7 Steps to investing in your first real estate syndication

Learn the 7 Easy Steps to Investing In Your First Real Estate Syndication

For the vast majority of people, buying a home can be fairly straightforward, but when it comes to real estate syndications, that can be a bit more intimidating.

You’ve made the decision to buy a house, you narrow down prime neighborhoods you would like to live, the features of the home you “must-have” vs “would-like-to-have”, you speak with a mortgage broker to see what you will qualify for, you get your pre-approval letter and get busy viewing properties to ultimately find your dream home. Easy – right?

Additionally, the “fix and flip” home buying strategy of finding a fixer-upper, funding the project, rehabbing the property, and turning it for a profit is also easy to understand. Likewise, the buy-and-hold model of real estate investing to purchase a rental property and rent out the property for a profit is straightforward as well.

It can get a little bit more technical when you’re talking about real estate syndication investments that are essentially group investments where investors pool their resources (capital, expertise, knowledge) to purchase a large commercial project that would otherwise be virtually impossible to purchase individually. The group investment – made with sometimes dozens of investors – is a way to scale up and have much better purchasing power.

In this article, we’ll walk you through the process of passively investing in your first real estate syndication so that you have a full understanding of the steps that are involved.

Timelines may change when investing in different real estate syndications, but overall the process will largely be the same.

1. First step – and this one is most critical – decide if real estate investing is for you – first and foremost

2. Determine what your investment goals are and the timelines you want for those goals

3. Locate an investment opportunity that meets your investment goals

4. Reserve your soft commit in the deal

5. Review the sponsor’s PPM (private placement memorandum) for the deal

6. Send your funds for the investment

7. Sit back and enjoy your passive returns

Step #1 – Decide If Real Estate Investing Is For You – First & Foremost.

This is the most critical step in the process. Real estate investing has to resonate with you or this investment strategy of real estate syndications just won’t be a good fit if you’re not totally on board.  There are many other investments you could pursue like tech start-ups, gold, or various stocks and bonds.

This is a decision that only you can make. You’ll want to review your overall portfolio, assess your goals and decide whether real estate investing is a good fit to help you meet your goals.

I can tell you about how I started in real estate investing. It has been almost 20 years since I began investing back in 2003.

For me, my husband I started with rehabbing and flipping houses, then we started acquiring properties and renting them out. We actually enjoyed doing the renovations ourselves.

Through almost 20 years of investing we eventually really took to the idea of earning passive income and how powerful it was to be able to have the freedom that passive income would allow. That’s when we discovered real estate syndications as a way to achieve steady passive income.

I’m here to say that not every investment turned out to be a home run. Some investments were much better than others, as to be expected. But I am very happy that we made each of the investments we did because they each had value. Real estate has taught us about how to leverage capital, about what kind of tax advantages we could receive, about the enormous benefits of passive income, and most importantly the power of community. Real estate, for us, has been a critical part of our path forward in attaining personal wealth and legacy wealth for ourselves and our family.

That said, you will want to decide if real estate investing is right for you.

Step #2 – Determine What Your Investing Goals Are & Your Timelines

What are you looking to get out of real estate investing? Be crystal clear on your goals and how real estate can help you achieve them. Is your goal a long-term investment strategy or a short-term investment strategy and what do you want that to look like for you and your family? Is a lump sum of capital important or steady cash flow through distributions or both?  Also, review exactly how much you have to invest both in terms of money and in terms of time?

If you have the time, and being a landlord doesn’t put you off, then it may make sense that you explore buying and holding rental properties to build up capital. On the other hand, if working with contractors or putting in sweat equity into a project floats your boat, then a fix-and-flip project may be ideal for you to build up capital.

If neither of those strategies is your ideal approach to investing then you may want to look further into a real estate syndication investment to achieve both passive income and a lump sum of capital when the asset sells. A real estate syndication allows you to invest your capital alongside other investors with a property manager, an asset manager, and a team of experts at the helm to see to it that the returns are maximized and your investment is as successful as possible.

Step #3 – Locate a Real Estate Investment Opportunity That Fits Your Goals

Ok, so you’ve concluded that real estate syndications would be a good investment fit for your goals. What’s the next step? Well, the next thing you want to do is to find real estate syndication opportunities that will help you meet your goals. There are various types of real estate assets that you can invest in such as apartment communities, mobile home parks, industrial parks, medical office buildings, self-storage facilities, and the list goes on.

Investors have the opportunity to learn more about various investment opportunities through the general partners who are presenting the deals. Some of the documents you will want to review are:

  • An Executive Summary
  • An investment summary or OM (offering memorandum)
  • And they typically present an investor webinar presentation to help answer any questions you may have

These documents are the cornerstone of what you will want to review before you proceed with the investment. They will give you a lot of detail into the deal sponsor team, the asset itself, projected financials and returns, why they are investing in this market and/or submarket, what their proposed business plan will be, and much more to help you make an educated decision.

Personally, when I review these materials, I want to see who the sponsorship team will be, what their track record is, and how well they manage their projects. They will need to have a solid track record of performance and they need to come from a place of integrity, honesty, and transparency. The truth is you can have a great project and a bad team, and that alone can tank the investment. On the other hand, you can have a project that is struggling and hand it to a fantastic team, and it’s very likely they will create a great opportunity for the investors by turning the project around. The sponsor team is key.

After I’m satisfied with the team credentials, then I look over what they propose to do in their business plan, does it make sense, is the construction plan justified, and are the financial projections sound? Then I begin conducting my own due diligence by researching the market, the job, and population growth, and trends. I want to know what the minimum investment will be, what the projected hold time for the project will be, and of course, what the projected returns will be. I also want to see a variety of exit strategies to account for various anticipated market and economic conditions or upsets during the hold term cycle. I also want to see that they are underwriting their projects conservatively. I always review the investor presentation webinar and I always ask the tough questions, and so should you.

In a nutshell, I look for the reason NOT to invest in the offering.

If, after researching and conducting all of my analysis, the deal looks good, then and only then will I consider investing in the opportunity.

The more opportunities you review, and the better understanding you have of the process, the easier it will become for you to decide if you will want to invest or not.

Step #4 – Reserve Your Soft Commit in the Deal

One side note about this step – is that most often these deals are based on a first-come, first-served, so if you feel that this is a deal you would like to invest, it’s important to put in a soft reserve especially if the deal is in a strong market with a strong team.

I’ve seen some of these opportunities fill up very quickly in a matter of just hours, so sometimes you will need to act fast.

That’s why researching in advance, knowing how much capital you feel comfortable investing, and knowing the type of investment opportunity and the returns you want is a good first step so that you can be ready when that great deal comes along.

The soft reserve is just that a “soft” reserve that allows you time to review the offering and the investment materials. You can always back out of the deal or reduce your commitment amount later with no penalty at this stage.

It’s best to go with this approach than to miss out on the deal. A soft commit is just a placeholder while you do your due diligence.

Not every sponsor offers a soft reserve, so when there is that option available, it’s wise to take advantage of it to buy yourself some time.

Step #5 – Review The Sponsor’s PPM (private placement memorandum) For The Deal

Ok, so say you like the deal and you want to invest, the next step is to sign the PPM (private placement memorandum).

A PPM is a legal document that is quite long and outlines in detail everything you will want to know about the investment opportunity, the sponsor’s role, your role as one of the investors in the project as well as the risks involved.

While the PPM is a lot to review, it’s imperative that you read it thoroughly so that you have a full understanding of the investment opportunity, the risks, the operating agreement, and the subscription agreement.

During this process, you can also decide how you want to hold your shares as your part of ownership in the entity and how you will want to receive your cash flow distributions – either by direct deposit or by check.

Step #6 – Send Your Funds For Your Investment

Once you have signed the PPM, the next step will be to send your funds for the investment – the amount of capital you have committed.

Typically, how this works is you can either wire your funds directly for a more expedient delivery or send a check.

Step #7 – Sit Back And Enjoy Your Passive Returns

After all of your due diligence, your research, and aligning your principles and goals with a project that will help you meet your goals, it’s time to celebrate and sit back and enjoy your passive returns. This is all you have to do as a passive investor – you’re work here is done.

You will likely receive communication from the sponsor team with a congratulatory message saying that the deal has closed (with lots of smiley face emojis and fanfare).

Beyond that, you will receive monthly communications giving you updates on how the project is doing, what has been completed, how efficiencies have been improved and various other updates as the business plan execution unfolds. Also, you will receive detailed quarterly financial reports, cash flow distributions, and your K-1 statement for your taxes.


So hopefully, this process, albeit a bit of work at the beginning of an offering, excites you to know how a real estate syndication deal works and what you will want to do to be sure you are investing in the right deal, with the right sponsor team, in the right market that meets your specific investing goals.

The first time you go through the process, it may be somewhat intimidating or confusing, but a good sponsor team is always there for you if you need anything or if you have any questions. After a few deals, the process will become much easier as you understand what to expect along the way.

Passive investing in real estate syndications is an amazing tool for you to be able to live your life by design, build legacy wealth for your family and create a more secure retirement. We hope you explore the possibilities of real estate syndications so that you can Earn Passively & Live Abundantly! Until next time…

Ready to Learn More? 

The best way for you to learn more about passive investment opportunities in commercial real estate syndications is to join the PCRP Passive Investor Club.

Through the PCRP Passive Investor Club, you’ll get a priority review of all the deals we offer. We’ll work with you to determine your investing goals and then present you with the best deals to meet those goals. We’ll then guide you every step of the way as you invest in those deals.

So if you’re ready to start investing passively in institutional-grade, commercial real estate in fast-growing, climate-resilient markets in the U.S., join the PCRP Passive Investor Club  – IT’S FREE! – and get started on your path to EARN PASSIVELY and LIVE ABUNDANTLY!

If you would like to know more about what we do and how it may be of value to you, please reach out to us anytime.  We’re always happy to help! 

7 Steps to investing in your first real estate syndication

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