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10 Critical Mistakes That Real Estate Syndicators Make - Part 1 of 2

By Joel Block

The following are significant errors that promoters who syndicate real estate make which cause them to fail in the running of their business. Be certain that if you get involved in a real estate syndication project, that you watch out for the following:

1. The property selected does not have enough upside potential: The issue is that in order for the syndicator to benefit from a property, in which he shares revenue with the investor, the proper potential must be very great or there won't be room for the syndicator to participate.

2. Tax structures are ineffective: Ever since the Tax Reform Act of 1986, real estate syndication has been much less about tax and much more about economic gain. But there are still opportunities for tax preference and treatment that must be attended to, especially if one is using an LLC structure.

3. Syndicators tend to put too much of their profit on the back end: A great amount of effort will be expended throughout the process of syndicating and ultimately managing the property before it's sold. Therefore, it's a critical mistake to put too much emphasis on back end profit and not enough emphasis on being paid for services that are rendered along the way. If they aren't careful, the syndicator could run out of money long before they reach the liquidity event that they've been waiting for.

4. Debt structures are unfavorable: It's important when syndicating real estate to create a debt structure that is reasonable for the property and the investors that you represent. As a fiduciary to the investors, you have to make sure that you don't take unnecessary risk.

5. Investors don't fully understand the deal: If the investors don't fully understand the deal - either the financial opportunity that you are offering to them or the nature of the properties that you will use the funds to acquire - then they won't move forward. Clarity is king in investment transactions.

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About Joel G. Block, President of Growth-Logic, Inc.
Often dubbed a "Growth Architect" by his clients, Joel Block advises companies on explosive growth strategies by driving revenue and sales. Well known in the capital markets, Joel is a successful entrepreneur, speaker, advisor and faculty member of the iLearningGlobal community. To bring Joel into your company, please visit http://www.joelblock.com or http://www.growth-logic.com. Also, be sure to check out our newest project: a blog to organize the blogs that cover entrepreneurship - http://www.entrepreneur-hub.com. And finally, for film makers: http://www.filmfundingblog.com - our newest project.