Real estate syndication brings the power of teamwork into the real estate space, but how successful any syndication company is depends on who’s included in its team. Read on to discover how to build the right team for a real estate syndication.
Real Estate Syndication Brings Investors Together
The concept behind real estate syndication is that people can attain greater achievements together than they’re able to on their own. Like a successful sports franchise, a team with the right people can have more success when investing in real estate. Pooling together knowledge, time, and funds helps everyone involved.
As is the case with any team, the potential that a real estate syndication company has is determined by who is on the team and how qualified they are. The best teams will consist of people who have extensive experience and skills in different areas of real estate.
How to Structure a Real Estate Syndication Company
If you’re ready to get started in the market, you’ll want to make sure you have the best starting lineup possible.
Your primary players will be referred to as “syndicators” or “investors” in the business’ official documents when it incorporates as a limited liability partnership or limited liability corporation (LLC). Syndicators (also known as “sponsors”) are generally the people who find investments and close deals, and sponsors typically provide the financial backing for the investments.
Even if specifics aren’t delineated in incorporating documents, everyone should come to a clear understanding of what each person’s role is. A sports team wins in part because everyone understands and accepts their role. Similarly, a syndication company requires similar clarity, so the company can function efficiently and succeed.
Who Should Be on a Team for Real Estate Syndication
As for who exactly should be on a team for real estate syndication, there are multiple roles to fill and they get much more specific than syndicator and investor. Each of the following roles should have one or more persons assigned to the position.
Real Estate Broker
The real estate broker is the person who actually finds properties that the company invests in. This is often a single person, but it could be multiple people if a company is large or invests in multiple geographic regions.
When choosing a real estate broker, it’s important to select someone who has intimate knowledge of the local real estate market and has a strong network to draw on. This person’s knowledge and connections are what will lead to acquisition deals, and the best brokers are able to source deals from both public listings and off-market opportunities.
The real estate broker may be part of the actual company, or they might be a separate party who brings deals to the company for evaluation. In either case, they fulfill an integral role.
The general partners are the people who manage the operations of the real estate syndication company. This may be a single person in small companies, or it can be a group of people in larger setups. In small companies, the general partners also have other duties.
General partners oversee everything from acquisition to sale, which also includes the management of current holdings. They frequently work with the real estate broker, lender, property manager, and others.
The lender is the person or institution that underwrites a commercial loan for the properties that the team acquired. The lender will complete their own due diligence and underwriting for each loan requested.
The lender is almost always a separate entity, but having a rapport with a particular lender can help streamline operations for a company.
The key principals provide specific financial backing for a company in the event that a company needs additional liquid assets. A lender will often require borrowers to have a certain amount of liquid assets that can be put into properties if the need arises, and key principals provide these financial resources if a company doesn’t have enough itself.
The passive investors are the primary financial investors in a real estate syndication company. Others may put up limited funds, but most of a company’s financial resources come from passive investors who write a check in hopes of getting monthly or quarterly returns.
The property manager is the person or group that physically takes care of a property while it’s owned by a company. This person is responsible for everything from maintenance and repairs to listing vacancies and responding to tenants.
The property manager may be a general operator, or this can be outsourced to a property management company.
Build Your Real Estate Syndication Team
Having a good team of people isn’t a guarantee that a real estate syndication company will succeed, for there are still risks that accompany this type of investing. A solid team is essential if you want to realize profitable returns. If you don’t have a team of people and want to get involved in real estate investing beyond what you can do alone, then start building a team of people using these roles.