An Example Real Estate Syndication:

[Justin Goodin]

Okay, so you’re interested, but you’re still like, “Is this real?” Here’s an example of what a real estate syndication deal would look like.

Let’s say that Jane and John are working together to find an apartment community in Dallas, Texas. Jane lives in Dallas, so she works with real estate brokers in the area to find a great property that meets their criteria. After looking at a bunch of properties, they find one, listed at $10 million.

John takes the lead on the underwriting (i.e., analyzing all the numbers to make sure that the deal will be profitable), and they determine that this property has a ton of potential.

Since Jane and John don’t have enough money to purchase the $10-million property themselves, they decide to put together a real estate syndication offering. They create the business plan and investment summary for prospective investors and work with a syndication attorney to structure the deal.

Then, they start looking for limited partner passive investors who want to invest money into the deal. Each passive investor invests a minimum of $50,000 until they have enough to cover the down payment, as well as the cost of the renovations.

Once the deal closes, Jane works closely with the property management team to improve the property and get the renovations done on budget and on schedule.

During this time, Jane and John send out monthly updates, as well as monthly cash flow distribution checks, to their passive investors.

When the renovations are complete, Jane and John determine that it’s a good time to sell and the property goes for $15 million after just 3 years. Each passive investor receives their original capital plus their split of the profits according to the original deal. In this case, a 70/30 split was agreed upon at the outset of the syndication (70% to investors, 30% to the Jane and John).

At this point, each passive investor has received monthly cashflow checks during the renovation and hold period, plus their initial capital investment back once the property sold, plus their portion of the profit split after the sale...a pretty sweet deal for little-to-no work!