Syndication is one of the most powerful ways to safely grow wealth in real estate. It’s simply a bunch of people that put their money together so they can each have a piece of a larger deal. This is common for larger projects like big multi-family apartment buildings, commercial buildings and self-storage although it could certainly happen with residential single family homes or a lot of smaller projects bundled together as well.
The advantage for an investor in syndication is it’s typically very passive in nature meaning you put your money in and you don’t have any direct involvement and very seldom hear much of anything other than occasional updates from the operator. It also gives an investor the ability to own a piece of a larger project while limiting their downside risk to a smaller amount. If the deal goes south, then instead of being on the hook for the entire project, they are just on the hook for the amount invested.
The downside is that your funds are typically tied up for a long period of time then most other investments. Once you’ve committed and placed your funds in the syndication, you can’t call up the operator and say “just kidding, can I get my money back?” When you’re in you’re in – those funds are deployed into the project and most likely the fund has an exit strategy of 2-5 years out.
What’s most important with a syndication deal is not so much the investment itself but the operator team. The ones picking out the investment and managing the fund will determine the success or lack thereof that you will have. Choose your operator team carefully – it all hinges on them.
Currently, I just closed out a $2 million dollar investment group fund where 100% of that will be invested into a self storage syndication. The minimum amount I would take was $100,000 and we expect a 5 year hold with no cash flow until the storage units are renovated and leased up – probably 3 years out. Clearly, this isn’t for everyone, however, the operator has done 108 deals like this and his lowest ROI was 10%. Typically, he hits 22-25% annualized returns. So essentially in 5 years if you hit a 20% annualized return you double your money. This is what the wealthy know, understand, and invest into that no one’s told you about.
I consider this investment is extremely safe and I lose absolutely zero sleep at night wondering if it will work. Why? Because the operator knows what he’s doing and he has a proven track record. 108 times – never missed. He has an acquisition team in place that only ends up buying 1/100 storage facilities that they look at. Additionally, my funds are invested into a real asset, that has real demand no matter what the economy is doing. People aren’t going to cancel their $110/mo. locker because they don’t have anywhere else to put their stuff. Stocks and crypto can go to 0 – real estate does not go to zero and even in the worst downturn averaged 30 some % drop in 2008. These type of income producing assets rarely if ever have these kinds of wild swings. If you have an income producing asset, you can ride out any market downturns because you’re positive cash flowing.
Personally, I think every young investor should be starting to plan and save towards getting into a syndication deal. Almost always you need at least $50,000 in cash to get in. It’s a solid predictable way to protect and grow wealth. For a lot of these deals you do need to be an accredited investor which means you make over $250k or are worth over $1 million. You also typically need to be connected to someone that invests into these deals. “It’s not what you know but who you know” certainly applies to syndication.
Occasionally I will be offering syndication deals through my Indestructible Wealth platform. In all likelihood, the only ones that I’ll offer it to is those that have taken my Premiere Mastermind course. When I put together a syndication deal, the group of investors that pool their money together all become Members of an LLC (Limited Liability Company). I personally want to be very careful about who I partner with on investments, especially at this scale. By going through the Premiere course, I will have a chance to get to know you on the one on one coaching calls as well as the group zoom classes. If you’d like to join the Wait List for the Premiere course, simply click on this link and you’ll be notified when the next course opens!