Syndication

· 2 min read
A real estate syndication is when a group of investors pool their money to buy a property that none of them could afford alone —…

A real estate syndication is when a group of investors pool their money to buy a property that none of them could afford alone — one person runs the deal, everyone else writes checks and collects returns.

The structure is simple. A sponsor (also called the general partner or GP) finds the deal, arranges financing, and manages the property. Limited partners (LPs) invest capital — typically $25,000 to $100,000 minimum — and receive a share of cash flow and profits at sale. LPs are passive. They don’t manage anything.

How the Money Works

Most syndications target apartment complexes, self-storage facilities, or commercial buildings in the $2-50 million range. The sponsor might put up 5-10% of the equity and raise the remaining 90-95% from LPs.

Returns are typically split through a “waterfall” structure:

  • Preferred return: LPs receive 6-8% annually before the sponsor gets any profit split
  • Cash flow split: After the preferred return, remaining cash flow splits 70/30 or 80/20 (LP/GP)
  • Sale proceeds: LPs get their capital back plus preferred return, then profits split per the agreement

A typical syndication promises 15-20% IRR over a 3-7 year hold period, with 6-8% annual cash distributions along the way. The sponsor earns fees (acquisition fee, asset management fee) plus their share of the profit split.

Finding Syndication Deals

Syndications are private placements under SEC Regulation D, usually 506(b) or 506(c). The 506(b) offerings can accept up to 35 non-accredited investors but can’t publicly advertise. 506(c) can advertise openly but only accepts accredited investors ($200,000+ income or $1M+ net worth).

Most deals are found through sponsor websites, real estate investing meetups, online communities, and referral networks. There’s no MLS for syndications.

Risks to Understand

Your money is illiquid for the entire hold period — typically 3-7 years with no option to cash out early. You’re trusting the sponsor’s ability to execute the business plan. If they overpay for the property, mismanage renovations, or can’t hit projected rents, your returns suffer.

Due diligence on the sponsor matters more than the deal itself. Track record, communication style, fee structure, and how they’ve handled deals that went sideways — these are the things to investigate before wiring money.

Understand the financing basics with our mortgage calculator and learn more investment vocabulary in the glossary.