Real estate syndication can be an attractive way for investors to gain exposure to investment property. Syndications provide opportunities to invest in larger commercial properties that generate income and significant profits through the expertise of experienced real estate firms. However, not all syndication deals are created equal. Investors should conduct thorough research to find real estate syndication opportunities that meet their investment goals.
Don’t Be Limited By Location
One of the benefits of real estate syndication is the ability to invest in properties located virtually anywhere. Syndicators frequently source deals across the country and internationally. While locally-sourced deals may seem more appealing, the most attractive opportunities could be located in other markets. Investors should avoid geographic constraints and consider deals based solely on their potential for returns, rather than location alone. The syndicator’s network and knowledge of markets and properties in cities across the world could open up more possibilities.
Find Deals That Fit Your Strategy
Investors should have a clear investment strategy before evaluating specific syndication deals. Some considerations include:
- Risk tolerance: Consider how much risk exposure is appropriate based on your financial situation and investment objectives. Deals involving properties at higher risk of decreased occupancy or valuations may not be suitable if aiming to minimize risk.
- Return goals: Look for deals expected to generate sufficient returns to meet your needs. Analyze the experience of the syndicator to determine if their projections for rental income, property appreciation, and overall returns are realistic and achievable.
- Asset class preferences: Focus on deals involving property types and asset classes that align with your interests and that you understand well. For example, stick to office buildings if that is your area of expertise and interest.
- Management approach: Seek syndicators with a management approach and philosophy you support. Some syndicators take an active role in maximizing returns through renovations and lease negotiations while others are more passive managers.
- Investment timeline: Consider the duration of the syndication deal and how long your capital will be invested. Make sure the terms align with your liquidity needs and investment timeline. Shorter-term deals typically 1-3 years may be preferred to exit within a short window.
Vet The Syndication In Detail
Once you find deals that meet your broad investment criteria, comprehensively analyze the specifics to identify any red flags before investing. Closely review the offering private placement memorandum or PPM to understand the terms, fees, risks, and other deal parameters. Also, assess the experience and track record of the sponsor syndicator to determine if they have a proven history of success with similar properties and deals.
Network And Connect With Multiple Syndicators
The most promising real estate syndication opportunities are often found through networking and connecting with several experienced syndicators. Consider building relationships with various reputable real estate firms that offer syndication deals across different property types, markets, and risk levels. Staying in regular contact with these syndicators about new and upcoming deals will position you to compare and evaluate opportunities that may be a strong match before they become broadly marketed or even “sold out”.
Strong relationships also mean the syndicators understand your criteria, preferences, and past interests. They will know the specific types of deals to approach you with, which can save time evaluating offerings that do not align with your needs. With multiple syndicators in their network, investors will have a choice of opportunities to consider and can pursue the single option most appealing based on their analysis.
To Wrap Up
While real estate syndication offers a path to investing in property you could not access on your own, not all deals are worth pursuing. But by taking a broad geographical scope, determining clear investment criteria, thoroughly vetting deals, and cultivating relationships with experienced syndicators, real estate investors will be primed to find the best syndication opportunities and tap into their full return potential.
