The Seven Most Important Team Players in a Successful Real Estate Syndication

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

Michael grew up near the beach and surfing was his passion. He caught the waves while pods of dolphins swam in the distance and boats sailed on sunset cruises.

This picture of a sailboat provides one of the best analogies for a real estate syndication. Think of the syndication as a sailboat ride. The skipper and the crew work together to bring the passengers to safety.

In this analogy, the skipper represents the sponsors of the syndication, and the passengers are the passive investors. They’re all going to the same place, but they have very different roles in the process.

If a squall breaks loose, if a sail has issues, or any other number of surprises, the skipper is the one who is responsible for course correcting.

The skipper will update the passengers with the progress of the trip, but the passengers don’t have any active responsibilities in making the decisions or sailing the boat.

A real estate syndication is much like this. The passive investors, sponsors, brokers, property managers, and more, all share a vision to invest in and improve a particular asset. However, each person’s role in the project is different.

In this article, we’ll talk about exactly who those players are, as well as their respective roles in a given real estate syndication.

 

The 7 Most Important People in a Real Estate Syndication

 

Here are the seven key roles that come together to make a real estate syndication happen:

    • Real estate broker
    • Lender
    • General partners
    • Key principals
    • Passive investors
    • Property manager
 
Real Estate Broker

The real estate broker is the person or team who surfaces the property for sale, either as a listing or as an off-market opportunity (i.e., not publicly listed).

Having a strong real estate broker is crucial, as they are the main liaison between the buyer and the seller throughout the acquisition process.

 
Lender

The lender is the biggest money partner in a real estate syndication because they provide the loan for the property. The lender performs their own due diligence, underwriting, and gets a separate appraisal to make sure the property is worth the value of the loan requested.

In the sailboat analogy, neither the real estate broker nor the lender are aboard the boat. They have important roles in bringing the project to fruition, but they are not part of the purchasing entity, nor do they share in any of the returns.

 
General Partners

The general partners synchronize with the real estate broker and lender to secure the loan and acquire the property in addition to managing the asset throughout the life of the project, which is why they are often also called the lead syndicators. 

The general partnership team includes both the sponsors and the operators (sometimes these are the same people).

The sponsors are the ones signing on the dotted line for the loan and are often involved in the acquisition and underwriting processes.

The operators are generally responsible for managing the acquisition and for executing the business plan by overseeing the day-to-day operations. Operators guide the property manager and ensure that renovations are on schedule and within budget.

 

Related : Evaluating Residential Housing and Multifamily Properties

 

Key Principals

For a commercial loan, the sponsor is required to show a certain amount of personal liquidity. This reassures the lender that the sponsor can contribute additional personal capital to keep the property afloat if things were to ever go wrong.

One or more key principals may be brought into the deal to help guarantee the loan if the sponsor’s personal balance sheet is insufficient.

 
Passive Investors

A real estate syndication’s passive investors have no active role in the project. They simply invest their money in exchange for a share of the returns. Like the passengers on a sailboat, they get to put their money in, sit back, and enjoy the ride.

Although the passive investors have no responsibilities after the initial research into a real estate syndication, their investments make the syndication possible. In fact, passive investors are probably the most important people in a real estate syndication.

What a great position!

 
Property Manager

Once the property has been acquired, the property manager becomes arguably the most important partner in the project because they are the “boots on the ground” who execute renovation projects according to the business plan. 

The property manager works closely with the operator (i.e. the asset manager) to ensure the business plan is being followed and that any unexpected surprises are addressed properly.

 
Flow Equity Partners

In a real estate syndication, Flow Equity Partners is part of the general partnership. Our main role is to lead investor relations, review of conservative underwriting criteria and help raise the equity needed.

We serve as an advocate for investors by ensuring that the sponsors’ projections are conservative, deals are structured favorably toward investors, that multiple exit strategies exist, and that capital will be preserved and grow.

After the property is acquired, we act as the liaison between the sponsor/operator team and the investors by providing updates, financial reports, and other important information between parties.

 

The Passive Investor is the Most Important Role in a Real Estate Syndication

A real estate syndication, by definition, is a group investment. And it’s only through pooling resources and coordinating that the syndication can be successful.

These seven positions aren’t the only people who will be involved in the syndication deal, but they are the ones most critical in creating a successful real estate syndication.

The passive investor, however, is the one role that makes the syndication possible.

Without your trust in our processes and without your capital investment, the real estate syndication project would most definitely fail. 

We honor your role by working hard to ensure the success of the syndication deal and by helping you secure your financial future.

Michael grew up near the beach and surfing was his passion. He caught the waves while pods of dolphins swam in the distance and boats sailed on sunset cruises.

This picture of a sailboat provides one of the best analogies for a real estate syndication. Think of the syndication as a sailboat ride. The skipper and the crew work together to bring the passengers to safety.

In this analogy, the skipper represents the sponsors of the syndication, and the passengers are the passive investors. They’re all going to the same place, but they have very different roles in the process.

If a squall breaks loose, if a sail has issues, or any other number of surprises, the skipper is the one who is responsible for course correcting.

The skipper will update the passengers with the progress of the trip, but the passengers don’t have any active responsibilities in making the decisions or sailing the boat.

A real estate syndication is much like this. The passive investors, sponsors, brokers, property managers, and more, all share a vision to invest in and improve a particular asset. However, each person’s role in the project is different.

In this article, we’ll talk about exactly who those players are, as well as their respective roles in a given real estate syndication.

 

The 7 Most Important People in a Real Estate Syndication

 

Here are the seven key roles that come together to make a real estate syndication happen:

    • Real estate broker
    • Lender
    • General partners
    • Key principals
    • Passive investors
    • Property manager
 
Real Estate Broker

The real estate broker is the person or team who surfaces the property for sale, either as a listing or as an off-market opportunity (i.e., not publicly listed).

Having a strong real estate broker is crucial, as they are the main liaison between the buyer and the seller throughout the acquisition process.

 
Lender

The lender is the biggest money partner in a real estate syndication because they provide the loan for the property. The lender performs their own due diligence, underwriting, and gets a separate appraisal to make sure the property is worth the value of the loan requested.

In the sailboat analogy, neither the real estate broker nor the lender are aboard the boat. They have important roles in bringing the project to fruition, but they are not part of the purchasing entity, nor do they share in any of the returns.

 
General Partners

The general partners synchronize with the real estate broker and lender to secure the loan and acquire the property in addition to managing the asset throughout the life of the project, which is why they are often also called the lead syndicators. 

The general partnership team includes both the sponsors and the operators (sometimes these are the same people).

The sponsors are the ones signing on the dotted line for the loan and are often involved in the acquisition and underwriting processes.

The operators are generally responsible for managing the acquisition and for executing the business plan by overseeing the day-to-day operations. Operators guide the property manager and ensure that renovations are on schedule and within budget.

 

Related : Evaluating Residential Housing and Multifamily Properties

 

Key Principals

For a commercial loan, the sponsor is required to show a certain amount of personal liquidity. This reassures the lender that the sponsor can contribute additional personal capital to keep the property afloat if things were to ever go wrong.

One or more key principals may be brought into the deal to help guarantee the loan if the sponsor’s personal balance sheet is insufficient.

 
Passive Investors

A real estate syndication’s passive investors have no active role in the project. They simply invest their money in exchange for a share of the returns. Like the passengers on a sailboat, they get to put their money in, sit back, and enjoy the ride.

Although the passive investors have no responsibilities after the initial research into a real estate syndication, their investments make the syndication possible. In fact, passive investors are probably the most important people in a real estate syndication.

What a great position!

 
Property Manager

Once the property has been acquired, the property manager becomes arguably the most important partner in the project because they are the “boots on the ground” who execute renovation projects according to the business plan. 

The property manager works closely with the operator (i.e. the asset manager) to ensure the business plan is being followed and that any unexpected surprises are addressed properly.

 
Flow Equity Partners

In a real estate syndication, Flow Equity Partners is part of the general partnership. Our main role is to lead investor relations, review of conservative underwriting criteria and help raise the equity needed.

We serve as an advocate for investors by ensuring that the sponsors’ projections are conservative, deals are structured favorably toward investors, that multiple exit strategies exist, and that capital will be preserved and grow.

After the property is acquired, we act as the liaison between the sponsor/operator team and the investors by providing updates, financial reports, and other important information between parties.

 

The Passive Investor is the Most Important Role in a Real Estate Syndication

A real estate syndication, by definition, is a group investment. And it’s only through pooling resources and coordinating that the syndication can be successful.

These seven positions aren’t the only people who will be involved in the syndication deal, but they are the ones most critical in creating a successful real estate syndication.

The passive investor, however, is the one role that makes the syndication possible.

Without your trust in our processes and without your capital investment, the real estate syndication project would most definitely fail. 

We honor your role by working hard to ensure the success of the syndication deal and by helping you secure your financial future.

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