They have more investors, and they generally manage portfolios aimed at longer-term holdings. REITs are, essentially by definition, larger than syndicates. The most fundamental difference between syndicates and REITs involves their relative size and scope. Potential investors should understand these differences before deciding where to put their money. Syndicates and REITs differ from each other in several important ways. Real estate investment trusts (REITs) own and manage portfolios of real estate holdings. Real estate syndication allows investors to contribute capital to a development project under the management of a syndicator. The fundamental concepts of real estate investment have not changed much over the centuries, but relatively recent innovations allow investors to entrust their money to professionals, freeing them from direct responsibility for managing investment properties. Real estate investments have generated income for investors for about as long as the concept of private ownership of real property has existed. Other syndicates may form as limited liability companies (LLCs), in which the investors own the majority of the business, but leave management and operation to the syndicator. Under this type of business structure, the investors are shielded from liability, but cannot have a direct role in the real estate project. Real estate syndicates in California are often established as limited partnerships (LPs), with the investors as limited partners and the syndicator as general partner. The same group of investors may go on to invest in more projects together, but they would do so as a new syndicate. While REITs typically invest in numerous real estate projects and ventures, a real estate syndicate usually exists to invest in a single project. The investors place a considerable amount of trust in the syndicator, so it is worth reviewing the duties that a syndicator owes to them.Ī real estate syndicate is a way to finance a project or development through private investors. While the investors take a passive role, the syndicator manages the project, usually in exchange for a fee and a percentage of the profits. The person or business that initiates the project is known as the syndicator. Investors in a real estate syndicate pool their money for a particular project, which might involve improvements to an existing property or an entirely new development. ( You can read about the differences between a REIT and a real estate syndicate here). Investors who prefer a more passive role can invest in a formal business structure like a real estate investment trust (REIT), which is similar to buying shares in a corporation, or a real estate syndicate. An investor who joins a project as an owner or partner might take an active role in the project. They can invest directly in a project, becoming a co-owner or creditor. With regard to how they can invest their money, California real estate investors have many, many options. Syndicates may only allow investors to buy in at specific times. Investors can buy into an existing REIT and sell their shares without restriction. A syndicate, on the other hand, might exist for the sole purpose of developing or improving a single property, with the intention of dissolving once the project is complete.Ģ.
REITs typically manage large portfolios of properties, with the goal being longer-term holdings. Depending on the type of entity, the syndicator might be liable for the syndicate’s debts and other obligations.Ī real estate syndicate differs from a real estate investment trust (REIT) in at least two important ways:ġ. Several different business forms may be used for syndicates, such as a limited partnership (LP) or limited liability company (LLC), to protect investors against liability beyond the amount of their investment. What Is a Real Estate Syndicate?Ī “real estate syndicate” is a business entity created to manage a property or project, and which seeks financing through investors. Before investing in a syndicate, investors should understand several important features. A syndicate may arise out of a group of investors looking for a project, or it may result from a developer seeking financing for a project from sources other than a bank.
The person responsible for managing the project, and the investors’ money, is known as the syndicator. This could be a new development or the refurbishing of an existing property. Real estate syndicates allow California real estate investors to pool funds to finance a project.
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