to be fully renovated and stabilized, followed by a holding period.
Who is eligible to invest in a real estate syndication?
Most of our deals are classified as Reg D 506(c). This term may sound complex, but it’s just an SEC (Securities and Exchange Commission) designation for many of our offerings.
One important aspect of 506(c) deals is that they are exclusively available to accredited investors. To be considered an accredited investor, you must meet at least one of the following criteria:
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Income: Earn $200k per year as an individual (or $300k together with your spouse) for the past 2 years, and expect to continue earning at this level.
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Net Worth: Possess a net worth of $1 million or more, excluding your primary residence.
Accredited? Fantastic!
If you meet these criteria, congratulations! You’re an accredited investor and eligible for all our offerings.
Time to celebrate!
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Start Here​
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​Start by joining the Nest wealth investor club
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Connect
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Connect with our team so you can learn more about us, see that we're real people, and get your questions answered.
Invest
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When we find opportunities that meet our strict criteria, we'll invite you to invest alongside us.
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Sit Back​
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Once you invest, sit back and let us do all the heavy lifting. We'll send you monthly updates on ongoing returns.