Syndication & Group Investments
Syndication is the act of bringing together in co-ownership a group of investors to fund the purchase, operations, and eventual resale of an income-producing property. Syndicated co-ownership is most effectively accomplished when structured as a limited liability company (LLC) or sometimes a limited partnership (LP). The real estate broker who negotiates the acquisition of the property and organizes the group is known as the syndicator, manager, or "sponsor." The broker also performs property management services during the group’s ownership of the property, and handles the resale of the property.
An existing income-producing property is generally the most prudent category of property for real estate investment groups to acquire and operate for income and profit.
The benefits derived from the co-ownership of existing income-producing rental property include:
an initial capital investment without the expectation of future additional contributions;
minimal involvement by each individual investor;
equity buildup due to amortization of the mortgage principal through monthly payments made from rental income;
spendable income from operations distributed periodically;
an increase in value resulting from consumer price inflation and asset appreciation; and
tax benefits provided by depreciation deductions for annual capital recovery from rental income, and reinvestment on a sale of the property.
While syndication is possible with other categories of real estate investment properties, such as yet-to-be-built construction and subdivision projects, pre-builder developable land to hold for profit on resale, and agricultural land, these other categories do not offer the same advantages as income-producing property. Moreover, these “quasi-real estate” investment programs are classified as corporate securities risks and require the expertise of the manager in an ongoing business-related service or trade operated on a parcel of real estate. The manager, or others, promise to create value for the co-owners after acquisition of an interest in real estate through development, managing resale of inventory or the husbandry and sale of crops before a return on (or of) the investment can be expected.
In collaboration with Lowenthal Realty Co., a full-service real estate brokerage firm owned and managed by Justin Lowenthal, we not only provide advice, counsel and representation for managers and sponsors, but we are available to identify acquisition targets, lead due diligence, and supervise property management.
With our office in Davis, we represent clients in Yolo County, Solano County, Sacramento County, and statewide throughout California. For more information, call our office today at (530) 231-4949.