Guide to Investing in Commercial Real Estate Syndications

Andrew Carnegie famously said, 90% of millionaires built their wealth by owning real estate. “More money has been made in real estate than in all industrial investments combined.” Even though he made these comments in the late 1800’s most millionaires today continue to agree with his statement.

The challenge is uncovering the right opportunity that aligns with your long-term financial goals without becoming a second job. If you are captivated by real estate but only have time to participate passively, syndications may be the best route.

Commercial real estate syndications are one of the few ways to hold direct ownership in property without requiring you to find, purchase, manage, and eventually sell the asset. Below is a step-by-step guide on how to get started:

Where Does Your Interest Lie?

The type of property you choose determines your risk exposure and how you earn profits. Commercial real estate is divided into four general areas, which include the following:

  • Multifamily housing
  • Office space
  • Retail including malls and strip malls
  • Industrial and manufacturing space

Choose Your Business Partner

Passive investing requires you to rely on active partners to locate, purchase, and manage the asset, while delivering returns to you as an investor. The syndicator’s expertise and skill directly impact the investment’s success.

Real estate syndications establish an LLC or business partnership between the sponsor and the investors. The syndicator is the managing partner or sponsor, and the limited partners are the passive investors who contribute a portion of the down payment required.

Do You Qualify to Invest in a Real Estate Syndication

The SEC places restrictions on who can invest in syndications. Many syndicators only work with accredited investors, limiting participation. McKee Capital Group partners with accredited and non-accredited investors, giving more investors access to profitable deals.

Decide on Your Level of Participation

The price is one of the primary reasons investors pool funds to buy commercial real estate. In 2022, an apartment building will sell anywhere from $1M to $100M+ million dollars. Sponsors must raise funds for closing costs and the down payment, often 20% to 40% of the purchase price.

Given the high cost, minimum syndications investments generally start at $50,000.

Determine Which Funds You Will Access

When considering an investment starting at $50,000, you must generally reallocate invested funds. Sometimes, it could mean selling a successful stock or pulling out of an underperforming position.

Fortunately, you can draw funds from market accounts, retirement funds, or other liquid investments.

Vet the Property

Before offering a property through syndication, the managing partner must vet the property based on the price, location, and upside potential. As an investor, you must also vet the property to ensure it aligns with your long-term investment goals.

Schedule a Call With the Managing Sponsor

Before investing with a sponsor, you must schedule a call with the managing partner. In most cases, you will discuss a specific property and your level of interest. They will also answer any questions you have as part of your vetting process.

We produced a short introductory video to get you started if you are ready to learn more about partnering with McKee Capital Group.

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