Syndication means crowd-funding in today’s term. The concept behind syndication or crowd-funding is nothing new, in which someone is trying to make a major investment. Due to whatever reason, perhaps the investor does not have enough capital, or the investor does not want to take on all the risk, or somewhere in between, the investor decides to open this up for other potential investors to join in. In exchange, they share the profits.

There are 2 types of investors in a real estate syndication deal. The first type is called “General Partners” (or G.P. for short). This group of investors are sometimes being referred as the “active investors” because they are responsible to make this deal happen, and they typically have an active role in the transaction, whether it is to source a deal, to act as capital raiser, to review contracts, to analyze the deal, to close the deal… etc. G.P.’s in general also put in their own capital as investment, but on top of that they also get compensated for the active role they involve. There is no exact guideline in terms of what type of fees they can charge, but typically G.P.’s would charge an asset acquisition fee when the deal is closed, and also charge an on-going maintenance fee annually for taking care of the deal.

The second type of investors is called the “Limited Partners” (or L.P. for short). Sometimes they are called the “passive investors.” This group of investors usually just involve in putting in the capital and expect a return, they do not want to be involved in the daily operations of running the deal. From a legal standpoint, their exposure to liability is also limited.

Real estate syndication deals are best suited for people who want to get into real estate, but do not have the time or energy to learn the details of it. As a L.P., you pretty much only need to pay up and wait for money to start coming in. Of course, on the flip side, your involvement is so limited, you do not really know what is going on behind the scene, and whether the G.P.’s are doing their jobs. You will only get to find out “after the fact” if something goes wrong. That is why at DoorInvestor, we believe when you invest in syndication as a L.P., you are more investing in the people than the actual deal.

Commercial real estate syndication is a hot trend right now. Whether you think you are ready for that or not, you should at least learn more about it. Education is always the most important part of making money. Click here to check out the resource to see if it works for you or not.

If you are already a G.P., or you want to learn more about how to property do due diligence on syndication deals, we encourage you to get a Deal Analyzer. It is a small investment but it saves you time on analyzing deals.