November 27, 2020

How To Find Good Real Estate Syndication Opportunities

Russ Zalatimo
Written by: Russ Zalatimo
Syndicate and Investment Banking

Real Estate Syndication OpportunitiesReal Estate Syndication Opportunities

Most people think that lucrative real estate investments are exclusively for the wealthy. For a long time, that was true. For most Americans without substantial capital, investing in commercial and/or residential real estate was simply out of the question.

But things are different today. While investing directly in large real estate deals remains challenging, real estate crowdfunding and real estate syndication have made things much easier than they used to be.

Let’s take a look at the difference between real estate crowdfunding and real estate syndications, and how syndications can be a good opportunity for both accredited investors (who have annual incomes over $200,000 or a net worth exceeding $1 million) and non-accredited investors.

 

What is a real estate syndication?

Often confused with real estate investment trusts (REITs), which are more like stocks, a real estate syndication is a real estate investment opportunity open only to a select group of investors handpicked by a syndicator (the person who sources the investment) or invited by other members of the syndicate.

Real estate syndicates aim to help experienced investors pool their capital together in order to fund a large real estate project, such as the construction of a luxury apartment complex. It’s an easy way for well-connected accredited investors to get in on the ground floor of a potentially lucrative real estate deal.

Notably, real estate syndications are also open to non-accredited investors, provided they know a guy who knows a guy. If the syndication is an SEC Reg D 506(b) offering, an unlimited number of accredited investors and up to 35 non-accredited investors can participate—but they have to be invited to the party.

Many real estate syndications are 506(c) offerings, which allow syndicators to advertise their offering to an unlimited number of accredited investors, but at the cost of inviting non-accredited investors. Unfortunately for non-accredited investors, 506(c) offerings are usually more common than 506(b) offerings.

Syndicates most commonly take the form of special-purpose entities (SPEs), such as limited liability companies (LLCs) or limited partnerships (LPs).

 

How is syndication different from real estate crowdfunding?

Real estate syndications are also often confused with real estate crowdfunding, which has become increasingly popular since the Jumpstart Our Business Startups (JOBS) Act was passed in 2012 and updated in 2016.

According to Title III of the JOBS Act, non-accredited investors can participate in real estate crowdfunding projects with a cap on how much capital can be invested within a 12-month period.

If a non-accredited investor makes more than $107,000 per year and has a net worth above that amount, they can invest up to 10% of their income or net worth, whichever is less, up to a maximum of $107,000 in one calendar year.

But if a non-accredited investor makes less than $107,000 per year or has a net worth below that amount, they can invest either 5% of their income or net worth or $2,200 in one calendar year, whichever is greater.

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Are real estate syndications “good” investments?

Unlike real estate crowdfunding, real estate syndications usually offer higher upside potential. For an experienced investor, real estate syndications may be attractive as a way to diversify an otherwise low-risk portfolio.

It’s important to keep in mind, however, that real estate syndication isn’t without its share of risks. Syndications are typically larger projects that require more capital and carry more risk in exchange for a potentially higher reward.

For this reason, members of real estate syndicates work with third-party mitigators—like lawyers, private-placement and mortgage brokers, and others—to ensure that disputes are resolved without conflict and that collaborators are all on the same page.

 

Where to find real estate syndication opportunities

The unprecedented access to both accredited and unaccredited investors provided by the JOBS Act has resulted in many online real estate crowdfunding platforms.

Some of these platforms may only offer real estate syndications for accredited investors, while others may offer real estate syndications and crowdfunding deals for both accredited and non-accredited investors:

 

Crowdfunding platform Accredited investors? Non-accredited investors?
CrowdStreet X
DiversyFund
EquityMultiple X
Fundrise
PeerStreet X

* This is strictly for illustrative purposes. Investors are advised to do their own due diligence to determine investment platforms based on their individual needs and objectives

 

Real estate crowdfunding marketplaces vet investment opportunities before they’re made available to investors, which is a big selling point for anyone who doesn’t have the time or know how to source their own deals.

And in order to build trust and keep investors interested, some crowdfunding platforms only offer what they judge to be the most qualified, promising projects. Fundrise, for example, only shows around 1% of the deals they analyze to their investors.

The downside to these investment platforms is that they are very hands-off and DIY. If you aren’t too sure what you’re doing, there’s little way of knowing whether you’re investing in a great deal, a good deal, or a bad one.

 

Looking to invest in real estate syndications with confidence?

While real estate crowdfunding platforms are a popular option for inexperienced investors looking to get a foot in the door, there are also white-glove firms that take a more hands-on approach to helping their investors access more exclusive deals.

At HUDSONPOINT Capital, we partner with expert financial planners to help knowledgeable investors access real estate syndication opportunities. We have access to opportunities that offer lower initial capital required to invest in promising projects and can handle all the investing on your behalf.

HUDSONPOINT Capital is 100% client-focused and committed to providing qualified investors with personalized, transparent advising. Our goal is to help you meet your investment goals—whatever they may be.

If you’re interested in learning more about the real estate syndication opportunities we have available, please schedule a call and we’ll be in touch shortly.

 

Please note that any investment involves risk including loss of principal. Some risks of investing directly or indirectly in real estate include declining real estate values, changing economic conditions and increasing interest rates. Private Shares are for qualified investors and involve a high degree of risk

This is for informational and educational purposes only and should not be construed as investment advice or an offer or solicitation of any products or services. Opinions are subject to change with market conditions. The views and strategies may not be suitable for all investors and are not intended to be relied on for legal or tax advice.

Securities offered through National Securities Corporation Member FINRA/SIPC

 

 

 

 

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