The Real Estate Syndication Market- Why the Secret?

The real estate syndication market in the United States was experiencing significant growth and had gained popularity among investors seeking exposure to real estate without the need for direct property ownership.

According to data from the Securities and Exchange Commission (SEC), In 2019 the amount of capital raised through real estate syndications has been substantial. For example, Regulation D offerings, which include many real estate syndications, raised over $1.5 trillion in capital.

So why doesn’t everyone know about these? It took me almost 15yrs.

The Securities Act of 1933 (post-stock market crash) ruled that all public exchange or private sector offerings must be registered with the SEC. As this was cost-prohibited for the private sector, they came up with some exemptions from full registration. However these exemptions created challenges for the operator making the offering and the investor community.

Basics of REG D offerings-

REG D is where Real Estate Syndications are offered as either a 506B or 506C.

506B- Accredited investors and a small number 36 non-accredited investors can participate. But the operator cannot advertise their offering. So, this becomes a word-of-mouth investment.

506C- Accredited investors only but the operator can advertise their offering.

Taking this a little further- Under Regulation D, specifically Rule 506, One of the conditions for relying on Rule 506 is that there must be a pre-existing relationship between the issuer and the investor. The intention is to ensure that the issuer has a reasonable basis to believe that the investor has sufficient knowledge and understanding of the issuer and the investment opportunity.

The rule implies an established and substantive relationship based on prior interactions, discussions, or dealings between the parties.

So in protecting investors the SEC has made access and awareness extremely limited.

As a busy Individual Investor where do you find these opportunities?

Accredited and Non-accredited investors can seek out operators and research their track record, form a relationship and hope they put out an offering that meets their investment objectives. Go to meetups and networking events to connect with other investors or operators to hear about opportunities.

Or connect to groups such as ours that raises capital for operator groups from our network of investors.

As a Broker Dealer Group We provide access to Multifamily, Self-Storage, and Industrial industry operators acquiring assets throughout the sunbelt and into the Midwest. We utilize an independent 3rd party to analyze the business plan and financials of the operator. We also physically view the asset and meet with the operator team. We provide this access and investment data to our investors at no cost to them to make informed decisions about the offerings. As a fully compliant team we solve these challenges for investors and operators.