5 Common Mistakes You Should Avoid in Real Estate Syndication

Being one of the most preferred and effective ways of raising money, real estate investments, if not properly visualized, can turn out to become a way of wasting rather than multiplying your wealth. Here are the common pitfalls that can derail your journey towards financial success:

Improper Planning

Not having a proper plan in place is the biggest mistake that you can do in real estate syndication. As an investor, you need to plan the amount you want to invest, research the syndicator you wanna work with, and ensure they have a solid portfolio, your exit strategy. You would also want to take a keen look at the regulations defined by the U.S. Securities and Exchange Commission (SEC). Also, when investing, make sure everyone has a consensus about the investment strategy for the property and you all are on the same page.

Skimming on Research

Before investing your hard-earned money in a deal, as an investor it’s important that you are familiar with the entire process and also have researched about things like the terms and conditions.preferred returns, exit strategy, capital stack, etc. Apart from things related to the agreement, you also need to conduct a background check on the property you’re investing in, the area, any specific rules, and regulations, etc.

Not Realizing Its a Passive Investment

It’s important for investors to realize that real estate syndication is a passive investment where it’s the syndicator who is responsible for the day-to-day activities and once you have decided on the syndicator you wanna invest with you don’t need to contact the syndicator daily for updates. Instead, ask them to update you via email or call once every week or month.

Lacking Cash Reserves

It all comes down to proper planning and once you’ve got that in place it’s easy to understand the amount of capital you need to raise and what sources you need to leverage in order to do so. Raising more capital than just having enough is not a sensible way to start, as going back and forth to an investor in case additional capital is required, will create a negative impression on your investors.

Poor Marketing

One of the reasons why real estate syndicators fail to make it big in this industry is that they lack marketing skills, or aren’t willing to invest in it. Think about it, if you aren’t well-positioned in the market and aren’t willing to invest in marketing, investors won’t know about you. With marketing, you are giving compelling reasons to sponsors/investors to trust and stick with you.

With the aforementioned mistakes in real estate syndication, hopefully, you were able to gather the information you need to succeed in this industry.