Real estate syndication is a hot topic in today’s news and politics, but let’s be real: even a lot of real estate investors don’t know what it means. Many commercial real estate investors tend to stick to investing entirely on their own. While this is a completely okay way to operate, they are missing out on some of the immense benefits of real estate syndication. Plus, real estate syndication is a great way for investors to try out investing in commercial real estate. Are you still confused? Read this blog to find out what commercial real estate syndication is and how to quite literally get your foot in the door.
What is Real Estate Syndication?
In a normal investment environment, a singular person or investment company purchases a lot of existing commercial property and then either hires a management company or manages the lot themselves. In this case, it is a single person or company operation, so usually, the funds are rather limited. However, in a real estate syndication, multiple people or companies are involved in the investment. Basically, syndication is when a bunch of individual investors and/or companies pool their money together to be able to purchase huge amounts of commercial real estate at once. Real estate syndication is generally split into sponsors and individual investors. Sponsors are generally a larger company or very experienced individual investor that takes care of the majority of the care and upkeep, such as initial buying fees, property taxes, and property maintenance responsibility. However, sponsors generally take in a large portion of the equity of the property, somewhere between 5-20%, for their efforts. Investors are usually a more average crowd who would rather have a more passive role in the real estate syndication process and make a few bucks here and there.
Accredited Investor Requirements
Due to the JOBS Act of 2012, all real estate syndication investors must qualify as accredited investors to make sure that they will be able to afford the associated payments. The requirements are as such:
- must have a total income of $200,000 or more within the last two years and earning at least $200,000 in the coming year (if married, combined income must be $300,000)
- must have a net worth of $1,000,000 excluding private residence, either individually or jointly with a spouse if married
The high requirements are put in place to prevent people from being unable to safely invest in commercial real estate and putting their own funds at risk by doing so.
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.