As we prepare for our April seminar program that covers the concepts of successful syndication, many people are sending in questions that they have about the topic. We are organizing them into categories and I am answering them so that everyone who is interested in learning how to make money the same way that Wall Street makes money, can begin to understand how the business works.
In the coming weeks, I will continue to answer the real estate questions that come in using our Wednesday column. Feel free to submit your own questions as well. To register for our upcoming live event, go to www.SyndicateFast.com. To submit a question of your own, go to www.joelblock.com/capital.
More Questions about Real Estate Syndication
1. What’s the difference between a “successful syndication” and a “successful syndicator”?
Many people put together a group of investors, or a syndication, on a one-time basis. But very few are successful in doing this process repeatedly. The single biggest difference between putting together one deal and putting together a number of deals is the way that you structure the deal with the investors so that they come back to you repeatedly.
Running a syndication business is a business – it’s not a one-time operation. Therefore, all of the revenue streams and all of the business techniques that apply to every kind of company also apply to a syndicator. They have to be concerned about maximizing business operations so that profit can be maximized. It’s not as simple as making a one-time investment. Running it as a business means that you’re going to have success in the short run and in the long run.
2. How do you keep smiling all the way to the bank?
The syndication business is a license to print money. Because you’re using other people’s money, you get enormous leverage in all of the activities you engage in. The syndicator is responsible for making critical decisions about which property to purchase, how to carve up the pie and how to make money for all the investors and other parties involved.
Because the syndicator is responsible for these important factors, the syndicator is the one who takes the profits, and those profits, as I will show you in this program, are enormous. There are many different ways that syndicators can make money, including brokerage fees, real estate acquisition and disposition, mortgage fees, property management fees, leasing fees, and maintenance company fees, as well as backend profits from the deal.
There are many opportunities for a syndicator to make a great amount of money, provided that the syndicator handles it correctly and runs it as a responsible business.
3. How much do syndicators profit from setting up these deals?
The syndicators that I counsel make anywhere from $25,000 on their very first deal to, in many cases, hundreds of thousands or millions of dollars per transaction. The techniques that I will show you in this program are techniques that Wall Street investment bankers use to make big money on their deals.
I didn’t make this material up. I’ve learned this material as a CPA at Price Waterhouse and in organizing these deals with attorneys from firms across the country. These techniques are proven, they’re legal, and they benefit the investors and the syndicator alike – which makes it a powerful win-win situation.
4. How do I get started in the world of real estate syndication?
In order to get started, you must have background either in real estate or some form of finance. The syndication business is a business that any sophisticated professional can learn; but if you don’t have background in either real estate or money, you’ll have a hard time, because there’s too much to learn in too short a period of time.
If you have a strong background in real estate and you’re able to find deals, then your job is to find partners who can work with you on the finance side. The purpose of our seminar is to bring investors and real estate professionals together so that powerful networks can occur, and so that you can begin to put your deals together immediately. We’ll provide the deal structure and we’ll provide the information that you need to be able to structure your relationship with your investors.
5. What are the best types of property to syndicate?
The concept of syndication, which is all about pooling funds for the purpose of acquiring assets, can be applied to many asset classes. It can be applied to real estate, it can be applied to personal property and equipment, it can be applied to plants, industrial plants, and other types of very heavy assets.
For example, I am involved in the syndication of a heavy industrial plant, and I know other people who have syndicated airplanes, yachts, and dramatic pieces of property. For purposes of real estate, any type of real estate can be syndicated – apartment buildings, commercial shopping centers, raw land, and even individual residential homes. The only caveat is that sufficient capital needs to be put aside to carry these properties; and with purchasing land, it’s not advisable to encourage debt.