What is a Real Estate Syndication (RES)?
A real estate syndicatation is a group of people who pool their resources to buy real estate, often large properties like apartment buildings. This can be difficult or impossible for individuals to do on their own.
Helmsley & Malkin purchased The Empire States Building from 3,000 small investors in 1961 for $65million. Many of them paid $10,000 each.
Who is involved in a Syndication?
A real estate syndicatation usually involves the “general partner” who organizes the syndication. This includes finding and financing the property. The general partners are also sometimes called the “sponsors”, or the “operators”.
People who invest in cash are sometimes called “passive investors” and “limited partners.” The limited partners get an equity share of the syndicatation in return for their investment. They also receive cash flow distributions.
Who Can Invest in a Real Estate Syndication?
Accredited investors are usually allowed to join a real estate investment syndicate. An accredited investor is defined by the Securities and Exchange Commission as having an annual income of $200,000 or $300,000 combined income, and a net worth at least $1M. This does not include your primary residence. For more information and resources, visit the SEC website.
Unaccredited investors are allowed to participate in some syndication offers, such as those designated as “506 (b)” offerings. Multifamily syndications can be 506(b), which means that they are available to unaccredited investors. However, these investors must be “sophisticated”.
An experienced investor is able to invest in other investments, such as oil, real estate, and precious metals. You may have previously invested in the stock market, or you might have attended an investing seminar. The person can make informed decisions about any syndication offering, regardless of whether or not they have investing experience.
It is equally important that the investor be “sophisticated” and have a “substantive relationship with the deal sponsor (i.e. The partner or partners that are offering the opportunity. Although the SEC does not define “substantive relationship”, it did provide clues to a company called Citizen VC.
Eagle City Multifamily will take you through a “get-to-know you” process when you become an investor. These steps enable us to collect pertinent information like financial info and goals. We also gather information about your investment experience.
