When is the average that cash flow payouts begins with syndication?

Question

When is the average time period that a syndication will start paying you returns on your investment? Immediately, 12 months, 18 months etc.

Allan Smith · Answer

They syndication with a stable asset would be right away. A lot of them require a value add with lots of work to be done, so I could see 12 to 18 months being very realistic.

Colton Hahn · Answer

They vary, depends on the offering and the strategy. A lot of companies, us included, have the option to invest and have that cash flow begin the following month of deployment. Others are more delayed as they are hoping to rehab and stabilize before making distributions. It is important to understand the offering/plan. The rehab/stabilize strategy could yield a huge return, its just more delayed

Gino Barbaro · Answer

@John B.

It depends on the market cycle. A few years back, when you could buy a deal that cash flowed day one 10% COC, then you could expect distributions quickly. As cap rates compressed and pricing went up, the ability to distribute profit was more difficult. As we are beginning to leave this seller's market and hopefully pricing drops, quicker distributions should be coming back.

There are other variables, such as the experience of the syndication group, the size and time it takes to reposition a property, the type of deal being invested in.

Gino

Brock Mogensen · Answer

Depends on the deal, but if it is a stable cashflowing deal, then generally within 3 month of closing, as most operators distribute quarterly.

Justin Moy · Answer

Like the others have said, it depends on the deal but most of the time a value add deal won't pay cash flow distributions for a bit of time (12 months is a realistic timeframe for most).

One thing to also consider is if there are returns up front, is it a return of capital or a return on capital. It's not uncommon for operators big and small to raise additional cash from investors to use for distributions while the property stabilizes. This gives a 'distribution' but really is a distribution of your own cash.

Some deals will also offer a preferred return but if you look at the cash flow distributions they don't project to really be 'caught up' on that cash return for a few years or even will catch you up on the back end at sale, so even if you're getting a 5% pref, you may not actually get 5% every year, you might get a majority of it in your catch up payout at sale.

Dan Crosby · Answer

Not all “syndicates” are equal. Our funds are performing just fine. Perhaps one of the issues is people behind the fund not doing the greatest job unwitting the markets before buying.

Chris Seveney · Answer

@V.G Jason

Real estate is never passive.

Syndications are getting crushed right now because All your eggs are in one basket and yes they were great last five years but let’s see what happens next five.

As someone a lot smarter than me said, have you ever invested in a stock and lost everything and the answer was yes - have you ever invested in a mutual fund and lost it all - and the answer is no.

Related to real estate / that is why I invest I. Funds not syndications

V.G Jason · Answer

I have one that paid the very next month, the other that has paused me until Q2 '24. I wouldn't do syndications again, simply cause I rather own the property outright. I did it cause I wanted the passive income. Real estate is not passive at all, infact, complete opposite.

Taylor L. · Answer

As others have said, it depends. BUT..

If the deal is a typical value add play on an existing property, but won't produce cash flow for more than a year that may be a sign that it's not a good deal and that the numbers are too tight. I prefer cash flows starting within the first Quarter.

Chris Seveney · Answer

@John B.

Depends, which is why it’s important to read the docs.

Also why sometimes better to look at funds as most funds begin paying day 1.

When is the average that cash flow payouts begins with syndication?

When is the average that cash flow payouts begins with syndication?

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