CLICK HERE TO LEARN MORE ABOUT OUR NEW DEAL


We once heard real estate syndications described as being like an airplane ride. It’s a brilliant analogy when you think about it. You’ve got the pilots, passengers, flight attendants, mechanics, and ground staff who all have a part to play in bringing the plane to its final destination successfully. Just as in a real estate syndication, where you have team members who work together to create a successful and profitable investment deal.

Imagine that the pilots are the equivalent of the sponsorship team, and the passengers are the passive investors. Both groups are getting on that plane, and both are motivated to make the journey, but their roles in the process couldn’t be more different. 

There might be storms, the ride could be bumpy if turbulence strikes, and there might even be engine issues. When problems arise, the pilots take charge of the flight because that’s what they’re trained to do.

Your pilot will keep you informed as a passenger, but they’re not expecting you to run to the front of the plane, wrench open the cockpit door, and fly the aircraft! They’re just letting you know what’s going on and assuring you during the sometimes complex process. 

A real estate syndication works in much the same way. Everyone on the team, from passive investors to sponsors, brokers, and property managers, are all moving forward with the vision of purchasing and renovating a specific property. 

This article will give you the details of who is on a real estate syndication team and how they work together to create a successful investment.  

 

Real Estate Syndication Roles

Here are the key roles that come together to make a real estate syndication happen:

  • Broker
  • Lenders
  • General Partnership Team
  • Sponsor
  • Property Manager
  • Passive Investor
  • Syndication Investors
  • Property Management Team
  • Ascent Equity

     

Broker

The real estate broker is the person or team who surfaces the property for sale, either as a listing or as an off-market opportunity (i.e., not publicly listed).

Having a strong real estate broker is crucial, as they are the main liaison between the buyer and the seller throughout the acquisition process. 

 

Lenders

The lender is the biggest money partner in a real estate syndication because they provide the loan for the property. The lender performs their own due diligence, underwriting, and gets a separate appraisal to make sure the property is worth the value of the loan requested.

In the airplane analogy, neither the real estate broker nor the lender are aboard the plane. They have important roles in bringing the project to fruition, but they are not part of the purchasing entity, nor do they share in any of the returns.

 

General Partnership Team

The general partners synchronize with the real estate broker and lender to secure the loan and acquire the property in addition to managing the asset throughout the life of the project, which is why they are often also called the lead syndicators. 

The general partnership team includes both the sponsors and the operators (sometimes these are the same people).

The sponsors are the ones signing on the dotted line for the loan and are often involved in the acquisition and underwriting processes.

The operators are generally responsible for managing the acquisition and for executing the business plan by overseeing the day-to-day operations. Operators guide the property manager and ensure that renovations are on schedule and within budget.

 

Sponsor

For a commercial loan, the sponsor is required to show a certain amount of personal liquidity. This reassures the lender that the sponsor can contribute additional personal capital to keep the property afloat if things were to ever go wrong.

Sponsors are responsible for identifying, acquiring, and managing the real estate investments within a syndicate. They are experienced and use their industry knowledge to ensure the venture’s success.

One or more key principals may be brought into the deal to help guarantee the loan if the sponsor’s personal balance sheet is insufficient. 

 

Syndication Investors

A real estate syndication’s passive investors have no active role in the project. They simply invest their money in exchange for a share of the returns. Like the passengers on an airplane, they get to put their money in, sit back, and enjoy the ride.

What a great position! 

 

Property Management Team

Once the property has been acquired, the property manager becomes arguably the most important partner in the project because they are the “boots on the ground” who execute renovation projects according to the business plan. 

The property manager works closely with the operator (i.e. the asset manager) to ensure the business plan is being followed and that any unexpected surprises are addressed properly.

 

Property Manager

A competent property manager is crucial for a fruitful real estate syndication deal. After acquiring the property, the property manager handles the renovation projects as per the business plan. They work alongside the operator to ensure the plan is correctly executed and deal with unforeseen surprises.

 

Passive investors 

Passive investors in a real estate syndication do not have to actively manage the project. Instead, they can invest their money and receive a percentage of the returns. This is similar to being a passenger on an airplane, as investors can benefit from the project without having to actively participate in its management. It’s a desirable position to be in, as investors can reap the rewards of the project without having to be involved in its day-to-day management.

 

Ascent Equity 

In a real estate syndication, Ascent Equity is part of the general partnership. Our main role is to lead investor relations, review conservative underwriting criteria, and help raise the equity needed.

We serve as an advocate for investors by ensuring that the sponsors’ projections are conservative, deals are structured favorably toward investors, that multiple exit strategies exist, and that capital will be preserved and grow.

After the property is acquired, we act as the liaison between the sponsor/operator team and the investors by providing updates, financial reports, and other important information between parties.

 

Types of Real Estate Syndications

There are different types of real estate syndications that investors use. Below are the most common ones.

1. Equity Syndications

In equity syndications, investors use their capital to purchase property. They share the property’s cash flow, appreciation, and profits upon sale.

2. Debt Syndications

In debt syndications, investors pool capital to provide loans for property owners or developers. They earn returns from interest and principal repayments.

3. Hybrid Syndications

Hybrid syndications allow investors to provide debt financing and equity investments in a single project, providing broader access to investment opportunities.

A Successful Group Investment

Real estate syndications are group investments that work by having a group of passive investors put their money together to purchase an asset. That asset creates continued cash flow and appreciates over time. To make the most of a deal, the whole syndication team needs to work together cohesively. 

In addition to the roles listed above, there are also inspectors, appraisers, cost segregation specialists, CPA, legal team, and insurance agents who are integral to getting the syndication off the ground. The real estate syndications must comply with state securities laws, which vary by state.

We are committed to finding a team that looks after your money as if it were their own. Our team will keep you in the loop regarding the safety of your investment, and will always make decisions with your best interest at the forefront of our minds.

Ready to see if Syndication Investing makes sense for you? Try our quick quiz to find out now! The answer might surprise you.