Almost every time we tell people about syndication and passive income the response is like clockwork - “this seems too good to be true” is the common narrative. Now let me say, if this is you then this isn’t a bad thing. It simply means you’re being smart and thinking through your investment decision. 

So are there hidden secrets about this investment vehicle that you don’t know? The truth is, syndications are not meant for everyone. With any investment, it, too, comes with its pros and cons. We want to lay these out for you so that you can decide if a real estate syndication is a good fit for you. Let’s dive into these. 

Holding Period

Most syndication holding periods are 5+ years meaning your investment will be in the deal for that amount of time. If you have a major life event coming up that might change your overall financial situation, such as buying a home, this might not be the best time for you to invest in a syndication.

Qualification

Some syndications require you to be accredited. This means you make $200K as an individual (or $300K with a spouse) OR you have a $1M net worth (this net worth does not include your primary residence). If you meet this requirement, you will be able to invest in any publicly advertised deals. 

Now, we realize this is a pretty high barrier to entry. Don’t worry, if you’re not accredited you can still invest in deals but you’ll have to network in order to find them. You’ll have to do some additional leg work like finding the sponsor, creating a substantive relationship with them, and getting on their list in order to be qualified. 

Trust

When you invest in a syndication, you are investing not only in the property but in the sponsorship team who is running the show. So you should have a level of trust in them with your money. The sponsorship team will be the ones making decisions, managing the management company, overseeing any renovations, and updating you every step of the way.

As a passive investor, you are essentially a “silent partner” which means after your investment is wired, you're free of any responsibilities pertaining to the project. You get to sit back and receive your monthly updates and your distribution checks. If you’re more of an investor who likes to make decisions and have their hand in their investment at all times, this may not be the best option for you. 

Conclusion

Real estate syndication is a wonderful investment strategy but is not the perfect investment for everyone. Just like any investment vehicle, there are pros and cons. Whether it’s right for you really depends on where you are in life and what your investment goals are. 

We hope that you see that even though real estate syndication is a unique investment strategy and is not heavily talked about, it is completely obtainable and not too good to be true at all. We encourage you to continue to research and ask difficult questions in order to determine if it aligns with you.