Real Estate Syndications vs. Real Estate Funds

If you are interested in owning Real Estate or investing in Real Estate you have probably heard the terms “Syndication” and “Fund” before.

And if you have listened to my podcast or watched any of my YouTube then you definitely have.

They are pretty similar in nature.

Both pool money to acquire Real Estate as investments to generate a return for investors.

These range from industrial to commercial offices to multifamily.

But there are some differences.

Today I want to go over some of those differences so that you can be able to decide which of these is the best tool for you.

Syndications vs. Funds

The inception of Real Estate Funds came around in the 1980s from big name firms like Blackstone and others.

They did exactly what we talk about in my course and on my media outlets.

They created funds to raise capital to buy Real Estate.

When raising Real Estate Funds that money is typically raised in advance of purchasing the Real Estate.

You have a General Partner you raises money from Limited Partners for a set purpose.

Once that money is raised for that fund and the money is deployed that is basically it.

Real Estate Syndications do the same thing on the inverse side,

You find the deal and then raise money for that specific asset.

These two concepts are exactly what I teach my students in my course.

Each one is good in their own way and so we combine the two to make it even better.

Compensation

Syndication and Real Estate Fund compensation works similarly for the General Partner in both cases.

There are many ways to get paid and breakup your fees.

The most common ways are by charging management or startup fees, then you can also collect cashflows, and lastly you can sell the property and distribute those profits however you like.

These splits are completely up to you as the manager but you need to make sure they are laid out clearly in your fund or syndication documents for your investors.

It is also important to note that most funds and syndications have a preferred term or preferred rate.

This rate of return is your promise to investors that those profits will completely go to them.

For instance, if you have an 8% pref rate then that means that the first 8% of profits will go to directly to investors.

And then the profits are split up after that however you determine.

bird s eye view of three houses

Real Estate Syndications are a great way to break into investing in large deals without needing a lot of money. It’s all about your knowledge and your hustle.

Conclusion

I know this article was briefer than ones in the past but there are so many things to cover with syndications and funds that I thought I might spare some long reading.

I went over what i believe to be the highlights.

The video linked above goes into much greater detail as I break down the ins and outs of funds and syndications.

If you have any questions at all please also visit the Facebook group link below.

It’s free and myself and my partners are all on there answering questions daily.

It’s a great way to network and we welcome anyone who wants to join!

Hope this article and the video helped to clear some things up.

Take Care,

Bridger Pennington

Want access to free trainings? Join our public Facebook group!

DISCLAIMER: This content is for educational and informational purposes only. It is not to be taken as tax, financial, or legal advice. You should always consult a legal professional before taking action. Furthermore, this is not a recommendation to buy or sell any security. The content is solely just the opinion of the authors.


Leave a Reply