A Investment Syndicate Structure
Saturday, January 31st, 2009
As the partner for EstateSyndicate.com, the largest real estate syndicate in the Midwest, I have seen many definitions of what syndicators are but none have tied it all together in a short succinct explanation. So here you go.
A investment syndicate is a bunch of people that have combined their means for a common purpose.
Next we have to talk about what it is they put together. There are both monetary and human capital assets. So let’s assemble a hypothetical syndicate as an example.
In order to get deals done on a more massive scale we need a number of types of human capital. Here’s a list:
* Real Estate Professional – this is the person who has expertise in deals. He or she understands how to make transactions work. This real estate professional should know about foreclosure deals, short sales, types of deeds and financing options, trusts, how to flip contracts, how to put together an LLC for real estate investing or set up a REIT, options and how to do rent to own transactions. This is more than a real estate agent because this agent should have practical experience in doing deals not just selling houses.
* Money Supplier – This could be a mortgage broker or a hard money lender or a person that can put together a supply of advance a transaction. This person should have knowledge of lender application forms and processes, underwriting, putting together loan documents,and have a ready supply of money that is available in two or three days to do cash deals. A bank is not a money supplier – they take way too long.
* Marketer – This person has not only unique skills in promotion but also has the pieces in place in order to generate lists of sellers, buyers, investors, and money lenders. If your syndicate has a decent marketer in place your partnership will inevitably be successful because you will have a constant flow of buyers, sellers, and money lenders entering your fold. Most real estate professionals don’t know how to market and that’s why they are not cashing checks often. Realtors are notorious for “no marketing knowledge” and that’s why houses are sitting on the market so long. (It has nothing to do with market conditions.
* Lawyer – this person is very useful on an “as needed” basis. Occasionally your syndicate will need legal advice about setting up investment entities, partnership documents and unique contracts. Your real estate syndicate should have your own “boiler-plate” docs ready to go so a lawyer isn’t needed except on demand. You should have a prearranged relationship with this professional so they know they are your “go to” guy and treat you accordingly.
* Accountant, – The ideal strategy of every endeavor is not the gross income but rather how much of it you get to keep. Taxation and entity structure plays a big role in the final outcome so an accountant can be an invaluable asset in the mix. Find somebody that is really competent in real estate taxation and entity structuring for tax advantages to insure your greatest return.
* Closer – If you plan on doing regular closings a closer can be invaluable to get all the ‘i’s dotted and the ‘t’s crossed and knows the laws and requirements to complete lending and title documents and most importantly how to legally distribute the money.
In this mix of human capital the real estate professional is the person most likely to be the syndicator because he’s the one intimate with the whole undertaking most often.
There you have it – a full blown real estate syndicate.
web design