If you’re looking at ways to grow your real estate portfolio–you’ve probably considered syndication’s benefits. A syndicated deal is a transaction in which multiple investors pool money to buy real estate.
This investment strategy can be an excellent way to grow your portfolio–especially if you’re starting as a real estate investor.
But what exactly is syndication? How does it work? And how can it help you achieve your goals as a real estate investor?
Let’s examine what makes this investment strategy powerful and why many investors use it today–
Syndication
Real estate syndication allows you to pool your money and invest in one property. The investor who acts as this syndicate’s general partner (GP) will be responsible for finding deals, managing the deal process, and providing ongoing support to each group member.
The main benefit of syndication is that it allows you access to otherwise inaccessible deals. If you could find a great deal alone, why not buy it yourself? Syndications allow you access without having all of the funds upfront or taking full responsibility for managing an entire building after closing day by yourself.
Selling Your Interest In A Deal
Once you have an interest in a property and are ready to sell it, there are several ways that this can occur. Assigning or transferring your interest in the deal is the most common way.
When this happens, the buyer will pay off all remaining costs and take possession of the property while assuming responsibility for any remaining debt obligations associated with the property (for example, mortgage payments).
This means that any equity gained from appreciation during ownership will belong solely to them; however, if there was any negative cash flow during ownership – meaning more money went out than came in – then those losses may be passed along as well!
Another “sale-leaseback” method involves selling an exclusive deal but continuing to live onsite as tenants under new management until your lease expires. At this point, both parties agree upon another mutually beneficial arrangement (e.g., purchase option).
Reinvesting Profits In Other Syndicated Deals
Reinvesting your profits is a fantastic method to expand your real estate portfolio. After all, the more properties you own, the more passive income streams you have and the more money you may generate.
Investors can reinvest their gains in one of three ways:
- Reinvesting in additional syndicated transactions (as the majority of individuals do);
- Requiring new assets with their earnings (such as another investment property or even a personal residence);
- Reducing outstanding debt.
Tax Advantages Of Real Estate Syndications
There are several tax advantages to participating in real estate syndications.
- You can defer taxes on capital gains by reinvesting them into new properties.
- You can also defer taxes on rental income by reinvesting it into new properties.
- Using a 1031 exchange will allow you to avoid paying taxes on both types of income until the next time that money is invested or sold (at which point it may be subject to capital gains).
There you go!
Syndication is a powerful tool for real estate investors. It can help you expand your portfolio of properties, earn tax-free income and reduce risk by diversifying across different types of investments.
If you’re looking for an alternative investment strategy or seeking more control over your finances, consider joining forces with other investors through syndication!
