Real estate syndications have been around for as long as people have been investing and are historically a great way for investors to pool their money and buy real estate.
But what is a real estate syndication, and how do you know that investing in a syndication is right for you as a physician looking to invest in real estate? In this article, we'll explore the ins and outs of investing in a real estate syndication so you can decide if it's the right financial move for you.
What is a Real Estate Syndication?
A real estate syndication is defined as an organization or group of people that pool investor funds to buy and manage real estate investments, whether residential apartment buildings or commercially tenanted spaces.
Syndications are like a mutual fund for real estate, except you get to own the underlying property instead of just owning shares in it.
If you're looking for better returns than what you would get from your traditional IRA or 401(k) plan, this may be an option worth considering. For a comparison of typical returns with a $50k/yr investment into a taxable brokerage account vs. a $50k/yr investment into syndications of your choice (returns reinvested), check out this informative link.
What Is the Difference Between Real Estate Syndications And Real Estate Funds?
Real estate syndications are an investment vehicle that allows you to invest in real estate with less capital than you'd need on your own.
Similar to real estate funds, they are legal entities created to pool investor funds and invest those funds into one or more properties.
One major difference between these two types of investments is that with a syndication, you have more control over which properties the group purchases and how much money is invested in each property.
How is Investing in a Real Estate Syndication Different than Traditional Real Estate Investing?
A real estate syndication is a type of investment structure has several advantages over traditional forms of real estate investing:
The investor doesn't have to manage the property or find tenants.
It's easy for investors with limited capital to get involved in this type of deal because they only need enough money for one share to fully participate in its success.
Real estate syndication is so attractive because it offers a high return on investment.
It's also relatively safe as long as you choose the right partner.
But before jumping into a syndication, it's important that you understand what they are and how they work, and how you, as the investor, can still make money on the investment.
Who Operates a Real Estate Syndication?
Real estate syndicators, or sponsors/general parents of the syndication, are the ones who would be managing and operating the real estate syndication.
These individuals would have control over setting up the initial investment structure, preparing legal documents, securing financing, and strategizing in the real estate investments for all parties of the syndication.
How to Properly Vet a Syndication Before Making Any Real Estate Finance Decisions
When considering a real estate finance deal, there are some important things to remember. First, make sure that the syndicator or syndication you choose to work with is reputable. You want to see if they have a solid track record of success and can provide references from previous investors.
Secondly, ask for detailed business plans and projections for your investment and information about how risk is managed on each project. If the project has multiple properties or units, be sure to understand what happens if one doesn't sell within its time frame or, for some other reason, goes off course.
Where Physicians Can Find a Real Estate Syndication to Invest In
Look for real estate investment associations in your area. These organizations can be a good place to start when looking for a syndication, as they're often connected with local professionals with experience in this field.
Or, you could ask friends and colleagues if they know of any syndications that might be suitable for you. If someone has been involved with a successful real estate investment deal before, their advice will be invaluable in helping you find another one!
Why Are Real Estate Syndications a Good Investment for Physicians?
Real estate syndications are an alternative to traditional real estate investing and are often a favorite form of real estate investing for physicians. Syndications allow you to diversify your portfolio, reduce risk, and get a higher return than you would from a traditional investment with less effort and time on your part - which is invaluable as a busy physician.
With the rigorous time demands and constraints that your career as a physician takes on your life, the last thing you need is another time vacuum where you can't guarantee results. That's why many physicians have begun to look towards syndications as investment vehicles due to the safety of working with professional investors, less demand on their personal schedules, and a detailed plan with projections available that will break down exactly what you are to expect in return.
Investing in this type of arrangement can help physicians because:
It allows them to get into real estate without having all the money upfront that would otherwise be required by most other types of investments (such as stocks).
It gives them access to information about different types of properties that would otherwise be difficult or impossible for someone new entering this field; this means less work on their part when it comes time for deciding which properties should go into their portfolio!
Real estate syndications are also a great way to get started investing. You can use them to build your investment portfolio and get experience before you move on to more advanced forms of investing, providing physicians an opportunity to manage their investments without having to worry about them on a day-to-day basis. They're also a good option if you want more control over your investment than most funds offer.
If you're interested in discovering more about how this type of investment works and whether or not it could be right for you, we suggest reaching out to colleagues, like-minded investors, or get in touch with me today.
David Price MD is the Founder and CEO of getFREED, a business providing real estate education and vetting of individual deals to help physicians and other healthcare professionals build a passive stream of income, allowing them to work less and practice on their terms.
David lives with his wife and two daughters in Atlanta, GA, USA.
To find out more about David and getFREED, head to http://www.get-freed.com.