Buying Into Investor Group LLC

[Mark S.]

Would you ever consider putting up money to invest in an LLC where there are other investors doing the same thing (who you don't personally know)?

I've recently been made aware of a group that essentially puts investors together based on their investment goals, available capital for investment, etc. The group invests alongside the other investors and takes care of property management. Basically, you'd be "buying into" the LLC as one of several individual investors. Property would be purchased for cash. LLC shares could later be sold, but group has right of first refusal.

Lots of questions still to be answered, but wanted to get everyone's feedback to see your thoughts and whether or not anyone has successfully (or unsuccessfully) done this.

[Michael Sjogren]

@Mark S. What you are referring to is a syndication. Experienced sponsors provide investors with an opportunity invest passively alongside the experts. Sponsors and investors pool their funds into an LLC which purchases the property. Generally, there is a preferred return, meaning the investors get paid before the sponsor takes anything. Investors receive quarterly payouts from the profits, receive regular updates and financial statements and receive an allocation of the depreciation in their K1 at the end of the year. If you are looking to grow your portfolio passively OR learn how to be an active investor, I think syndication is one of the best ways to invest. The key part is to due your homework on the sponsor and make sure they have a long-standing track record of performance. I'm happy to answer any questions you have on the specifics of how a syndicate works or how to properly vet a sponsor.