You may have heard of making money as a syndicate, but what is it? Well, essentially it’s a group of investors that use their resources in order to make bigger investments that they may not be able to do alone. Like other investment models, there a lot of ways to make money when setting this up, since every syndication can be different. Not all will leverage every revenue option, but some might even have their own, and the degree that they can does vary, and it’s up to you whether you want to craft your own or work with the ones listed here. But, ideally the less complicated the better, so keep that in mind when you’re choosing the different options to work in real estate syndication.
First, there are acquisition fees. This is the successful closing of an asset, and it’s a small amount, like a commission, but it covers the sourcing deals, screening, and then managing from beginning to end.
There is also asset management fee, which is a management fee that’s a percentage of the revenues collected, and it’s a bit different from splitting profits, and generally, the role does oversee the operations such as property management.
You can also get refinance fees, and this involves working on refinancing the commercial property. For long-term types of holds, this is a regular type of occurrence, due to loans that end up maturing or face adjustments every 5-10 years.
The disposition fee is another one, and while few syndicates do buy and hold for the long run since most want an exist in the future. Assets are regularly recycled in order to maximize the returns, and some syndicates are created for the sole reason of developing and flipping the commercial properties once they’ve been renovated and the performance has been decided.
There are also loan guarantor fees, and while commercial mortgage loans are mostly asset-based loans, there is a guarantor that’s signing off on the loan. These are the more experienced, and the better the credit, the better the loan term, and it essentially helps everyone, and the syndicator will get a risk-based fee for that.
Finally, you’ve got a profit split. You can offer returns to the preferred ones to the first that you like. You can put cash into the deal in this case. It will be split either 70/30 or 90/10 in that case, and it’s essentially what you want to offer the partners will determine the split.
For multifamily properties, sometimes the user of a syndicate will help out in the future, and they are good for investing in properties since it involves less risk and more profit. That way, you can get the most that you can out of this, and create a better, more rewarding result from this as well, and you should never sell yourself short, but also be competitive and don’t’ give in to greed as well, for you’ll see better returns in this way.