How people structure a syndication

Question

Todd Dexheimer · Answer

Would you be both on the general partnership side? There is not much for detail in your post, so you could structure it a lot of ways. If you are both doing some of the day to day you could just be partners and split it 50/50 or 60/40 or however. Your attorney would set up a multi-member LLC with the member control agreement, etc. The other way is a full syndication, where you would want to get a securities attorney involved.

Good books: Gene Trowbridge - I's a whole new Business

There are several blog articles on BP about syndication. Just search that in the menu.

Good books: Gene Trowbridge - I's a whole new Business

There are several blog articles on BP about syndication. Just search that in the menu.

Jeff Greenberg · Answer

There are many posts related to this issue.  One investor or 100.  If you have full control of the success or failure of the deal and their is an expectation of a profit, your are in the Securities Zone.  Don't make it the twilight zone. Get legal advice.

Ivan Barratt · Answer

@Derek Perez I'm not an attorney but for my first apartment deal (35 units) I too had one investor. His capital received a 7% pref and we split 50/50 after that. It wasn't a full syndication due to our longstanding relationship. We simply had an operating agreement drawn up for our special purpose entity.

Consult your trusted advisors.

All the best!

Jeff Greenberg · Answer

This link will explain.

https://kb.osu.edu/dspace/bitstream/handle/1811/71438/OSLJ_V72N1_0059.pdf

Dominic Dilello · Answer

I have a 96 unit multifamily in Georgia assumable attractive 1st Mortgage will give an 8% preferred return and a 70% ownership which will be around a 15%-20% return, it is 95% occupied with management in place respond for more info

Jeff Greenberg · Answer

JV and are fine as long as there is participation (not just funding) from both parties.  The structure does not matter.

Ask yourself there questions. If all are true, then it is a security and you need to follow SEC regs.

• It is an investment of money
• There is an expectation of profits from the investment
• The investment of money is in a common enterprise
• Any profit comes from the efforts of a promoter or third party

Adam Sheren · Answer

@Derek Perez I agree with @Jeff Greenberg. there are several posts that are PROBABLY correct in their advice as far as being able to avoid the SEC because of the nature of your relationship and the better use of other formats such as a JV. How you structure your deal as far as ownership and payouts is entirely up to you too, but just as you would an investment, due your due diligence on how you make/manage that investment. Best of luck!!

Percy N. · Answer

@Derek Perez, if it is just the 2 of you, this seems more like a standard business joint venture than a traditional syndication which involves real estate as securities being sold to multiple (passive) investors.

The split of the JV would depend on the RISK/Reward ratio for each party.

If this is your first deal and the investor is putting up all the capital, then majority of the risk is on the investor, including loss of capital.

You already have a few good suggested starting points on deal structures. My advice would be to keep it simple and not get hung up on what trips most beginning investors - "I should get most of the profits since I am doing most of the work".

How people structure a syndication

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