The Step-by-Step Guide to Close a Real Estate Syndication Deal Faster
Real estate syndication is among the most preferred investment options available today. It has been proven that syndication deals are recession-proof. However, as an investor or aspiring syndicator interested in breaking into syndication deals, you must be aware of the process behind closing a real estate syndication deal.
Let’s go through a step-by-step guide, taking a glance at various procedures and elements to close syndication deals, emphasizing how they can be completed faster.
Here are the crucial steps in closing real estate syndication deals:
Finding Syndication Deals
Real estate syndicators need to apply a multidimensional approach to find the best syndication deals. Syndicators rely on various online and offline sources, such as online real estate syndication forums, associations, real estate professionals, advertising their business, and more.
Escrow Account
Escrow is a third-party entity that secures the deal-related documents and capital unless everything settles down properly. Syndicators can ensure that no malicious acts are harming the process of closing a deal. This trusted and unbiased third party retains the documents and money and hands it over to the new owner when instructed.
Due Diligence
Conducting thorough due diligence of the property includes analyzing the physical, financial, and legal condition of the property. Hiring a professional property inspector and a real estate attorney experienced in syndication deals would be crucial at this stage.
Bringing the Property Under Contract
Syndicators bring the syndication deal into contract with the sellers. This step is executed when syndicators are satisfied with the physical condition, legal aspects, and property title. This contract document keeps the property reserved for the particular real estate syndication and explains the deal-specific financial and legal aspects.
Formation of Real Estate Syndication
The most crucial step is to form an LLC or LP abiding by the Federal and state-specific company formation norms. Usually, a real estate syndication would be a Limited Liability Partnership, comprising real estate syndicators as the General Partners and passive investors as Limited Partners.
In this step, the syndicators also file any necessary regulations to the Securities and Exchange Commission (SEC). The SEC is the government authority governing the process.
Acquiring Finance
The real estate syndication then seeks a loan for acquiring the property. The syndicators would be responsible for the loan agreement and the subsequent repayments, securities, and any legal suit concerned to the property. Usually, it takes 30 to 45 working days to process such loans.
Finding Potential Investors
The syndicators may be investing a considerable percentage of the total property cost. They need to pool financial resources from like-minded investors to materialize the deal. Here, real estate syndication comes into play. Syndicators can create their customized investor portal adopting a real estate syndication platform and attract investors.
Real estate syndication software accelerates the overall marketing process. It helps syndicators close syndication deals faster by effectively communicating with the potential investors and building trust. It is beyond just a CRM, as it helps automate the workflow.
Fundraising
This is the most crucial step in closing syndication deals, as sufficient capital must be raised for the down payment for the loan and closing charges. Syndicators can perform online fundraising swiftly by adopting a real estate syndication platform.
The real estate syndication platform offers various features useful to raise funds faster, such as taking soft commitments from investors, ACH payments to transfer capital and distributions, and a robust dashboard that showcases the real-time details of all transactions.
Negotiations
Syndicators negotiate the real estate syndication deal with the sellers to get additional discounts, add-ons to the property, and other gains. By this step, syndicators would have the financial capability to get the loan finalized from the lenders and acquire the property.
Closing Syndication Deal
Finally, a real estate syndication deal is closed following the norms for the transfer of ownership, evacuation if required, and other formalities.
Notably, the investors own a stake in the equity, based on their contribution to the real estate syndication.
Syndicators are supposed to administer the investments, property, and legal aspects to run the syndication. Syndicators are responsible for running the syndication as a profit-making entity. They also need to distribute mutually agreed profit shares to the investors regularly.
The actual duration required to close a real estate syndication deal may vary based on the time to fulfill the initial formalities to form syndication, find the suitable property, and raise adequate funds to acquire the property.
The Bottom Line
The step-by-step guide to closing a real estate syndication deal faster explains the crucial stages in the process. The article also highlights real estate syndication software to help syndicators close the syndication deals more quickly. We hope that the guide helps you understand the procedure and encourages you to adopt the best real estate syndication software at the earliest.
