Becoming A Real Estate Millionaire Is Easier Than You Think | The 4 Steps of Syndicating in Real Estate
Real estate syndication is the fastest way to build wealth in real estate. Not enough people talk about the power in these deals, so I am here to tell you what exactly real estate syndication is and the four steps on how to actually syndicate a deal.
So what is real estate syndication?
Real estate syndication is the process by which you can take no money and no credit, then generate millions of dollars a year if you do it correctly. Now, when I say no money, I do mean no money of your own because you will need investors during this process. So let’s get into exactly what real estate syndication is. Real estate syndication is essentially when you pool together a number of investors to purchase a large real estate investment property. There are two parties involved in real estate syndications: the real estate syndicator/sponsor and the passive investors.
Here is just a few things a real estate syndicator does:
- Structure and operate the syndication
- Underwrite the deal
- Complete the due diligence process of the property
- Find investors
- Raise capital
- Asset management
The passive investors on the other hand just provide some of the capital the syndicator needs in exchange of earning passive income and their ROI when the property is eventually sold.
There are a lot of benefits to real estate syndications such as: tax-benefits, the potential to gain passive income, and control over which specific properties you wish to invest in. However, that is not to say that real estate syndications are easy, these syndications do come with their own set of challenges. Investors need to choose you to invest with which means that you do need to put in a lot of work to ensure that your investors know you are trustworthy and knowledgeable enough to create a beneficial syndication.
Here are the 4 steps of how to syndicate a real estate deal and make millions:
Step 1: Identify the asset or piece of property that you are looking at to buy, you can use brokers, drive by searches and website like LoopNet to begin your search.
Step 2: Find the investors who will lend you the money so you can buy the property you have identified. Make sure you identify whether your investors need to be certified or not. Investors can be friends, family and neighbors.
Step 3: Identify the bank that will lend you the money so you can go ahead and close on the deal. My advice is to always approach small to medium local banks.
Step 4: Do the correct due diligence so you can close on the property. During the due diligence phase, make sure your numbers add up so your investors are actually getting the ROI you promised them. Resources for due diligence will include engineering and architecture preliminary work, a real estate attorney to look over potential issues in the contract, permitting requirements from city and county etc. We go over these steps in detail in our coaching mastermind
As I mentioned you can make millions in real estate syndication; however, you do need to ensure you are on top of your game to really make the big bucks. As the sponsor, your responsibilities are towards your investors and bank. Be confident in the deal you’re planning and the quality of the product you’re developing. Practice transparency in your work and keep your investors updated on progress. Your reputation in the industry can make or break you, not only with investors but with potential buyers of your deals and with vendors.