How To Syndicate Your First Real Estate Deal
To start your career as a real estate syndicator, you will need to take care of various aspects of the real estate deals, including finding a suitable deal, finding potential investors, and running the real estate syndication as a profit-making business in the long run.
If you have already invested in real estate syndication, you may know how the overall process runs. As a beginner, you need to juggle various skills and follow the best management practices. Understanding the steps to syndicate real estate deals is very crucial.
Here are some significant steps to syndicate your first real estate deal:
Develop a Network of Best Professionals
To syndicate real estate deals as a beginner, you should try to be a known face in the real estate industry. Develop ties with different real estate professionals, such as brokers, agents, investment advisors, investment managers, millennial investors, realtors, and more.
Your rapport and good contacts will help you throughout the journey of forming your first real estate syndication. You may find good deals, great investors to work with, and good tenants to rent a space in your property through these relationships.
Identify Profitable Real Estate Deals
Finding a profitable real estate deal is the most critical aspect to form a real estate syndication for the first time. The other crucial operations go around this property. It is essential to understand the types of real estate syndication before you decide to syndicate a real estate deal:
Real Estate Syndications focus on different property classes, such as:
- Multifamily Real Estate like Residential Apartments
- Self Storage Spaces that are rented to multiple tenants
- Mobile Home Parks
- Student Housing
- Warehouses
- Hotels
- Commercial Complexes
To syndicate real estate deals, you need to rely on multiple sources, like your contacts in the real estate industry, online sources like listing sites, foreclosure deals due to debts or relocation, and much more. Beginners can start small to deal with manageable assets and investments.
Find Potential Investors
Real estate syndication is formed by pooling the financial resources of multiple investors. Therefore, searching for potential, like-minded investors is a crucial part of this game. Beginners should adopt a multifaceted marketing strategy to spread the word about the expertise to syndicate real estate deals.
Real estate syndication software can help you create your investor portal and brand identity as a real estate syndicator. You can manage your communication with your potential investors effectively and efficiently through the platform. Adopting such technology-driven solutions will help you convert prospects into actual investors faster.
Legalities to Form a Real Estate Syndication
Complying with the SEC norms and forming an LLC are crucial legal formalities to syndicate real estate deals. You will be the General Partner in the real estate syndication structure and take care of the overall administration of the investments, debts, distributions, marketing your property, and making crucial decisions.
Opt for Finance
To finalize the real estate deals you find, you need to opt for mortgages and other kinds of loans. Being the head of the real estate syndication, you will sign loan agreements with the banks or other institutional lenders. Similarly, you will be responsible for the loan throughout its lifecycle.
Pool Financial Resources Through Crowdfunding
Converting your potential investors into actual investors is a significant process for fundraising. Usually, you take soft commitments from serious investors. The investor pays a small token advance and commits the date for the rest of the agreed investment.
Through real estate syndication software, you can accelerate the conversion process. You can effectively communicate with your potential investors and disclose your strategies aligning with their financial goals. The best real estate syndication software offers an ACH payments feature. You can get the investments through electronic payment transfer.
Close the Real Estate Deals
When you accumulate enough funds for the down payment of the loan you apply for and the closing formalities, you need to acquire the property as soon as possible. The property will be owned by the real estate syndication, and all the investors will own equity as per their share of investment.
Property Management
As a real estate syndicator, you can take up renovations for value addition of the property, look after the maintenance of the building, find tenants, collect rents, and distribute the profit shares among your fellow investors regularly. You can also outsource the property management task to a third-party agency specializing in these operations.
Distributions
Every investor investing in your real estate syndication will have an agreement with you before investing. To syndicate real estate deals, you must strategize and execute the distributions precisely. The investors receive their profit share based on their share in the total investment and the distribution structure you create and share with them in the beginning.
With the help of real estate syndication software, you can manage this process with the utmost transparency and accuracy. Investors can glance at their profit shares they have received and the initial investments they have made through one click. Similarly, you get the real-time financial statements and details of every investor through a simple dashboard.
Exit Plan
Usually, the holding period of a real estate syndication may vary from 5 to 10 years. You can sell out the property to another buyer at a better price after this period. Investors thus receive profit shares from the cash flow and the equity gains also. You need to have a good exit plan. Some room to alter your strategies as per the market condition is also essential.
The Takeaway
The article discusses the process of syndicating a real estate deal for the first time. We hope that beginners will understand the technicalities and responsibilities to syndicate a real estate deal by reading this article.
Adopting real estate syndication software accelerates the process and helps you synchronize and automate your operations. To succeed as a real estate syndicator, switch to the best real estate syndication software from the beginning.
