When I heard the first person say he was a syndicator, I was immediately skeptical of intentions. That word sounds scary, in the way that anyone using it must be a part of the Mafia, or worse, a snake-oil salesman trying to sell me on the latest and greatest real estate pyramid scheme.
Technically speaking, the mafia is an example of a syndication (a crime syndicate). The mafia does not share the same values systems or the path of work as an “apartment syndicator” (at least here at Riverside Investment Group), but similarities do exist in other ways.
What Is A Syndication?
Syndication is simply a structure we use to purchase, hold, and operate real estate. It is the pooling together resources in order to accomplish something no one person could accomplish on their own. Typically, a syndication is formed of two groups, the “general partners” and the “limited partners.”
The general partners (think Riverside Investment Group) are the operators. They source, analyze, negotiate, perform due diligence, form the management team, structure the financing, raise capital, create and execute the business plan, manage the asset, and decide when and if to sell/refinance. The general partners make decisions that impact both day-to-day operations and long-term wellness of the business.
The limited partners invest money into the deal. These people are hard-working professionals that want to invest in real estate, but either lack the time, knowledge, or experience to buy something themselves, or they just understand the power of scaling faster with syndications. Limited partners typically invest in real estate due to maximize income, to diversify, to have a recession-resistant investment, to reduce taxable income, or simply because the investment is safer and the returns are better. They exchange their capital for equity in the property, and because they do not have direct control over the asset, they are as “passive” investors.
A syndication could look something like this. Bob and Kathy (the general partners) find a great value-add apartment complex that costs $1,000,000. In order to purchase the property and complete some renovations, Bob and Kathy determine they will need $400,000. They put together a deal package and share it with a group of 50 people they know that would be interested in investing in apartments (limited partners). Out of the 50 people, 10 invest in the deal, with investments ranging from $20,000 to $100,000. A limited-liability company (LLC) is formed, and all partners own a portion of the business entity (LLC). As owners, all members benefit from actual ownership of the asset, including receiving quarterly distributions of profits and a big distribution when the property is sold in 6 years.
Syndication has the inherent strength of teams. Together- (as Aristotle said)t the whole is greater than the sum of its parts. That is a core belief here at Riverside Investment Group. That is a major reason why syndication is main business model we use. Syndication is an incredible tool that allows team members to leverage each others strengths and build amazing teams.
Riverside Investment Group is all about forming amazing teams.
