What is a real estate syndication?

A real estate syndication is an incredibly effective way of raising capital for a real estate deal. It includes General partners, who do all the work and get the deal done, and then there are limited partners, which bring capital to the table. The general partners would be in charge of finding, analyzing closing on the deal, as well as taking care of the construction/contracting and management side of things.

Fees associated with syndication:

Acquisition Fee: 1–3% of the purchase

Asset Management Fee: different from a property manager. An asset manager is looking at bigger-picture problems like financial reporting, market changes, and portfolio-wide policies

Other Fees: refinance fees, disposition fees (when a property is sold), etc

GP -> puts the deal together

LP -> supplies the funds

How to Find Limited Partners for your Syndication:

• Network, build a personal brand online and in your personal market
• Get to know other investors, and go where other investors hang out

Securities and Exchange Commission (SEC):

• Responsible for the oversight of all stock trading in the U.S
• Offers several different methods
• 506b and 506c

Accredited Investor

• Someone who the government has deemed rich enough to invest in a risky real estate deal
• Net worth greater than 1,000,000, not including their personal residence
• An individual whose annual income has exceeded $200,000 in the last 2 year
• A married person who has had a joint income with a spouse exceeding 300k in the last 2 years
• w/ a reasonable expectation of reaching the same income level in the current year

506b vs 506c

506b -> you can only raise money from people you know, family, friends, neighbors, coworkers, etc, and you can invest with up to 35 non-accredited investors

• They must be “sophisticated enough” meaning at least know how to read a financial statement, et cetera, understand and reiterate the risks behind the investment, have they had experience with real estate deals

506c -> you are allowed to advertise for your syndicate

• The limited partner must prove they are accredited with documentation, like a tax return or a document from their CPA