REIT vs. Deal Syndication

[Andy Gross]

I've been listening to Michael Blank's podcast after he was a guest on the BP podcast, and he talked about deal syndication. I think I understand the concept of syndicating a deal, but how is that different than forming a REIT? I know a REIT has to have 100+ shareholders, and a syndicator can do a deal with 1 or 2 investors. Is it accurate to say that a REIT operates like a holding company, and that investors have invested in a pool of funds rather than individual properties? Is it possible to make the leap from syndicated deal to REIT? How so? I ask because I am trying to wrap my head around these concepts, and my research hasn't yielded the proper framework yet.

[Pat Marco]

Setting up your own syndication requires experience in drafting the right business plan and PPM (private Placement Memorandum). You will need to have a good lawyer who can do the legal work for you and file your fund with the SEC. Costs vary from $25K to $70K, it depends on your offering and what work is needed. Then you have to know how to raise capital, and what do to deploy it safely and profitably.  remember, you have to manage the fund. 

It is very well worth it and it is your first real step into the big game of tens of millions in real estate transactions. Eventually you can issue your own private REIT and then maybe a public one.

There are a couple of syndication companies out there that allow you to co-syndicate to start in the business. You can join them, for a flat fee and within a week you would be under their expansion rules of the SEC to start raising capital and co-manage the fund. In my opinion, it is the best way to ease your career into the big game because they offer a true apprenticeship while you build instant credibility as a Fund Manager with much lower risk and a lot less hassles.

I am in the process of reviewing one of these companies right now and I like what I see because they will even pay me for co-managing!