A syndication is the pooling of funds from various investors, which has the benefit of allowing us to purchase a larger asset because of the economies of scale.  As the passive investor, you can take advantage of the General Partnership’s extensive expertise in sourcing opportunities, underwriting, due diligence, acquisitions, market analysis, operations, management and an array of other skills to allow you to own a part of an asset without having to have the expertise and without having to deal with toilets, tenants or termites.  You get all of the benefits of real estate ownership without all of the hassles and headache.

Here’s how the SEC defines an accredited or sophisticated investor:

An accredited investor, in the context of a natural person, includes anyone who:

earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).

There are other categories of accredited investors, including the following, which may be relevant to you: any trust, with total assets in excess of $5 million, not formed specifically to purchase the subject securities, whose purchase is directed by a sophisticated person, or any entity in which all of the equity owners are accredited investors.

In this context, a sophisticated person means the person must have, or the company or private fund offering the securities reasonably believes that this person has, sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of the prospective investment.

An accredited investor, as defined by the Securities and Exchange Commission (SEC), must satisfy at least one of the following:​

• Have a net worth of more than $1 million, excluding the value of their primary residence;
• Have an annual income of $200,000, or $300,000 for joint income, for each of the last two years, with expectations of earning the same or higher income this year

While some deals are only limited to accredited investors, there are also deals that accept non-accredited investors or what the SEC define as sophisticated investors. By definition, sophisticated investors must have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment.

Investors may invest as an individual with a checking or savings account, or with an entity such as a LLC, trust, or Self-Directed IRA, Solo 401(k), or Qualified Retirement Plan (QRP) account.​

Typical minimum investment amounts range from $50,000 – $100,000, though each deal is unique.

The business plan for most investments is to hold the property for five to seven years. The initial investment cannot be withdrawn, but you may receive regular distributions during this time.

While exact percentages will vary from one investment to the next, you will receive the same TYPES of returns across the board. Cash on cash returns are paid out throughout the lifecycle of each investment.  You will also receive a portion of the profits from the sale of the asset at the end of the project.

The frequency depends on the investment, some are monthly, some are quarterly. There is usually a short wait period before distributions are made to give the new management company time to build up some additional cash reserves and stabilize the property after the acquisition.​

When you invest in a REIT, you are buying shares in a company, just like when you buy shares in a stock. You do not own the underlying real estate, you own shares in the company that owns those assets.

When you invest in a real estate syndication, you are investing directly in a specific property. Together with the other limited partner investors and general partners, you will own the entity (usually a LLC) that holds the asset. Thus, you have direct ownership.

When you invest directly in a property through a real estate syndication, you get the benefit of a variety of tax deductions, including depreciation. In some case those tax benefits can be quite substantial. The depreciation benefits often surpass the cash flow, so you’re showing a loss on paper while you’re actually getting positive cash flow. Further, you may be able to use those paper losses to offset other income you have.

When you invest in a REIT, because you’re investing in the company and not directly in the real estate, you do get the benefits of depreciation, but those are factored in before you get your dividends, so you don’t get any tax breaks on top of that, and you can’t use that depreciation to offset any of your other income. And any dividends are taxed as ordinary income, which can contribute to a bigger, rather than smaller, tax bill.

Commercial real estate assets like apartment buildings and self storage complexes operate independently of the stock market.  In fact, they tend to fare better in recessions because more people tend to downsize.  They also tend to be safer investments than single family homes because if one tenant moves out, you still have the others to pay down the mortgage.

As with any investment there are risks, so we advise prospective investors to consult with their advisors in determining if any investment is the best strategy for their personal financial planning.