A real estate “syndication” is the pooling of funds from many passive investors to purchase income-producing real estate. A passive investor has one role: investing cash in a solicited real estate investment for a specified return. Unlike real estate crowdfunding, real estate syndications usually offer higher upside potential. For an experienced investor, real estate syndications are an attractive alternative to diversify an otherwise low-risk portfolio.
There are three phases of syndication: origination, operation, and liquidation. The origination phase usually lasts several months from property identification to close of escrow including performing due diligence, obtaining financing, and closing the deal. The operation phase can take several years and includes executing the business plan created in the origination phase, usually alongside a professional property manager and other contractors. The liquidation phase involves a “liquidity event” that returns capital to the investors, either the sale of the asset or refinancing of the loan.