Who owns that apartment building?
Updated: Jul 22, 2019
Ever wondered who owns the apartment complexes you see around town? Syndication makes it possible for many to own these buildings in partnership. In this short blog we break down what syndication is and how it’s possible to participate in large apartment complex ownership.
Syndication, let’s start with the definition.
Couldn’t have said it better myself.
In the commercial real estate world, a syndication is the bringing together of an operator/sponsor, the particular “deal” or property being acquired, and the group of investors who will participate.
The structure becomes a G.P. (general partnership) and L.P (limited partnership) between the operator and the investors. An LLC will be formed around the project or asset, and investors become LP’s in that particular partnership.
A few reasons here why this structure benefits LP investors:
· All the same benefits of ownership- tax, depreciation, cash flow, 1031 exchange ability into future property
· Limited downside with all the upside—only liable for principal investment
· Completely passive participation—sit back and collect the checks.
This last bullet point might not satisfy everyone, for those investors who prefer to be “hands on” and have a say in every decision, syndication might not be for them.
But for those that want to deploy capital alongside experts in conservatively underwritten projects, while they focus on their FTE job, family, time on the beach, or whatever pleases them, syndication is a great choice. While the investment itself may not be hands on, that doesn’t mean an investor is not involved. Good operators/sponsors will provide investor communications that include items such as: rent rolls, finance breakdowns, pictures, business plan updates, community event notifications, etc. etc.
In summary syndication allows you to gain access to private off the market opportunities, typically only reserved for institutional grade investors, while doing so in a passive manner.
If you’d like to learn more about how this process works and the syndication's Red Rock puts together please contact us today.