What is the difference between a fund and a syndication?

What is a Fund? Unlike a syndication, you aren’t investing in a single asset, so naturally funds are more diversified. Simultaneously, you’re lowering your risks by spreading capital across multiple assets. Typically, funds are structured as opened (ongoing) or closed (definite date).

What is a good return for a real estate syndication?

Preferred return is also known as a class A share in real estate syndication. Here, the syndicator decides what percentage it’ll be before presenting the deal to investors. Preferred return usually ranges from 5% to 9% and must be paid out to investors before the syndicator takes his part of the returns.

What does it mean to syndicate real estate?


It has been a popular method of financing the purchase and sale of properties in the higher price ranges. The term “syndication” has no precise legal significance. It is a descriptive term for an organization or combination of investors pooling capital for investment in real estate.

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What is the difference between a fund and a syndication? – Related Questions

What are the 3 phases of syndication?

While real estate syndication looks complicated to a newcomer, every syndicate moves through three identifiable phases:
  • Origination. Find the asset, perform due diligence, close the deal.
  • Operation. Execute the short-term and long-term business plan.
  • Liquidation. Sell or refinance the asset to cash out.

Are real estate syndications risky?

One of the risks of real estate syndication investments is that you may need to exit the investment early. This could be for a variety of reasons, such as personal financial difficulties, changes in the market, or problems with the property itself. If this happens, you may wind up in a bind.

How does a property syndicate work?

It consists of a group of investors who, individually, would not have sufficient capital to invest in commercial real estate. By pooling funds together, the commercial property syndicate can acquire a larger more valuable property with better income return and capital growth potential.

How does Syndication make money?

#1 Acquisition Fee

The first primary way that a multi-family syndicator makes money is with an acquisition fee and refinance fee. The acquisition amount compensates the syndicator for their make money time for putting the entire syndication deal together, from start to close.

What is the difference between a REIT and a syndicate?

A syndication is a company built by the sponsor to buy a specific property. On the other hand, a REIT is a company that invests in a variety of real estate projects. REITs almost always have multiple projects, and as an investor, you may not have visibility into exactly where your investment is going.

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What does it mean to syndicate a deal?

A syndicate is a temporary alliance formed by professionals to handle a large transaction that would be impossible to execute individually. By forming a syndicate, members can pool their resources together, and share in both the risks and the potential for attractive returns.

How do you structure a real estate syndication?

In a real estate syndication deal with an 80/20 split, the passive investors get 80% of the returns across the board, and the general partners get 20% for their role in syndicating real estate. This deal structure can be especially beneficial to passive investors in deals with high returns.

How do you start a real estate syndicate?

Here’s a 10-step checklist on how to start a Real Estate Syndication:
  1. 1 – Select an asset class.
  2. 2 – Obtain training in that area.
  3. 3 – Brand your company.
  4. 4 – Pick a business model.
  5. 5 – Get training on syndication.
  6. 6 – Build your database.
  7. 7 – Analyze deals and make offers.
  8. 8 – Get a property under contract.

How do I syndicate my first real estate deal?

7 Steps To Investing In Your First Real Estate Syndication
  1. Decide whether to invest in real estate, period.
  2. Determine your investing goals.
  3. Find an investment opportunity that fits.
  4. Reserve your spot in the deal.
  5. Review the PPM (private placement memorandum)
  6. Send in your funds.
  7. Celebrate.

Who owns the property in a syndication?

A syndication is just a fancy name for a form of partnership. It’s an ownership of real estate by two sets of partners. Managing Partners (Syndicators) find a distressed property (generally an apartment building), rehab it, stabilize its income and manage it 100%.

What fees can I charge for my real estate syndication business?

In most cases, syndicators will charge a 1 to 3% percent asset management fee based on the gross revenue collected from the property and would be paid out either monthly or annually. In some cases, the asset management fee could be charged per apartment unit.

What is the standard syndication fee?

The typical acquisition fee in a real estate syndication is 1% of the acquisition cost. However, it’s not uncommon to see fees range from 1% up to 3%, depending on the particular deal. Broadly speaking, syndicators can collect their acquisition fees in one of two ways.

How do real estate sponsors make money?

As noted above, real estate sponsors generally earn their income two ways. The first is through fees (detailed below). The second is through a return on their own investment, often referred to as a “promote”.

What is a typical acquisition fee?

The typical commercial property acquisition fee is 1% – 2%. Smaller real estate deals tend to be at the high end of this range while larger deals tend to be at the lower end. For individual investors, the key to evaluating the amount of the acquisition fee is to understand exactly how it is calculated.

How do you avoid acquisition fees?

Acquisition fees can only be avoided if you notice them before you officially sign the contract. If you try to negotiate the acquisition fee with the leasing company and have no luck, consider finding a new offer. Don’t be pressured to accept the lease terms.

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