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  • Writer's pictureRick Martin

7 Steps To Investing In Your First Real Estate Syndication

I love my kids. Let me make that darn clear. My youngest is continuously belting out, "Dad-da!" He does it in a variety of ways. Sometimes it is delivered with such vigor, it startles those of us in the room, and every time it breathes a wind of optimism into my current mood. And then there are the adoring hugs, the impromptu cards, the sad looks as you leave for the day; it goes on and on. I remember a friend saying, when weighing the pros and cons of having kids, there are 100's of cons, and maybe 10 pros, but those 10 pros carry much more weight – Quality vs. Quantity. But let's talk a bit about those cons, and see if there is something we can do to address them. 1) Elimination your free time, 2) waking your up two hours earlier than you would like, 3) turning your living room into a daycare, 4) crushing your dreams of becoming a professional athlete, musician, or artist, 5) having to pay for diapers, daycare, swim lessons, soccer clubs, piano lessons, and college, all while you are trying to prepare for retirement. I can't help you with the first four, but number five, I do have some useful suggestions – well, it is actually one. Get crafty with your investing. Honestly, it isn't even getting crafty; it is merely opening your mind to the possibilities. In this case, I am going to focus on one. Investing in a real estate syndication.

As your eyes gloss over, stick with me for a second. What the heck is a real estate syndication? This video succinctly explains it all in a minute. The term sounds very official, almost classified information – and in a way it is, because a lot of people don't seem to know what they are. It is actually a relatively simple concept. It is a group of people coming together to buy a more considerable, more expensive asset, such as an apartment complex. These syndications can take advantage of economies of scale, professional management, and mitigation of risk, and single-family rentals, frankly just can’t.

For a lot of people, the process of buying a house is familiar.

You decide you want to buy a house. You think about the neighborhoods and features in your must-have versus nice-to-have columns. You speak with a lender to see how big a loan they're willing to give you and consequently move some things from your must-have to your nice-to-have column after you get your lender's pre-approval letter. You then get together with a broker to tour properties until you find the home of your dreams and put in that offer package that the seller would be crazy to turn down.

By extension, the traditional types of real estate investing that involve buying a house and making some sort of profit are also reasonably easy to grasp. Fix-and-flip: buy a home, renovate it, sell it for a profit. Buy and hold: buy a house, rent it out, get monthly rent checks.

Beyond that, things may become more complicated, especially when you start talking about stuff like syndications.

In this post, I'd like to quickly take you through that process from start to finish. This way, you have a clear understanding of all the steps involved in investing passively in your first real estate syndication.

If you are more of a watch a video person, I go into how you make your money and how it works here:

While the timeline can vary with different deals, the overall steps of investing in a real estate syndication are primarily the same:

1. Decide whether to invest in real estate, period

2. Determine your investing goals

3. Find an investment opportunity that fits

4. Reserve your spot in the deal

5. Review the PPM (private placement memorandum)

6. Send in your funds

7. Celebrate

Each step will help you gain more clarity on what you want and enables you to get a little closer to your goals of finding and investing in a specific deal.

Step #1 – Decide Whether to Invest in Real Estate, Period

This is perhaps the most critical step of all, the decision of whether you want to invest in real estate, period. There are many other things you could invest in, from gold to coffee plantations to stocks and bonds.

This is a decision that I won’t be able to make for you. You’ll have to look at your overall portfolio, reflect on your goals, and decide whether investing in real estate can help you reach those goals.

What I can tell you is a bit about how I got into real estate investing.

I sort of fell into real estate investing. I planned to buy my first house as my own personal residence. I bought it as a single guy and rented out a room, which was nice, as I learned that really offset my costs. That basically was my first ah-ha moment. Then life took a turn, and I had to move away. I held on to the house and continued to rent it out, and never looked back.

As I acquired more rental properties over the years, I really started to grasp the power of passive income. Real estate has taught us about people and relationships, leverage, tax benefits, passive income, and community power. Real estate is a critical part of our personal portfolio and our long-term building wealth

Step #2 – Determine Your Investing Goals

Once you decide that you want to invest in real estate, think about what you're hoping to get out of it. Are you looking for a long-term or short-term investment? Are you hoping for a lump sum reasonably quickly, or a steady stream of passive income over time? How much do you have to invest, both in terms of money and in terms of time?

Suppose you're not afraid to roll up your sleeves and put in some sweat equity, or you want to choose your own tenants or cabinets or flooring. In that case, you might consider trying a fix-and-flip or buying and holding a small rental property. Be prepared as it takes a considerable amount of time and knowledge.

A better alternative might be investing your money alongside other investors. In syndication, you have an asset manager take the helm, manage the asset, and carry out the business plan to update the units and maximize impact and returns.

Step #3 – Find an Investment Opportunity That Fits

If, at this point, you've decided that a real estate syndication is the best fit for you, the next step is to find a syndication opportunity that works for you. Just as there are various real estate assets you can invest in personally, there are various real estate syndication projects available. They range from ground-up construction to value-add assets, and even turnkey syndications.

To help investors learn about investment opportunities, deal sponsors typically provide some variation on the following materials:

  • Executive summary

  • Full investment summary

  • Investor webinar

These are the core materials that will give you a full 360-degree view of the asset, market, deal sponsor team, business plan, and the projected financials.

I'm looking first and foremost at the team who's running the project. A bad team can take a good deal and run it into the ground. You can give a struggling project to a skilled team on the flip side, and they can raise it from the ashes.

Beyond the team, I look to see if the business plan makes sense, given the asset class, submarket, and where we are in the economic cycle. I do my own research on the market, looking at job growth, population growth, and other trends. I look at the minimum investment amount, projected hold time, and projected returns. I look to ensure that the team has multiple exit strategies in place, in case their Plan A doesn't pan out. I look for conservative underwriting. I attend or review the investor webinar and ask questions


Step #4 – Reserve Your Spot in the Deal

One thing to note about real estate syndications is that the opportunity to invest in the deal is on a first-come, first-served basis.This can be especially important for deals in hot markets with strong deal sponsors. Multi-million-dollar investment opportunities can fill up in

48 hours. That's why it's essential to do your research ahead of time, know how much money you want to invest, and what you're looking for in an investment opportunity.

That way, when the opportunity opens up, you can jump on it.

Often, there will be an opportunity to put in a soft reserve amount. This is to hold a spot for you in the deal while you take some time to review the investment materials. If you decide to back out or reduce your investment amount later, you can do so without penalty.

The flip side is if you don't hold a place, but then decide you want to invest, there may no longer be room for you in the deal, and you'll have to join the backup list.

Not every deal offers a soft reserve, but when there is one, and I think I might be interested, I always put in a soft reserve to buy myself some more time. I can then think about the deal, review the materials, and do my own research.

Step #5 – Review the PPM

Once you’ve decided to invest in a deal, the first “official” (aka, legal) step is the signing of the PPM (private placement memorandum).

This is a legal document, often quite lengthy, that details the investment opportunity, the risks involved, and your role as an investor in the project. When I say risks, I mean it really gets spelled out. It is likened to when you get a medical prescription, and it lists all the potential side effects. When you buy a stock or invest in a mutual fund, all these risks are in the fine print - or should I say tiny print. However, most of us don't tend to even notice it. The PPM is a full document, in full size; There is no tiny print. In that regard, it is a more transparent process.

The PPM is undoubtedly not the most fun document to review. Still, you must read through it to fully understand all aspects of the investment opportunity, including the risks, subscription agreement, and operating agreement. As you become more familiar with them, you will begin to move more quickly through them.

As part of signing the PPM, you'll also need to decide how you want to hold your shares of the entity holding the asset. Often, you can also specify whether you want your cashflow distributions sent via check or direct deposit.

Step #6 – Send in Your Funds

Once you’ve completed the PPM, the next step will be to send in your funds (aka, the amount you’re investing into the deal).

Typically, you will have the option to either wire in your funds or send them in a check. I've used both methods before and have had no issues with either way.

Pro tip: Before wiring in your funds, be sure to double-check the wiring information, and let the deal sponsor know to expect your funds to be on the lookout.

Step #7 – Celebrate

You did it! You've done your due diligence on the investment, reserved your spot in the deal, reviewed all the legal documents, and sent in your funds.

That means you're done with all the active parts of your role as an investor. To be analogous to taking an airplane: you've picked your destination, bought your ticket, checked your bags, reviewed the safety information, and buckled your seat belt. Now you're ready for a cocktail and a movie.

The next piece of communication you'll likely receive is a note once the property has closed. Deal sponsors typically like to put lots of smiley emojis and exclamation points in these emails.

After that, expect monthly updates on the project, more detailed quarterly reports on the financials, quarterly cashflow distributions, and an annual K-1 for your tax returns.


So, there you have it. Hopefully, the process of investing in a real estate syndication is a bit clearer now, and perhaps, a little less intimidating.

Real estate syndications are more of a set-it-and-forget-it type of investment, so most of your active participation is upfront. After you decide to invest in syndications, you review the investor materials (executive summary, full investment summary, and investor webinar). You then reserve your spot in the deal, review and sign the PPM, and send in your funds


So raising a family requires a lot of time, love, and yes, money. In my opinion (and many others), working for a living and putting that money into a 401k does not work. You have to think a little outside the box, but have no fear. You just need to get started, follow the steps above, and it will all become routine. And once it does, you will find that you have many income streams to cover life's challenges and take the weight (maybe of your children) off your back.

If you’re interested in investing in apartment communities on your path to early retirement a great place to start is by joining the Fortress Federation Investor Club. Sign up for our quickstart guide to real estate syndications below.


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