You’ve heard of investment clubs. You’ve heard of crowdfunding. Now meet their much more powerful cousin, real estate syndication.
Real estate syndication allows the average person to realize high-dollar returns on investing in commercial real estate. Although it’s been around for many years, real estate syndication has recently seen a surge of interest as the general public has become more familiar with crowdfunding platforms like GoFundMe.
A decade ago, fewer than 50,000 people were actively participating in real estate syndication. By 2019, more than 120,000 people had joined real estate syndicates and this number will likely continue to grow.
Let’s take a closer look at what real estate syndication is and how it typically works for the average investor.
Defining Real Estate Syndication
Real estate syndication is simply a transaction between a sponsor and a group of investors. Your sponsor – ideally, someone with proven experience in real estate investing – locates an investment project and brings it to the investor group.
For you as an individual investor, there’s an opportunity to examine the deal and decide whether you want to join in. If you go in on the project, your investor group sees a level of returns from the project each of you wouldn’t have had on your own.
As you can see, real estate syndication brings the power of group buying to the world of real estate investing. In fact, it’s largely a passive form of investing because you can essentially sit back and wait for returns while your sponsor and your money do the work for you.
Why Invest in Real Estate Syndication?
Real estate syndication comes with big benefits over traditional forms of investing. Instead of wading into the dangerous waters of the stock market or worrying about another type of high-stakes investment, you can stick with the relatively safe bet of real estate investing. Property has been used to build wealth for centuries.
Real estate syndication benefits include:
It’s an effective way for a group of investors to pool their financial resources and make smart investments. While $10,000 might not buy much real estate on its own, when you join a group of like-minded investors in a real estate syndication, you have much higher buying power.
Going From Undervalued to Highly-Valued
The group can invest in bigger, more valuable properties than each person could afford alone. Many of these projects may be currently undervalued in the marketplace but could be revamped and rebranded to sell/rent for a much higher price than the initial price.
Investing in Multifamily Commercial Projects
Multifamily commercial properties like apartment complexes and condo communities are some of the most profitable projects for real estate syndicates. The average investor wouldn’t be able to invest in these types of projects alone, and probably wouldn’t even know about them without the sponsor’s expertise.
Making Bigger Investments for Bigger Returns
It’s about having more financial resources, but you also have more intellectual resources to invest wisely. Your real estate syndicate helps you make bigger, bolder investments based on actual marketplace data and proven results in the past.
Welcoming “The Little Guy”
If you’re inexperienced with real estate investing, this can be a great way to start. There’s no penalty for being inexperienced here.
Receiving a Reliable Income
It provides a predictable monthly or quarterly income from your real estate investments. You can focus your attention elsewhere – on your family, your day job, or your retirement years – and allow your syndicate sponsor to handle the details day-to-day.
A Real-World Example of Real Estate Syndication
If you’re wondering how real estate syndication works in the real world, let’s look at an example from Life Bridge Capital. We made an investment in Lincoln Springs Apartments, a 180-unit Colorado Springs apartment complex.
Although Colorado Springs has recently experienced more than triple the nation’s average wage growth, many of the city’s citizens still seek affordable housing that’s accessible on a modest income. They’re looking for a nice apartment that won’t be too expensive.
This made the Lincoln Springs apartment complex attractive to Life Bridge Capital and our Passive Investors. While the complex was a bit run down and undervalued for the marketplace, it could easily be rehabbed into a mid-priced apartment complex that would attract plenty of new renters.
We quickly determined that the apartment complex needed new roofing, but this could be covered by a previous insurance claim. With some fresh landscaping, parking lot paving, and relatively minor interior upgrades, rents on the property could be increased by about 7% while still staying within the preferred range for the rental target market.
Lincoln Springs project highlights:
- Purchase Price $19,500,000
- 21.70% Projected IRR
- 2.09x Equity Multiple
- See the full project summary
Getting Started With Real Estate Syndication
As you can see, passive investors are well-positioned to realize large returns on the right kind of property investment. We invite you to learn more about this and other previous projects Life Bridge Capital has successfully sponsored along with our investors, and decide for yourself whether this route to passive income is right for you.
Ready to try real estate syndication? Contact Life Bridge Capital today and start your investment journey with the Life Bridge Capital team.