Understanding Real Estate Syndication
A real estate syndicate buys, operates and sells real estate investments.
Typical legal entities for a real estate syndicate are corporations, limited liability companies and general or limited partnerships.In its simplest form, a real estate syndicate is simply the pooling of money from multiple investors and organizing these funds as a whole into real estate projects. The investment money contributed is used as an equity investment and together with a commercial loan secured by the real estate and guaranteed by a high net worth individual or a entity, fund the bulk of the cost for purchase or development of the project. Investing in a real estate syndicate is essentially joining together with others to invest in commercial real estate. HighMark's entity is a limited partnership which provides passive income to its partners through fractional ownership commercial real estate, without any ownership responsibilities.
How A Real Estate Syndication Makes Money
The person who desires to create a real estate syndication must comply with the laws of the state where the real estate syndication is to be created and operated. The syndicator of such a venture usually receives compensation for locating the property to be purchased, performing the due diligence for its acquisition and intended development, and getting the purchase to close. Investors in the transaction typically pay the syndicator's fee based upon a percentage of the costs of the transaction when the targeted property is acquired. The syndicator also receives a management fee, typically based upon a percentage of gross revenue on a yearly basis. For instance, if there has been an apartment complex constructed and owned by the syndication, the gross profits for management of the apartment complex would be paid to the syndicator for collecting rental money, maintaining the complex, paying insurance, taxes and making repairs.A person can also make money through a real estate syndicate by investing in the project itself, which is typically the case. The investor typically receives a high rate of interest paid monthly on a preferred return status and quarterly on cash flow on his investment, besides maintaining an ownership interest in the syndicated project.