If you are a commercial real estate investor, you may come across properties that you would love to invest in but you couldn’t possibly afford on your own. You might also find you have major strengths in some areas, but are weak in other areas, such as having lots of capital or accounting. In the commercial real estate world, real estate syndication is a way to invest in a property that is otherwise out of reach.
The Two Roles in Real Estate Syndication
If you have lots of skills of capital, but not enough means to purchase a commercial property, you might form a real estate syndication, a group of investors who work together to make a building prosper while earning from it. The two main roles are syndicator and investor.
The syndicator is also known as the sponsor. This role is responsible for securing a deal with the capital given by the investor(s). He may also help to manage the building. In some cases, the sponsor will help invest money into the purchase, while in other cases he might just put in his time and effort and earn an acquisition fee for it. A syndicator should be adept at making deals, accounting, fixing unexpected problems, and have a knack for paperwork.
There can be one or more investors who have the capital to purchase the property together. They will also send money to help with building renovation and property management. They are passive investors who put in money while hiring a syndicator to help manage the deal. Meanwhile, everyone will receive a regular return. The syndication is complete when all decide to resell the property at a higher price than they paid.
When setting up a real estate syndication, one should hire a commercial real estate attorney to help set up the legal contract to help your team work together in an organized way. The syndication may consist of a limited partnership or a limited liability company. Therefore, the syndicator may be called the general partner or managing member, while the investors are limited partners or members.
Splitting the Profit
There are many ways to split the profit, and it will take negotiation between you and your team to decide on the best solution. The syndicator will likely get a set commission price, while the rest is flexible.
Trust the Professionals at Clagett Enterprises for Your Realty Needs
If you’re looking for an experienced property management company, the perfect realtor for your property, or a professional to assist you during your purchase of any home, you can rely on Clagett Enterprises. Clagett Enterprises is a full-service real estate company with almost 30 years of experience in the Frederick and Western Maryland area. For assistance with commercial sales, leasing, management, and development and consulting, contact us online or give us a call at 301-665-6009. To meet our team and see some of our beautiful homes, follow us on Facebook and Linkedin.
Tags: commercial investing, commercial real estate, real estate syndication