Syndication is a way for people to pool their financial and intellectual resources together to purchase properties much bigger than they could afford or manage on their own. The person who puts together a group to purchase a property is called a Syndicator, Promoter, or Lead Investor. The syndicator usually brings the intellectual resources needed to identify, analyze, contract for, inspect, finance, fund, close, manage, refinance, and dispose of a property in a manner that provides a financial return to his investor/partners. The investor/partners leverage their financial resources into the transactions as passive investors while continuing their current occupation. This creates a symbiotic relationship, as well as a fiduciary responsibility to each other.
The syndicator is the responsible party that actively manages the project. The syndicator uses his market knowledge and experience to create value for his investor/partners by increasing the value of the property and provide cash flow. The syndicator is compensated for his work and expertise. This compensation is referred to as a Promote Fee. Promote fees can be drastically different. The only way to know exactly what those fees are, plus all the disclosures and details of the investment is through a Private Placement Memorandum or more commonly referred to as a PPM.
A PPM is prepared by the syndicator and is required by the Securities and Exchange Commission (SEC) to make full disclosure of the investment, the operating agreement, the fees charged by the syndicator, and many other details. Read it carefully. Realistically, much of the PPM is disclosures to protect the syndicator by informing the investor/partners of the risk associated with the investment.
Every investment has inherent risks. Real Estate has some other risks that also include the lack of liquidity as well – meaning, there is not a market to pull your cash out, even at a loss. These are some of the reasons that the experience of the Syndicator and understanding the PPM is so important. There are always risks.
I am a real estate syndicator. I utilize my experience to create wealth for investors/partners by providing an avenue they can use to invest in real estate. The investors receive a passive stream of income, participate in the tax advantages, and participate in the appreciation, all without the need to be actively involved or risk their time and money learning the, sometimes expensive, lessons from real estate. This symbiotic relationship allows me to purchase more, and larger, projects than I could do with my own capital.