The team behind a real estate syndication can make or break the deal. Several key players are needed to create a successful deal, with each bringing their own talent and expertise to the table.
In a real estate syndication, every team member has their own specific role, and everyone contributes to the project’s overall success. Everyone is working toward the same common goal, from the sponsors to the management team to the passive investors.
How the team responds when unexpected issues arise contributes heavily to the success of the real estate syndication deal. When everyone knows their role and performs it well, the chances of creating an agreement that benefits all parties dramatically increases.
In a real estate syndication, passive investors, sponsors, brokers, property managers, and more share a vision to invest in and improve a particular asset.
Keep reading for a breakdown of exactly who the key players are and their respective roles in a given real estate syndication.
Key Players in a Real Estate Syndication
Here are the crucial roles needed to bring a real estate syndication to life:
- Real estate broker
- General partners
- Key principals
- Passive investors
- Property manager
- Ardent Equity Group
Real Estate Broker
The real estate broker is needed during the acquisition phase of the project. They’re the person or team who surfaces the property for sale, either as a listing or as an off-market, not publicly listed, opportunity.
It’s imperative to have a strong real estate broker. They serve as the principal liaison between the buyer and the seller throughout the property acquisition process.
The lender, or lending team, provides the loan for the property. They’re the most prominent money partner in a real estate syndication because they provide the capital for purchasing the property. The lender’s responsibilities include performing their own due diligence, underwriting, and getting a separate appraisal to make sure the property is worth the value of the loan requested.
The lender and the real estate broker have essential upfront roles in making the project viable. However, they aren’t part of the purchasing entity, and they don’t share in any of the returns.
The general partners work closely with the real estate broker and lender to secure the loan and acquire the property. They also manage the asset throughout the life of the project. For this reason, they’re often called the lead syndicators.
The general partnership team includes both the sponsors and the operators. In some deals, the sponsors and the operators are the same people.
The sponsors are the ones who ultimately sign on the dotted line for the loan and are often also involved in the acquisition and underwriting processes.
The operators oversee the day-to-day operations and are generally responsible for managing the acquisition and executing the business plan on behalf of the investors. In addition, operators work with and guide the property manager, ensuring that the renovations remain on schedule and within budget.
When obtaining a commercial loan, the sponsor must show a certain amount of personal liquidity. In addition, the lender requires reassurance that the sponsor can contribute additional private capital to keep the property afloat in an unexpected problem or emergency.
For this reason, one or more key principals may be needed to help guarantee the loan and secure the deal if the sponsor’s personal finances are insufficient.
In a real estate syndication deal, the passive investors are key players, but they have no active role in the project. Instead, they put up their capital in exchange for their share of the returns. As passive investors, you can sit back, relax and collect your returns. Therefore, the limited (passive) partner position is arguably the best role to have in a real estate syndication deal.
A good property manager is essential to a successful real estate syndication deal. Once the property has been acquired, the property manager becomes the boots-on-the-ground team who executes the renovation projects according to the business plan.
The property manager works closely with the operator to ensure the business plan is being followed accordingly and that any unexpected surprises are appropriately addressed.
Ardent Equity Group
Ardent Equity Group is part of the general partnership in a real estate syndication. Our primary role is to provide reliable investor relations, ensure the underwriting meets our conservative criteria, and help raise the equity needed.
We’re the primary advocate for investors. We work hard to ensure that the sponsors’ projections are conservative, deals are structured to favor investors, and there are multiple exit strategies in place. By doing this, we make sure that investors’ capital will be preserved and allowed to grow.
After the property is acquired, we serve as the principal liaison between the sponsor and operator teams and the investors by providing frequent updates, financial reports, and other important information between parties.
Every Successful Deal Needs a Good Team
As you know, a real estate syndication is a group investment. So it’s no surprise that for a group investment to be successful, you need a solid team to make it come to pass. Only through pooling resources and coordinating efforts can a real estate syndication be genuinely successful.
Beyond the critical roles discussed here, a syndication deal also has inspectors, appraisers, cost segregation specialists, a CPA, a legal team, insurance agents, and more, who all work behind the scenes to ensure that the syndication gets off the ground.
While every team members’ role is different, they’re all crucial in ensuring the success of the real estate syndication project.