How commom is real estate syndications?

Question

I was wondering if anyone actually already closed a syndication deal to share their experience, and expectations vs reality. I am looking at a 400k 6 unit building that is positive cash flow. I am 21 years old with excellent credit score with diversified credit types except real estate. I understand i need to get at least 100k for down payment. I dont have that much money. i would like to syndicate and raise that 100k from various investors. And analyzing the cashflow i can certainly give them a 10% annual return on their cash invested. How should i start doing this and do i need to be incorporated to do it? I do have a family real estate LLC business going on if being incorporated is a must, but i want to do this on my own. Can i syndicate this deal with no money down, maybe something as little as 5k? Am i being reasonable? Will investors freak out knowing i am barely putting money down? I want to be the main syndicator meaning i handle all decisions and they only get their return.  thanks!

Luke Miller · Answer

Account Closed Don't worry about spelling. It's important, don't get me wrong, but this is also a space to learn. Your deal probably shouldn't be "syndicated" in the SEC/official sense. To have a lawyer draft all the necessary documents would be around $10k to $30k depending on complexity, which would probably kill the deal. A better option would be joint venturing with a partner that will actively invest along side you. This is probably better for you anyway since you don't have the experience. If it's a good deal, team up with someone who will help you take it down.

Account Closed · Answer

I am sorry if "i" offended your OCD, but i am too busy running and starting multiple businesses in different industries plus being a full time Engineer and options trader to focus on petty details. All that after coming to the US 3 years ago, english isn't my first language home boy. No need to project your insecurities and short coming in life on others by being petty, i thought this was more of an adults forum not Reddit. Big picture thinkers and leaders don't waste time on unnecessary details, they hire people like you to do that for them. I am happy to pay you a couple of hundred bucks to proof read my social media texts big shot. The fact that you focused on picking on punctuation and not content says a lot about you psychologically, life is too short to be miserable big boy, cheer up a little XOXO. You need some Gary Vee in your life lmao.

Account Closed · Answer

@John Corey

We’re in agreement & on the same page.

John Corey · Answer

Like he said. It is a subtle let critical distinction if you want to successfully avoid prosecution by the SEC or a state regulator. Do not make up a 'job' for the cash investor(s) which a judge will think is window dressing. Make the role something important to the business and something the cash investor would be competent at handling.

Charles Carillo · Answer

As already mentioned by @Charles LeMaire and @Lucas Miller - the raise is too small. I was told years back by a syndication attorney that if a raise is under $500k it is not worth the cost and hassle of syndicating; it would be more of a JV (joint venture) deal.

Charles LeMaire · Answer

This deal is likely too small to syndicate.  The legal fees are non trivial.

Charles

John Corey · Answer

Be careful about what you are reading.The phrase earlier was 'active JV'. Any deal with multiple investors could be called X, Y or Z. That does not mean the SEC will not raise objections because of the label you choose to use. Active JV requires the investors have be an active member of the management team. They are not passively investing with the expectation of profit. Having multiple cooks in the kitchen can be highly effective or a nightmare. If some of the early investors stop participating in the management, does that flip the deal from a JV to a syndication even though you wanted to avoid the cost of syndication.Good luck with the venture. Just be very, very careful about how you set it up and run the investment. The more you do to run things, the more you are leaving proof you have a syndication. And a legal syndication requires very specific compliance with the SEC / state processes.

Account Closed · Answer

Account Closed

With the right mindset adversity can be a foundation for massive success!

Your father and my grandfather, among countless others, are examples of this.

Thank you for sharing.

Perhaps your father is the perfect person to JV with. You two certainly know the ropes.

Dino

How commom is real estate syndications?

Most Popular Reply