What is a syndication?

Question

What if a syndication and what are some factors that play into it? What do the general partners and what do the limited partners do? What types of syndications are there?

Brock Mogensen · Answer

There is a lot in this question and likely too much to explain here.  You can do some Googling and Youtube to get an idea of how these deals are structured.  As @Aaryan Patel mentioned - Joe Fairless's book on syndication is the best resource for going deep on how these deals work. It's not a space you can just breeze into for sure, it requires some time to learn..especially because you will be investing with other people's money.

Aaryan Patel · Answer

I reccommend reading Joe Fairless's book on apartment syndications

Chris Seveney · Answer

@Dev Patel

Every aspect of real estate can be syndicated.

Recommend reading here on BP, watch YouTube and google real estate syndications.

Marina Wong · Answer

Brian Burke is a good syndicator though I have not invested with him. I heard good things about him. When I started doing syndication, BP did not have much info. Syndication has grown so much in the last 4-5 years thanks to many equity raisers using YouTube as their platform to help people understand syndication. I still feel YouTube and syndication summits are better ways to learn about syndicators and various projects. The economic environment recently changed a lot. If you have not invested in syndication yet, I suggest you spend at least 3-6 months learning about this investment. There are quite a few technical jargons you want to understand well in order to decide what is a what is not a good deal. Current debt market has changed, you need to be able to understand what the risks are with each debt instrument. Once you can evaluate various deals, try to diversify geographically as well as asset class (Multifamily, self storage, mobile home parks, RV parks, BTR etc) and sponsors. Just remember not to put all your nest eggs in one basket. Funds are usually safer than single projects, of course only with operators who have had success in single projects. Funds might have slightly lower return than some projects. Learn what a typical cash flow is in hot market vs in markets like OH and IN for eg. I find that most multifamily operators/syndicators invest in landlord friendly states but not necessarily mobile home park operators. Look up Dan Handford on YouTube for some educational material. There are also tons of Podcasts on multifamily and syndications.

As someone who owns properties and invest in syndications, I do like syndications but of course I have heard a lot of horror stories too. It's a good way to invest without spending too much time. You do need to spend time interviewing operators and reviewing projects.

Justin Moy · Answer

A syndication is a group of investors that combine their resources (money and/or experience) to purchase larger properties. Most common with commercial properties since the purchase prices are generally much higher.

Think of it this way, if an apartment building costs $10M to purchase and you need 25% down and an additional ~5% in closing cost and other fees, you need to come up with $3M to purchase one property. So instead of you needing $3M to purchase one property, investors (limited partners) can partner with general partners (active investors) and pool together $3M with a minimum investment amount of typically $25k - $50k. So someone doesn't need $3M to invest in apartment buildings but can still get in the game and get some equity.

General partners are the active investors in the deal. We find, underwrite, put in offers, find debt and insurance, pool together the limited partners (passive investors), close the deal, manage the business plan (usually some type of renovation plan), manage the property or manage the property managers, and sell or refinance the property.

Limited partners are 100% passive. They typically wire in their investment by a certain date and in exchange get a % of equity in the deal which means they get a % of rents, tax benefits, and payouts for refinances and sales. Good general partners will update their limited partners usually via email once a month or possibly once a quarter for a stabilized property on the performance of the property.

Colton Hahn · Answer

I will give a 50,000ft view of a syndication. There are a lot more details than I am providing but this is the basics.

Generally a syndication is a group of investors that pool their money together to purchase properties or some sort of asset. This is usually done in a limited partnership, with a General Partner and Limited Partners. General Partners are the ones that run the deal and are actively making decisions. Limited Partners are passive investors and receive benefits from the investment in the form of distributions or when the project sells they get a cut of the profits, provided there are profits or even both distributions and a cut of the profits at the end. The LP does not make day to day decisions in the deal.

Hope that helps!

Nathan Gesner · Answer

Here's a podcast that discusses syndication: https://www.biggerpockets.com/...

Here's a short blog: https://www.biggerpockets.com/...

Brian Burke has a book on syndications in the Biggerpockets bookstore.

What is a syndication?

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