The real estate business can be very profitable, but to start, you’ll need a proven track record of raising capital. So, how do you raise capital for real estate syndication? Here are some tips:
Before syndicating, it’s vital to examine the common real estate syndication fees associated with it. Most commonly, you’ll come across some of these fees:
Real estate syndication waterfalls represent a financial structure that describes how returns on an investment are distributed to investors. This structure is conveniently named “waterfalls” because the cash flows down in different increments to the various investors and the developer.
In most syndication deals, these structures are simple. They can be arranged in numerous ways, depending on your agreement and most commonly involve:
Crowdfunding and syndicating are two terms that are often used interchangeably, even though they don’t necessarily mean the same thing.
Real estate syndicating is the process of forming an alliance of investors to invest in real estate opportunities. By pooling their resources, the investors can be a part of deals that they may not be able to afford on their own. Usually, the sponsor makes all the decisions while investors have a more passive role.
In contrast, real estate crowdfunding is a way of finding investors willing to syndicate. Individuals and companies use different channels to seek investors that want to pool together financing and invest in a property. Currently, this is usually done through specialized online portals.
Investing in real estate syndication has become more and more popular in the last few years. However, the decision to invest in a property shouldn’t be made lightly. Investors should pay attention to several factors before deciding to invest in a real estate syndication. Some of them are:
A syndication itself, is an investment into an entity, typically a limited liability company (LLC). While many new syndicators form the syndication LLC or corporation themselves, there are decisions along the way and steps that should be taken.
If you’ve found a property that seems like a great opportunity, it’s essential not to rush the decision to invest but consult with a real estate syndication lawyer first. Namely, real estate syndications come with numerous legal and regulatory issues you may not expect. If you want to ensure you’re protected every step of the process, hiring a lawyer is necessary.
First, lawyers will draft and revise all the paperwork to ensure everything’s in order and there is no conflicting information. They ensure every document is created according to the law. Moreover, lawyers will help you structure the syndication properly and ensure every syndicator is paid out adequate compensation. They also help maximize tax benefits, take advantage of potential exemptions, file correct documentation, etc. Essentially, syndication attorneys ensure the smooth operation of every real estate syndication.
Contact our syndication and private placement memorandum law firm today!