What is a syndication deal?

Question

Hi, I'm new to the investing world but have been interested and learning for a few years. I am primarily considering small multi-family as my initial investment niche and BRRRR as my strategy, but am open to other ideas as I an pretty much a blank slate as of now. I live in the Philadelphia suburbs and am primarily interested in investing nearby.

I've heard about doing syndication deals as one investment strategy but I don't know what that is. What is a syndication?

Scott Passman · Answer

@Ben Feder Syndications are when a group of people collectively invest their money together in a deal.  Typically there will be a primary operator(s) who are actually running the deal along with other investors who are putting their money into it with the expectation of a certain return.  Syndicated deals are primarily done for large commercial or multifamily investments because of the large amounts of money needed to properly execute.  They can certainly be a great way to start as a way to put your money to work with an experienced operator and potentially earn a good return on your money.  The key to investing in a syndication is to find the right operator to invest in who is trustworthy and has a proven track record of success. While the deal itself is important, in syndications you are primarily betting "on the jockey and not the horse", so to say.

Account Closed · Answer

@Ben Feder  You've got some great explanations on here so I won't dive into what a syndication is, but wanted to let you know that I was in the same boat when I first started looking at Multifamily investing.  We were looking at 6-10 units to start out and actually bought a brownstone in Chicago.  We quickly realized that we weren't able to "go big" quickly by sinking a lot of our capital into these smaller properties.  We did quite a bit of research and discovered syndication- found a mentor (Mark Kenney) and we're closing in a couple of weeks on our first deal- 173 units. It is certainly a team sport and finding the right people with the right skill sets is crucial to your success.  We could not have done it without Mark and other key players in our group who came on board to help raise capital, analyze the deal, sign on the loan, etc.  Happy to chat if you have more questions! Send me a PM.  Hope this is helpful.

John Corey · Answer

Ben,

Read the content at the following link. It will explain the Howey Test. https://www.investopedia.com/terms/h/howey-test.asp

So, a syndication is a way to legally pool funds if you follow the state and SEC regulations. You either register or are exempt from registration. There are specific things you can and can not do. For the most part, you can not raise funds from others without running into the laws around securities. Syndications are one solution which can stay compliant.

Steve K. · Answer

one of the best sources of info

https://joefairless.com/passiv...

Alina Trigub · Answer

@Ben Feder

I think you're at a point where a detailed research should be done as to which strategy fits your personal case best. Once you figure it out, you can put all your time into educating yourself on the strategy and taking action. Here's some guidance for you with the next steps: https://www.biggerpockets.com/member-blogs/10850/86621-six-steps-approach-to-getting-started-in-real-estate

Ben Feder · Answer

@Scott Passman thanks!

What is a syndication deal?

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