10 THINGS TO LOOK FOR WHEN COMPARING REAL ESTATE SYNDICATIONS TOM WILSON
b. Asset Management Fees. During the hold,
some sponsors will take compensation for
management time and costs incurred to keep the
property running successfully. These are typically
a percentage of rents collected or net cash flow
that the syndication receives and are paid at the
same time as dividends to investors.
10) Voting Rights. Most syndications are
structured through an LLC. The LLC buys and sells
c. Profit Splits. Typically, most of the value of a the property with the sponsors being Class B
property is derived at the time of sale. A successful managers. The Class A investors will be formally
syndicator is incentivized by a percentage of net included in the company/operating agreement of the
profits to help close a deal out and maximize LLC that outlines their portion. Some LLCs will give
profits. These will vary by deal, but should be high members voting rights as well, which can be used
enough such that a sponsor is motivated to invest for large decisions such as changing management,
time and effort throughout the entire hold period to restructuring returns, or dealing with death or
maximize returns. transfer of existing members. It is important to
understand the type of rights you have as an
9) Exit Plan. Syndications are illiquid and passive investor and what types of transferability, if any, your
investments, meaning sponsors retain the final shares have.
decision of when to sell the property. A good
sponsor will have an exit plan that has a projected These are just a sampling of the many differing
hold period or range of years, contingent on market components of a real estate syndication savvy
forces and occupancy being favorable for a investors should be educated on when evaluating
property sale. Most valueadd deals will be shorter opportunities. Knowing how syndications are set up
in length due to most of the value being created in will allow you to make smart investment choices in
early years. Many stabilized property deals will the future.
be longer in order to take advantage of increasing
rents, equity build up through debt payoff, and Best regards to you and your investing,
stabilized cash flow. Tom
Wilson Investment Properties is a turnkey provider of both single family investment homes and commercial real estate
syndications. We’ve been providing high quality investments for over 12 years to investors around the world. To learn
more, visit us at www.tomwilsonproperties.com or contact us at [email protected] and 4088671867