The new buzz word: Syndication. What is it really?

Apartment syndication is the new buzz in the real estate world. It seems like every niche goes through its phase of extreme popularity where everyone wants to try their hand at it. Flipping houses, wholesaling, house hacking, and now the hot word is syndication. I think just like any of the other strategies anyone can succeed with a lot of persistence, education, and action. By the definition in Joe Fairless’ Best Ever Syndication Book, syndication is a temporary professional financial services alliance formed for the purpose of handling a large apartment transaction that would be hard or impossible for the entities involved to handle individually, which allows companies to pool their resources and share risks and returns. In regards to apartments, a syndication is typically a partnership between General Partners GP's (ie. the syndicator) and limited partners (ie. the passive investors) to acquire, manage, and sell an apartment community while sharing in the profits. Wow, that’s a mouthful; so lets break it down a little, and then we can get into the benefits.

“A temporary professional financial services alliance formed” Usually done through a Limited Liability Corporation (LLC), this form of business is created with the sole purpose of being the purchaser/holder for the apartment complex itself. The LLC will be created by the syndicator before the purchase is made.

“…For the purpose of handling a large apartment transaction that would be hard or impossible for the entities involved to handle individually, which allows companies to pool their resources and share risks and returns.” Why do REITS, banks, and extremely wealthy individuals purchase multifamily communities and other large commercial real estate? Because it is one of the most lucrative, secure, and tax advantageous investment class out there. So why shouldn’t the individual investor that isn’t’ quite to that level yet get to take part in this amazing investment. Well that is what syndication has accomplished.

“…In regards to apartments, a syndication is typically a partnership between General Partners GP's (ie. the syndicator) and limited partners (ie. the passive investors) to acquire, manage, and sell an apartment community while sharing in the profits.” There are two takeaways you can get from this section. 1) In the syndication world the syndicator can also be called sponsor and GP and the investors are usually referred to as LPs. The reason this is important, is that when you are getting into syndication whether as an aspiring syndicator or a passive investor looking for a strong sponsor to invest with you will need to know the lingo. When having conversations with brokers, owners, and fellow investors often times these small terms will get thrown in and you can instantly be lost in the conversation and not understand what is happening. I know, because it happened to me when I started out. 2) The roles of the GP and LPs, the general partners acquire and execute the business plan, while the limited partners provide the majority of the capital for the purchase.

Obviously this is syndication from 10,000 feet above, but hopefully it gives you a good understanding of the basics of it and you can continue your education from here.

Book recommendation Alert! Another week of multiple recommendations, because there are two books that I think fit perfectly. 1) Joe Fairless – Best Ever Apartment Syndication Book: This is the blueprint for apartment syndication and can truly be followed from the first page to the last page and put you into position to purchase your first apartment community through syndication. 2) Bruce “Apt-Guy” Peterson - Syndicating is a B*TCH: This is for the aspiring syndicators. Most of what you see shows how amazing syndication can be and how much wealth you can create, and its true. I truly believe most everyone can do this with the right dedication and work ethic. But its not easy, not by a long shot. This book breaks down the truths of syndicating and is a great read to make sure that this is something you definitely want to get into.

Questions? Comments? Concerns? Introductions? What makes you happy?

Everything is welcome here and I am happy to help in any way I can!

Tyler Lynn