Thanks to an amazing variety of television programs dedicated to flipping houses, renovating fixer uppers, and locating hidden gems in trendy neighborhoods, most people have at least a vague idea of what’s involved in purchasing a single- family home or rental property.

When you distill this process and bring it down to the basics, buying a home or rental is a matter of choosing the ideal neighborhood, deciding how large a home you want, finding a reputable lender and broker, checking out potential properties, and then making an offer.

Investing in a commercial project, however, requires a completely different knowledge base, skill set, and tools.

Syndication is one highly popular method of buying commercial real estate, especially among wealthier, knowledgeable investors. In fact, it is estimated that over 70% of apartment building purchases are made using syndication.

Syndication allows prospective investors to pool their financial and intellectual resources in order to purchase properties that they might not have been able to acquire on their own. It can help those currently investing in single-family rentals more easily transition to the role of passive investor in larger, more prestigious projects.

Syndication is certainly something to consider, particularly if you’ve ever dreamed of getting away from the grind of dealing with “tenants, trash, and termites.”

All syndications are unique, but there are some basic steps you need to take in order to enter a syndication successfully.

After you’ve taken some time to do your general research on the syndication process, you should:

1. Ask yourself the question, “What are my investment goals?”
2. Do your due diligence and find an opportunity that is the most likely to help you achieve your goals.
3. Contact the syndicator to reserve your spot in the deal.
4. Review the private placement memorandum (PPM)
5. Send in the required funding.

Step #1 – Knowing your investment goals – Once you decide to investigate syndication, you should sit down and objectively evaluate both your short-term and long-term investing goals. This ensures that you choose projects in line with those goals.

You should consider how much money you have free for investment and whether or not you can afford to tie that money up for what could be a significant length of time.

Bear in mind that a typical syndication takes anywhere from 12 months to 5 years to fully mature. Can you afford to “buy and hold?” You should also consider which tax advantages you hope to gain and whether you are investing for long-term appreciation, cash flow, or both.

Step #2 Find The Best Projects
After clarifying your goals, you need to find the perfect opportunity to ensure success in meeting those objectives. Real estate syndication projects run the gamut from shovel-ready construction to value-add assets, and even turnkey syndications.

Deal sponsors (syndicators) will usually provide you with an executive summary, full investment summary, and an investor webinar. This collateral material should provide you with a complete view of the asset. The reports will define the market, introduce the deal sponsor team, outline the business plan, and will include projected financials.

A good sponsor’s team consists of people who have the skills, training, education and experience to enhance the possibility of a successful project outcome. Don’t be afraid to check out each member of the team and ask them questions about their track records and expertise. Be especially diligent in reading the business plan to determine if there are any red flags or unclear language. Look for the presence of multiple exit strategies and conservative underwriting. Ask yourself whether the business plan as presented makes sense given the current economic cycle. If things don’t seem quite right, you may want to back away.

Make a list of questions and things that might seem a little off to you and ask them at the investor webinar. At this stage of the game, you should be looking for any and every reason to NOT invest in the deal.

Step #3 Reserve Your Spot in the Deal
Once your sponsor and their team have run the gauntlet and satisfactorily answered your questions and addressed your concerns, it’s time to reserve your spot in the deal.

Syndications are normally filled on a first-come, first-served basis. Good deals often go quickly so you’ll want to take the time to ask questions and do your research BEFORE the deal goes live.

The deal of a lifetime could be gone in the blink of an eye. That’s why it is so crucial to get your goals clarified and your due diligence done. In the case where a “soft reserve” is available, you may have additional time to review all the materials again or do some more research.

In that instance, you could combine Steps #2 and #3 by reviewing the executive summary, reserving your spot in the deal, then reviewing the rest of the materials. Doing so allows you the opportunity to reduce your investment or even back out, penalty-free. But don’t be late putting in your soft reserve though or you could find the deal is full by the time you decide you want back in.

Step #4 You need to review the PPM

So, you’ve decided to invest in a deal. The first official step will be reviewing and signing the PPM (private placement memorandum).

The PPM is a legal document providing in-depth details about the investment opportunity, potential risks involved, and your role as an investor.

Legalese isn’t very fun or interesting to read. However, don’t gloss over this important document as it will give you a full understanding of the risks, subscription agreement, and operating agreement pertaining to the investment.

The PPM will also ask you to decide how you’ll hold your shares of the entity holding the asset. You will indicate whether you want your distributions sent via check or direct deposit. I always recommend ACH, so distributions come directly to your checking account. This speeds up the process and reduces the chance of a check getting lost. Besides, it’s kind of neat when you find passive income deposited directly into you account. Imagine getting tax efficient cash flow every month or every quarter. It’s a tangible reward for the time and effort you put into researching and vetting your deal.

Step #5 Send in Your Funds
When you’ve completed the PPM, the final step is to send in your funds. You will usually find find wiring instructions in the PPM document. Prior to wiring the funds, it’s a good idea to double-check the wiring information, and let the syndicator know to it’s on the way.


I hope this short summary on the process of investing in a real estate syndication should helped you understand this powerful strategy a little better.

Real estate syndications may indeed be the very thing for which you are looking to catapult your investment business into a higher level with more income potential. Unlike investing in some other popular assets, syndications require your active participation only in the very beginning. After that, you are free to sit back and enjoy the fruits of your hard work.

If this process still seems a little challenging or you lack confidence, don’t worry. We are here to answer your questions and guide you every step of the way as you invest in your first real estate syndication. We’ve done this many times as well as helped many others. It won’t be long until you become an expert yourself.

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