Question about Syndicating Deals

[Goanar Mar]

I recently read the book “Investing in Real Estate with no and low money down” by Brandon Turner and one question I had about syndications is I know the limited partners generally pay for the down payment and different fees but in terms of the loan itself from the bank do the general partners apply for that as a business loan? Do they need an L.L.C? Also is it common to use syndication to purchase different types of commercial properties like shopping centers and office centers?

[Taylor L.]

Syndication is definitely not a low or no money down strategy. The GPs will be fronting a lot of capital for due diligence, loan fees, legal costs, and many other things. Most of the time the GPs are reimbursed for those costs via the Acquisition fee. But there is still a pretty considerable outlay. 

You might find people here or there who got into syndication without investing much, but for most of us there is a considerable up front investment.

Experienced lenders are all familiar with the setup of typical syndications. They will require the GPs to have some capital in the deal net of acquisition fees, in addition to net worth and liquidity requirements.

Generally speaking, syndicated deals will be structured under LLCs, with two or more share/membership unit classes. GP shares have control rights, LP shares do not.

Syndication can be used to acquire just about anything! I know a guy who is syndicating a private jet!