Does Real Estate Syndication Have A Place For YOU?
If you have followed me for any time at all or read any of my previous blog posts you'll know that I am passionate about real estate and especially real estate syndications.
Some of you probably ask yourself, "why is Chad so stuck on this real estate syndication thing?"
The answer is because I believe that it is one of the best ways to grow wealth for anyone who participates in it. The question that I get a lot is this, "
what is in it for me when it comes to real estate syndications?" This is such a good question and one that I love to answer. Before I give you the answer I want to lay some framework on the 2 major components to a real estate syndication.... First, there is the General Partnership (GP) and then there is the Limited Partnership (LP).
Both are very crucial and important pieces to creating a successful and profitable real estate syndication. In the General Partnership (GP) you have the active real estate team and that is comprised of the acquisition team that goes out and sources the opportunities. There are those that secure the long term financing for the project and carry the legal risk for the project. In addition, you have the individuals that are actively managing the asset to make sure that the business plan is being carried out successfully and that at the end of the day the deal is profitable. The second component is the Limited Partnership (LP) which consists of the investors that bring the capital to the deal. Typically the limited partners only bring the needed down payment (25%-30% of the purchase price) as well an any funds needed for rehabbing the property.
The rest of the funds are secured through a loan with a financial institution that the general partnership puts together. Some might ask which component of the real estate syndication is more important?..... My answer to that is.... both are equally important. You can't have one without the other. If you are not an active real estate investor but have the capital to do a deal... chances are you are not going to spend your time vetting and qualifying deals let alone managing them after the purchase. On the other hand... if you find a good deal but don't have the capital to secure the down payment for a loan on a larger property then you are not going to cross the finish line at closing. Back to the question from earlier.... "what is in it for me when it comes to real estate syndications?" My answer is the same for both the GP and the LP.....
You get to participate in the equity and cashflow of a deal that you wouldn't have been able to participate in on your own which usually means benefiting from larger upside potential and returns without taking on all the risk alone. How cool is that?? That is the biggest reason why I love real estate syndications and why they can be a big part of your investing success. Real estate syndication is a team sport and the stronger your team the more you will win. Cheers! Chad