Real Estate Syndication vs REIT

Entering the real estate world is truly the best idea to start increasing your wealth and develop a luxury life for yourself or your whole family. You reasonably don’t want to miss out on the opportunity to live your life at its best, but you might also really don’t want to get involved in all those landlord troubles like fixing other people’s problems, collecting rent money, looking for tenants, etc.

Fortunately becoming a landlord isn’t the only way of investing in real estate and actually, there are several ways of doing it. For example, the main topics of this blog post - apartment syndication and REIT.

Both of them are the kinds of passive investing, meaning that they don’t require any of your involvement in the management and are great for investors who want to own a share of a building, that they wouldn’t be able to purchase on their own, for example, huge shopping malls or high office buildings. And even though it sounds exciting, there is still more you should learn about them before deciding where you prefer to invest in.

Investing in REIT:

REIT (Real Estate Investment Trust) is a group of investors who put their capital into the company that later manages the property of their choice and afterward pays investors either monthly or with a quarterly dividend check.

When investing in REIT, you absolutely have no control over properties and you are simply earning passive income from them, which clearly means that you will successfully avoid all the landlord hassles mentioned above while still earning cash from the property.

But obviously not everything is as smooth as it might seem.

Every investment comes with some risks and in the case of REIT, you are risking your whole capital. I don’t want to scare you off, but REIT is basically part of the stock market where the prices of your shares simply depend on the actual prices on the market, you can’t possibly grow their value, but the opposite - they might lose its worth completely and you might be forced to sell it for cheap, losing a profit or not be able to sell it at all.

Investing in apartment syndication:

Here we have got apartment syndications, pretty similar, but definitely not the same. Simply put, it is when numerous investors pool their money together to purchase a building and develop a business plan for it.

Oppositely from the REIT, in apartment syndications you know where you are investing your capital - the exact location of the building, the number of its units, the business plan of it as well as all the financial aspects of the building.

Here is how it works:

The syndicator, also known as GP or general partner is an owner of a partnership that is actively managing the business and is responsible for collecting money from passive investors (like yourself). In some cases, a general partnership may include multiple individuals, all responsible for different aspects of the business.

In apartment syndications, passive investors are referred to as limited partners or simply LP. They have absolutely no responsibilities over apartment management and their only requirement is investing their money into the building.

To sum up, you are purchasing a building together with other investors and are generating profit from it, without any work done.

Investing in apartment syndications is a great idea if you are looking for an extra income that doesn’t require any of your time and energy, or even if you are just starting your business in real estate and are scared to join the market alone.