I’m Ready To Start Investing in Commercial Real Estate Syndications: Where Do I Start?

by | Jul 9, 2022 | Investing Advice | 0 comments

Most people are familiar with the process of investing in traditional real estate. That is, buying single-family homes or rental properties. You pick the city, the neighborhood, and what amenities you want. You find a lender, a real estate agent, tour possible properties, and finally, put in an offer. 

The process looks quite different when investing in real estate syndications though. If syndications are new to you, it can feel quite intimidating.

This is why we’re going to break down the process for you, beginning to end. Understanding the steps to take will help you confidently navigate through your first real estate syndication deal.

 

5 basic steps to follow when investing in commercial real estate syndications:

 

  • Determine your investing goals
  • Find an investment opportunity that fits
  • Reserve your spot in the deal
  • Review the PPM (private placement memorandum)
  • Send in your funds

 

Step #1 – Determine Your Investing Goals

Once you decide you want to invest in a real estate syndication, consider both your short-term and long-term investing goals so you can be sure to find investment opportunities that best fit your personal goals.

Think about the amount of capital you have to invest, the length of time you want that capital invested, tax advantages you’re looking for, and whether you are investing primarily for ongoing cash flow to help offset your income, long-term appreciation, or a hybrid of both.

 

Step #2 – Find an Investment Opportunity That Fits

Once you’ve determined your investing goals, aim to find a deal in alignment with your goals. 

There are countless real estate syndication opportunities and markets out there. If you’re looking for recession-resistant multifamily investments, we can help you surface the strongest and most viable opportunities.

We will typically provide an executive summary, full investment summary, and host a webinar for investors, which provides a full 360-degree view of the asset, the market, the deal sponsor team, the business plan, and the projected financials.

Be sure to take time to properly vet the track record of the operating team, ask them your questions, and read between the lines of any investment materials provided. Take a look at things like whether the business plan has multiple exit strategies, whether there are signs of conservative underwriting, and double-check whether the proposed business plan makes sense given the asset class, submarket, and current economic cycle. 

Research market trends in job and population growth. Review minimum investment requirements, projected hold time, and projected returns. Finally, attend or review the investor webinar and make sure you get your questions answered. 

Basically, at this stage, look for any reason not to invest in the deal.

 

Step #3 – Reserve Your Spot in the Deal

Once you’ve found an opportunity you want to invest in, it’s time to reserve your spot in the deal. Usually, deals are filled on a first-come, first-served basis, so you’ll want to take the time to ask questions and do your research before a live deal opens up.

Often, investment opportunities can fill up within mere hours, which is why it’s important to have completed research, solidified your investment value, and have clear goals. That way, when the opportunity opens up, you can jump on it.

Typically, the first step is to make a soft reserve, which holds your spot while you take time to review the investment materials. The soft reserve does not lock you in the deal; it merely saves you a spot in the deal while giving you more time to review the fine details of the investment and conduct your own due diligence.

 

Step #4 – Review the PPM

Once you’ve decided to invest in a deal, the first official step is to review and sign the PPM (private placement memorandum).

This legal document provides in-depth details about the investment opportunity, the risks involved, and your role as an investor. Although reading legal jargon may be no fun, it’s very important you gain a full understanding of the risks, subscription agreement, and operating agreement pertaining to the investment.

As part of signing the PPM, you’ll also decide how you’ll hold your shares of the entity holding the asset and whether you want your distributions sent via check or direct deposit.

 

Step #5 – Send in Your Funds

Once you’ve completed the PPM, the final step is to send in your funds. Typically, you’ll find wiring instructions in the PPM document.

Pro tip: Before wiring your funds, double-check the wiring information, and let the deal sponsor know to expect it so they can be on the lookout.

Read More Multi Family Real Estate Investment Fund: A Safe Investment with Attractive Returns

 

That’s Not As Complicated As I Thought It Would Be…

 

Now that you see the process laid out, hopefully it doesn’t feel quite as daunting. 

The beautiful thing about real estate syndications is that your active part is at the beginning of the process – finding the right property, reading through investor data, reserving your space, reviewing and signing the PPM, and sending your investment funds. 

We know it still seems intimidating starting the whole process. But not to worry, we’re here to help guide you through your first real estate syndication, step by step. And just like anything else, the more deals you invest in, the easier the process becomes.

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