As the partner for EstateSyndicate.com, the largest investment syndicate in the Midwest, I have seen many definitions of what syndication is, but none have explained it in a short succinct explanation. So here you go.
A real estate syndicate is a network of people that have assembled their wealth and talents for a common purpose.
Next we have to talk about what it is they put together. There are both monetary and skill assets. So let’s put together a hypothetical syndicate as an example.
In order to get deals done on a more massive scale we need a number of types of skill. Here’s a list:
* Real Estate Professional – this is the person who has expertise in transactions. 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 salesperson because this person should have on-the-ground experience in doing deals not just selling properties.
* Money Supplier – This could be a mortgage broker or a hard money lender or a person that can put together a supply of money{/spin] to putting together loan documents, underwriting, lender application forms and processes,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 money lenders, investors, sellers and buyers. 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 agents don’t know how to market and that’s why they are hardly making any money. Realtors are notorious for “no marketing knowledge” and that’s why houses are sitting on the market so long. (the state of the economy matters very little.
* Lawyer – this professional 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 investment 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 design of every enterprise is not the gross income but rather how much of it you get to hold on to. Taxation and entity structure plays a big role in the final outcome so an accountant can be an invaluable asset in the syndicate. Find somebody that knows real estate taxation and entity structuring for tax advantages to maximize your profits.
* 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 title and lending documents and most importantly how to legally make sure everybody gets paid.
In this mix of professionals the real estate professional is the person most likely to be the syndicator because he’s the one putting the deals together most often.
There you have it – a full blown investment syndicate.
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