Real estate: a fantastic investment, with seemingly endless options.
Along the way, you may decide that a real estate syndication is right for you – we’d say that this is a smart choice. There are many advantages to investing in a real estate syndication as opposed to other forms of real estate investing.
If you’re reading this article, chances are you don’t need any more convincing that a syndication is the right choice for you, but the question remains: how will you choose a firm to invest with?
This can be a daunting task in its own right.
Choosing the right firm is critical, but don’t worry. We compiled seven keys to evaluating a real estate syndication in this article so you can choose the firm that matches your financial goals.
What is a real estate syndication?
A real estate syndication is where a group of individuals or companies pool their money together to purchase a property and benefit from the rental income and potential appreciation that the property provides.
Real estate syndications are comprised of two groups:
- The syndicator(s)
- Passive investors
The syndicators are responsible for finding, structuring, underwriting, performing due diligence, financing, raising capital, completing the purchase, and finally, exiting the deal, among other things. The syndicators spearhead the transaction and perform the critical overhead tasks to make a deal for the property and ensure the investors receive their pro rata share of available funds.
About those investors: passive investors provide the capital needed to purchase the property and in return, they receive equity in the property. Typically, these investments can range from a minimum of $50,000 – $100,000 to several million dollars.
Check out our intro guide to real estate syndications for more information.
How to evaluate a real estate syndication
The seven keys below are simple, yet critical, questions you’ll need to answer when judging a real estate syndication.
The word “evaluate” carries a great deal of weight with it, but don’t worry. Even if you juggle a busy schedule you will be able to follow the seven steps below and pick the right real estate syndication.
Choose the right market
When choosing a firm, you’ll need to determine which market you want to invest in.
That’s because the real estate market can significantly impact the profitability of your investment. Look for a firm that has a strong presence and understanding of the market they invest in, and good reasons for it. The firm should take into account the profitability of the different markets as well as their potential to generate passive income via rental payments.
At Colony Hills, for instance, we invest in value-add real estate in growing sectors around the United States. “Value add” means that the real estate, while in good shape, can benefit from targeted improvements. Not only does this help our chances of generating a profit when selling the property, but it also allows us to increase rents and therefore raise the potential for passive income while holding the property.
Choose the right management team
If the real estate syndication invests in the right market, then it’s time to look at the management team.
Look for a team with experience and a proven track record. They should have a diverse skill set, including expertise in real estate investing, finance, law, and property management. This assures that they can navigate different aspects of the investment process effectively.
At Colony Hills, we have an excellent management team boasting decades of experience in real estate. Our founder, Glenn Hanson, has over 30 years of real estate experience as well as entrepreneurial experience and has been featured in online news segments for market commentary.
Choose a firm with the right investment strategy
If you believe in the management team, it’s time to review their strategy.
How does the firm choose its investments? How do they view and manage risk? These are questions you will need to answer to judge if it is the right firm for you. While every investment will carry some element of risk to it, you can get a sense of how much risk a firm is willing to take on by the markets and properties they invest in.
Choose a firm that makes the right decisions for the property
A good real estate syndication doesn’t just sit on a property and sell it after some time, they are making targeted improvements to generate the best ROI (return on investment) possible once the property is sold. That’s the benefit of investing in a real estate syndication after all. Not only can you benefit from regular passive income, but you can also profit on the eventual sale.
Choose a firm with experience and a track record
You must choose a firm with a strong track record. While past returns are not a guarantee for future results, you can tell a lot about a firm based on the decisions they have made over the years.
At Colony Hills, we’ve published our track record for anyone to review. You can review our transactions to learn more about the sizes of our investments as well as the properties we have invested in over the years.
Choose a firm that communicates
While investing often comes down to dollars and cents, a big part of investing in a real estate syndication also lies in communication. A real estate syndication is more than investing in stocks or bonds. It should provide a closer relationship with the firm, which means you need to choose a firm with the right communication style.
At Colony Hills Capital, we pride ourselves in our commitment to excellent client service and communication. From the minute you fill out a form on our site to the moment you sign on the dotted line, we are here to guide you through each step of the process.
Choose a firm with the right holding and exit strategy
Lastly, you’ll need to consider the hold period and exit strategy.
A real estate syndication is less liquid than stocks or REITs which allow you to convert your investment into cash more quickly. Because of this, you should know how long the property will be held, and make sure that the timing aligns with your investment goals and cash needs.
For the exit strategy, you’ll want to make sure you understand the potential scenarios for selling the property and how the proceeds will be distributed to investors. A clear, well-thought-out exit strategy can provide you with a better understanding of when and how you might realize the returns on your investment.
Ready to invest in a real estate syndication? Here’s how
If you’ve made it this far, you’re probably wondering how you can take the first step to invest in a real estate syndication so that you can reap the benefits of investing in real estate.
Fortunately, getting started is simple.
At Colony Hills Capital we specialize in purchasing value-add multifamily real estate properties through our finds and deals, allowing our investors to benefit from passive income as well as the appreciation of each property when it is sold. Past performance is no guarantee of future results. Contact us today to learn more.