March 03, 2022

Identify Real Estate Syndication Companies For Your Needs

Real Estate, Real Estate Syndication Companies

Real Estate Syndication CompaniesReal estate syndication companies offer investors a way to invest in real estate of all types without having to handle property management or any of the hands-on approaches required in traditional real estate investments.

At its core, real estate syndication investments are group investments. They take away some of the risks of investing in a solo real estate deal. There are advantages to the real estate syndication investments route, including access to larger opportunities, diversification and more choice, and leverage as well as lower cost of debt. As with any investment, there are risks involved in a syndication. Risks such as losing your money, Losing your passive investor protection and lack of transparency. Understanding these risks and performing your own due diligence prior to investing in a syndication can minimize these risks.

Here, we’ll help you find companies to invest with based on your own needs. Follow our checklist to find the real estate syndication company aligned with your investment portfolio.

 

Real Estate Syndication Companies Investor Checklist

  1. Determine Your Eligibility
  2. Identify the Type of Investment That Fits Your Needs
  3. Consider Current Economical Factors
  4. Find a Syndication Company

 

Step 1: Determine Your Eligibility

Let’s briefly discuss eligibility. To be eligible to invest in real estate syndication, you have to be an accredited investor or have extensive experience investing in large portfolios.

An accredited investor is someone whose income exceeds $200,000 (or $300,000 together with your spouse) for two consecutive years, has a net worth of over $1,000,000, or holds a good-standing series 7, 65, or 82 license.

Alternatively, if you have in-depth knowledge and experience in real estate syndications, you could also be considered an eligible investor or a sophisticated investor.

 

Step 2: Identify the Type of Investment That Fits Your Needs

First, decide on the type of syndication investment that fits your portfolio. There are many ways you can invest through real estate syndication.

Primarily, investment is done through entitlement deals, diversified Single Family Funds (SFR), land development, and other large real estate deals, with the two most common being entitlement deals and Single Family Funds (SFR).

 

Here is an overview of the four types.

  1. Entitlement deals: An entitlement deal is one where you’re able to “tie up” a piece of land. However, it’s much more complex than that. It involves working with government entities and regulatory bodies to get approval to build.
  2. Diversified Single Family Funds (SFR): This is where funds are pooled together. This option gives you the flexibility when you need to buy and hold properties.
  3. Land development: This is exactly what it sounds like; your capital would be invested in a land development project. It could be for any type of commercial development: corporate offices, multi-family homes, shopping plazas, and more.
  4. Other large real estate deals: This encompasses any large real estate investments that aren’t covered in the three types above.

The type of investment you choose is dependent on your investment goals. For example, if you’re looking to invest quickly, entitlement deals probably aren’t a good fit for you because they can take longer periods of time to clear and gain the necessary approvals.

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Step 3: Consider Current Economical Factors

Any time you’re considering a real estate investment deal, you should take into consideration any current economic factors or trends that could affect your ROI both positively and negatively.

 

Property Demand

Despite many setbacks in the last couple of years due to the pandemic, the demand for commercial real estate is increasing again. Forecasts show that the commercial real estate industry is expected to continue growing through 2023.

Look for the specific types of property that are in demand, too. For example, multi-family properties have largely recovered from earlier in the pandemic. There’s an even higher demand for more upgraded and higher-end multi-family units.

This could be a choice for investors looking for ROI opportunities.

 

The Effects of Inflation

Inflation is a consideration to take when you’re thinking about real estate investment. Currently, because of how well the CRE industry is expected to bounce back, forecasts predict that inflation won’t affect the market as much as it has in the past.

It’s important to understand these factors and the overall well-being of the commercial real estate market before you invest any of your funds.

 

Step 4: Find a Real Estate Syndication Company

Now you can start your search for a syndication company, or a syndicator, that suits your needs. Real estate syndicators are the ones responsible for structuring the deal, and as the investor, your role is more passive.

The primary role of the syndicator is to underwrite the deal, find investors, arrange financing, create a business plan, and raise capital.

As the investor, you provide a portion of the capital to the syndicator for the real estate deal. It’s important that the syndication company you choose is experienced in handling large portfolios.

Look for these factors when you’re searching for a real estate syndication company.

  • Experience: A simple Google search will give you insight into how experienced a syndication company is. Look at how long they have been in business and look for successful past projects.
  •  Property holding duration: Typically, syndicators will hold a property for 5-7 years. You have to decide whether you’re comfortable with an investment for this period of time.
  • Investment strategy: The real estate syndication company  establishes the strategy for each investment. Before you close any deals, make sure the strategy in place makes sense for you and aligns with your time horizon, liquidity need for the invested funds and is a risk you can tolerate comfortable.
  • Asset management history: Look through the syndication company’s portfolio to find how well they manage assets, especially in terms of how well their properties generate income for investors.

These are four important factors to consider when you’re thinking about working with a real estate syndication company. Now you have a baseline of information for how to find a real estate syndication investment that fits your investment profile. If you’re ready to dive into real estate syndication, schedule a call with us to get started.

 

 

 

The opinions expressed are those of HUDSONPOINT capital and not those of B. Riley Financial and National Securities Corporation.

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.

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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