What is a Syndication?
Today we're going to talk to you about what is a syndication? I'm sure that is a term that if you haven't heard before, it can sound like a very scary term. However, it is not it's not. That's right. There is a way for everyday people like you and me to become a partner in an apartment complex, through a process called syndication, is syndication is when a group of people pulls their money together to make the downpayment on an apartment complex. And that team owns the complex and is broken down into two important groups.
So the first group is the general partners or the GP’s. They are the active owners doing the due diligence required to purchase the property and overseeing the property management company once the property has been bought. After closing, the property management company and the local contractors implement the business plan that the general partners are the GPS created. So the GPS will oversee the entire team, as they upgrade the apartments, find families to live there, improve the interior and exterior and just create a really great community.
That's right. The other important group of people involved are limited partners, or LP’s. The limited partners are the passive investors in the business mean they are they don't control the day to day operations, right. They joined the partnership with their initial capital contribution, and have partial ownership in the apartment complex, similar to owning a stock in the company. But you get all the great depreciation benefits of owning the real estate itself. Usually, there is about a 70% to 30% ratio or split of the shares in the company, meaning 70% going to limited partners and 30% going to the general partners, and oftentimes, or most times, actually investors are paid out through quarterly dividends and upon the refinance and or the sale of the asset or the apartment building. This is a really exciting process because this helps the LP’s, it helps the GP’s, it helps everybody who's involved in anyone who can be a part of this journey. Everyone benefits and that's the greatest part about it all is that everyone in anyone can join this team that purchases apartments and helps communities improve.
If you're interested in learning more about what a syndication is, please reach out to either of us!
Until next time….
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Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.
