Beginners Guide to Commercial Real Estate Syndications
What is a Commercial Real Estate Syndication
July 11, 2022
Introduction
Commercial real estate, especially multifamily units, is an attractive investment. They tend to have lower risk, offer a reliable source of revenue, rents that increase with inflation, and an asset that appreciates over time. The challenge is that most commercial properties cost millions of dollars, beyond the reach of most investors.
Key Takeaways
- Real estate syndications provide a passive investment that builds wealth through commercial real estate ownership.
- The sponsor puts together a commercial real estate deal, and investors participate by funding the down payment required to purchase the property.
Real estate syndications allow you to gain ownership in commercial property by pooling assets with other like-minded investors.
How Real Estate Syndications Work
A commercial real estate syndication begins when the syndicator, or sponsor, locates a property meeting their criteria. The sponsor makes an offer, negotiates the terms, and sets a closing date. Once the parties agree on the particulars, the company solicits investors to participate in the deal, providing the necessary funding for the down payment.
The sponsor or managing partner actively participates in the deal. Once the property closes, the sponsor oversees the management, completes upgrades, takes steps to lower operating costs, and engages in other activities based on the objectives in the management plan. At the end of the term, or based on market conditions, the managing partner will sell or refinance the property.
Investors become limited partners in the company. You hold partial ownership based on the level of investment. The minimum investment typically starts at $50,000, which mirrors the cost of buying a $200,000 single-family home with 20% down.
Active Versus Passive Investing
One of the most attractive features of commercial real estate syndications is the passive nature of the investment. It is not necessary to acquire the expertise or commit the time required to vet, manage, and sell the property successfully. Yet, as a limited partner, you receive a portion of the profits through monthly or quarterly distributions and upon liquidation, making it truly a passive investment that can produce above-average returns.
How to Invest in Real Estate Syndications
- Qualify: Sunage Equity Capital requires investors to be accredited based on SEC rules.
- Vet the property: We vet the asset based on strict criteria designed to reduce risks and maximize profits. As an investor, you must vet the deal to ensure it fits within your long-term financial objectives and income goals.
- Schedule a call with Francis Aniekwensi to discuss your interest and the next steps to invest with Sunage Equity Capital. (Link to schedule a call)
Participating in real estate syndications allows you to build wealth passively. You are investing in an experienced team that works to identify properties with above-average upside potential and the ability to pay monthly or quarterly distributions within a year of acquisition.