Real Estate Syndication: What You Need to Know

• Real estate syndication is the process in which multiple investors pool their money together to purchase a commercial property. Syndication is similar to crowdfunding, and many real estate syndication deals are now crowdfunded on the internet, through platforms such as Fundraise, Realty Mogul, and a variety of others. Investors in a real estate syndication deal benefit by getting access to deals they would not be able to create on their own, as well as by not having to worry about the day-to-day hassles of personally owning investment property (i.e. property management).

• Real estate syndication deals are usually structured as either limited liability companies (LLCs), or limited partnerships (LPs), with the sponsor being the general partner (GP), and each investor participating as a limited partner (LP). A sponsor typically invests somewhere between 5% and 15% of the equity into a real estate project, while the investors typically place 85% to 95% of the equity into the project.

• In some cases, a syndication deal is set up as a joint venture(JV), in which a third equity partner helps gather investors for the sponsor. In many cases, this JV partner will also help with other responsibilities, such as tax reporting.