The process of creating something new has the potential to lead to great things.
Syndication (Multifamily)
A multifamily syndication is a real estate deal where active investors gather funds from passive investors to buy, acquire, or fix up multifamily properties. These syndications can be small with a few investors or large with thousands. Syndication lets investors join bigger real estate deals than they could alone or in smaller groups, helping both passive and active investors grow their wealth.
General partners (GPs - That's us and the operators) play a key role in the investment process. They raise funds, choose and buy multifamily properties, and handle disbursements to passive investors (LPs). GPs also decide when to sell the property. Besides regular disbursements, they return the initial capital and any profits to LPs at the deal's end. GPs bear most of the risk and liability, earning extra fees and, based on the property's success, possibly a higher return on investment.
Limited partners (LPs - That's YOU) just put their money into the syndication and get passive income. Unlike GPs, they don't take part in the real estate investment process. LPs are usually not legally or financially responsible for anything in the syndication and only risk losing their initial investment if something goes wrong.
Limited partners in a real estate syndication are generally paid in two ways. Provided the property is profitable, they will generally get monthly or quarterly disbursements derived from the property’s rental income. In addition, when the property is sold or refinanced (with cash out), the LPs will get a larger, one-time, lump-sum distribution.
Syndications have a variety of tax benefits for both active and passive investors. The amount of tax benefits an investor can utilize is proportional to their ownership in the property. Some of these include:
• Depreciation Deductions
• Cash-Out Refinancing
• Mortgage Interest Deductions
• 1031 Exchanges
