Top 5 Ways to Find Real Estate Syndications
There are many places to find real estate syndication deals. They range from word of mouth to highly vetted deals from online marketplaces. The most important advice I recommend to someone starting out on this journey is to start small and make sure that you do your due diligence on the sponsors of the deal.
If a deal seems too good to be true you are probably right. Below are some general ranges for reasonable returns over a 3 to 5 year holding period:
- IRR of 18-23%
- Cash on cash return of 5-8%
- Equity multiple of 1.8-2.5
Another helpful tip when be to have someone like myself who has gone down this road before and evaluated hundreds of deals review the specific deal that you are considering investing in. If you have not already done so book your 15 minute Calendly meeting with me here:
http://calendly.com/themultifamilymd
One other choice you have to make is whether to invest locally or not. This comes down to a personal comfort choice, but in my opinion you are missing out on great deals and diversification if you limit yourself to your own backyard. I am personally invested in deals in multiple states across the country including Texas, North Carolina, Florida, and Oklahoma across different asset classes.
My Top 5 Ways to find real estate syndications
1. Networking
Find a sponsor through networking. Most of the syndications that I am currently invested in I found through networking. Some of them are from online networking and some of them from offline. The benefits of this type of referral is that the sponsor will typically be a bit more vetted and already have some credibility based off of the person who referred you to them.
Examples of ways to network to find syndications:
- Referrals from colleagues and friends
- Referrals from commercial real estate brokers
- Facebook groups
- Reddit forums
- Real Estate Conferences
- Meetups
2. CrowdStreet
Crowdstreet offers a wide variety of syndications for accredited investors. They are one of the oldest players in this space. The main benefit of using crowdstreet is that they make it easy to navigate and compare different investment options. They also provide some degree of safeguard against making a bad investment as not all deals that get submitted to Crowdstreet by sponsors get approved. According to their website they only accept 5% of deals that were submitted. The typical minimum investment is $25,000.
You can invest not only in residential real estate, but also commercial, industrial, and even Medical office buildings. they also have options to invest directly in a single property or in a fond of multiple properties. The historical internal rate of return over the life of Crowell Street has been 18.3.
The main downside is that they are in essence a middleman and they do charge fees to the sponsors which ultimately reduces your returns.
3. Yieldstreet
YieldStreet is another large broker similar to Crowdstreet, but they offer a wider variety of Investments and also typically a lower minimum investment. Not only can you invest in real estate you can also invest in loans, art, and cryptocurrency.
They also analyze every deal so your chances of investing with an unethical sponsor or a terrible deal are significantly reduced. They have been around since 2015, so they also have a fairly long track record.
One thing I did find confusing with navigating their website is some of the Investments are REITs and some are syndications, but it was not always straightforward to tell the difference. The reason this matters is that the income you generate from the REITs will be taxed as ordinary income at whatever your effective tax rate is typically around 30% and syndications will typically only be taxed somewhere around 5% because of all of the depreciation.
4. RealT
I want to start out by saying that this platform is relatively new and definitely not for everyone, but I think 10 years from now this is how real estate syndication deals will be done. They are similar to the above brokers, but everything is done on the blockchain.
One of the benefits of tokenized fractional real estate ownership is that you can invest very small amounts. Just to try it out I invested $500 and everything is working well so far.
If you have never set up a cryptocurrency wallet I would not even bother with this one.
5. Fundrise
I almost did not include fundrise on this list because it is really open to all investors; not just accredited investors. The reason I chose to include it is because this is actually the first place that I used to invest a small amount into real estate. I only invested $1000. After the first month I started getting very small ACH deposits into my bank account and I was hooked.
They are not a broker like the other sites. They own and operate their own real estate. they are a private REIT ( Real Estate Investment Trust). This is identical to the REITs that you can log into your brokerage account and buy, but the ones on fundrise are private deals and not listed on the stock market.
The main benefit is simplicity of diversification and the very small minimum investment of only $10. If you are still on the fence about whether investing in real estate is for you this would be a good place to start.
The biggest downside is that your Dividends are taxed at your ordinary tax rate because you own shares in the corporation; you do not own the real estate directly like you do when you are involved in a syndication.