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Thursday, November 7, 2013

Gather investors to make the big deal: Three tips for forming a real estate syndicate

Teams of investors pool funds to make large real estate buys
Research investments to avoid risk
By Larry Moore

Syndication in real estate is the pooling together of funding to pay for a much larger commercial real estate property than one person could buy on their own. Many times this means investing in a shopping mall, an office building or a multi-family housing property, and the profits that stand to be made from these properties is enormous. 

While the profits are there to be made and most people understand the importance of passive wealth generation as part of their investment portfolio, it can still be hard to find the right people to pool together funds to get started. There are three tips that can make it easier to find the right investors and get started down the path to wealth and financial freedom.

Do your research

The first step in any project is to do the research, and this is especially true when it comes to commercial real estate. Potential investors are going to ask a lot of questions, and because of the amount of money involved, they are going to expect concrete answers from you from the beginning. The last thing that you want to do is look like you do not know what you are talking about, so make sure that you research the property thoroughly.

For office spaces they are going to want to know how many units are available and whether or not they can be sub-divided. They may also ask about current tenants and the status of their leases. For multi-family housing units they may want to know when the last major renovations were done or the last time that the property had a major electrical or plumbing problem. Knowing the history of the property will help you to ease some of the concerns that potential investors have and it will show them that you are serious about the property.

Have a game plan

Most of the time commercial properties become available because the previous owners mismanaged or mishandled the property. Potential investors want to know that you are not going to do the same thing, and they will feel better about the property if you can show them that you have some kind of plan in place to increase rents and revenues. How do you plan on getting new businesses in to the retail spaces? What can you do to extract longer leasing contracts from companies who potentially want to lease office space from you? What is your vision for the multi-family housing property? When you can show investors your vision and you can help them see the potential in the property you generate excitement and make people want to be a part of the process.

Talk to the right people

Finally you need to find the right people to talk to. You might be tempted to go to your friends and family for the first investment property, but this is one of the worst mistakes that you can make. The real estate business can be brutal and you do not want to strain or ruin your personal relationships in the process of building your real estate portfolio.

A good idea is to go around to small business owners in your area and let them know about an upcoming investment opportunity and invite them to attend a presentation that you will give on the property. Business owners are always looking for ways to diversify their investments, and a real estate syndicate is a good way to get started. You will want to try to avoid posting on things like social media sites because many of the older investors will be turned off by this approach and it may make you seem like a fraud instead of a serious real estate investor.

Building a real estate syndicate can help you get the access to large commercial real estate properties where you can generate substantial funds; however, doing so is not easy. When you take the time to do your research, come up with a plan and find the right investors, you are well on your way to real estate success.

About the author: I am Larry Moore and I bought my first office with a real estate syndicate last year after I got some advice from www.gocmrei.com about commercial properties. The deal has gone so smoothly that my investors and I are looking for a new property to invest in sometime in 2014.
Image license:  Lumaxart, CC BY-SA 2.0