As passive investors begin to learn more about commercial real estate syndications and once they have made the decision to invest in these real estate assets, one question that may arise is how do you fund the investment? Real estate investors love to receive passive income, but there is a way to capitalize on this type of investment opportunity so that the cash flow distributions create the best benefits for you. Usually with these investment opportunities, the minimum investment is fifty thousand dollars. So this takes a bit of planning to tap into your financial equity sources.
The good news is that there are three main ways you can fund investing in real estate syndication deals. The strategy you decide on will depend on many factors so you may want to check in with your financial advisors to figure out the best way for you to acquire as much capital as you need to invest in a real estate syndicate.
So, let’s explore the three different ways you can fund your next commercial real estate syndication investment opportunity.
You’re A Solo Player – An Individual Investor
The easiest way to invest in commercial properties is to fly solo and bring your own real estate funds to the deal. Depending on the size of the deal, if you have the net worth and enough capital to qualify for a mortgage loan on the property, you could leverage up to 80% of the purchase price. As a solo real estate syndicator, you would have no partner so you would be in complete control of all of the logistics of the deal acquisition and you would be in charge of overseeing or conducting the property management.
This entails more responsibility, more risk, and therefore more upside if the deal is managed well and if the real estate project produces strong rental income. You would be essentially your own real estate syndication company and the sole operator of the deal. You would not have another general partner or equity party or any other potential investors.
As a sole owner, you would receive quarterly or monthly distributions from the commercial real syndication directly into your own account while taking advantage of the many tax benefits that real estate investing provides for investors. You’ll receive a K1 each year with all the pertinent information your accountant would require.
You Want To Invest As Part Of A Duo
Suppose you wanted to invest in an apartment building syndication as part of a duo, say with a partner or your spouse – you sure can! You both can pool your money and resources together to make up that minimum investment of fifty thousand dollars and invest in these real estate deals. It happens all the time!
With this investment strategy, you can reap all of the rewards and tax advantages together with your spouse, which numerous investors do.
This has a bit more technicalities because this strategy does require two signees and both parties have to agree on the investment property. As a general rule, you may want to have a legal document outlining the beneficiary designations that you will want appointed.
Want To Invest As An Entity?
You may want to invest through an entity. You can invest through various retirement accounts such as self-directed IRAs or a QRP, through a trust, or through a limited liability company. You will want to check with your state’s regulations and of course, always consult with your CPA or financial advisor. before proceeding.
As you receive your distributions on a quarterly basis, these funds flow through to the entity so do the tax benefits such as depreciation or any paper losses, so it is important that you keep your funds separate to avoid having an unexpected tax bill due to an accidental withdrawal.
When commercial real estate investing through an entity, your level of asset protection and heirship is based on the Operating Agreement of the entity you are using. The important thing to remember here is that you don’t want to be hit with UFDI or UBIT taxes, so be sure you talk with your financial advisor/CPA before investing as part of an entity.
So, Which Funding Option Should You Choose?
In order to determine the best way to participate in these real estate investments, you will want to figure out when you will need the cash flow, the tax advantages associated with each approach, and how much asset protection you will want. Other factors are important as well such as which state you reside in, the age of your children, when you would like to retire, and what you would like to do with the distributions.
If you want the distributions and tax benefits to be applied to you personally and want the cash flow to create a particular lifestyle sooner rather than later, then an individual approach or joint investment may be the best option for you.
If your goal is to build long-term wealth and have your cash flow distributions accrue to set you up for a strong retirement, then exploring a QRP, a self-directed IRA or an LLC may be the best approach for you.
What’s The Next Step?
Typically, most of our syndication opportunities are open to accredited investors only, but you don’t have to be an accredited investor to invest in a real estate syndication. From time to time we have opportunities for a sophisticated investor to participate as well.
All you have to do is join the PCRP Group Investor Club and hop on a quick call with us so that we can better understand your investing goals, how you envision syndications will help you achieve those goals, and the lifestyle you are hoping your investment strategy will achieve for you. Then, we can share our syndication investment opportunities with you.
Our investment opportunities do fill up fast, so it’s best to think ahead about whether you would like to invest individually, jointly or through some type of an entity. Once you have identified where your funds will come from and you want to invest in a real estate syndication, then we can help you find an opportunity so that you can start your journey in being able to earn passively and live abundantly.
Note: we are not financial advisors and are not offering financial advice of any kind. Please consult with your advisors before making any investment or financial decisions.
Ready to Learn More?
The best way for you to learn more about 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!