GENERAL PARTNER As discussed, you and other limited partners aren’t active in the operations. The general partner takes care of those responsibilities. You may hear the general partner referred to as an operator, sponsor, or GP. So, what exactly is the GP responsible for? In essence, everything. The GP finds investment properties; analyzes deals; builds relationships with brokers; puts deals under contract; takes care of due diligence; works with an SEC attorney for compliance; manages more emails than you can imagine; coordi- nates attorneys, lenders, appraisers, inspectors, and contractors; handles legal, financial, and property evalua- tions; works with all the limited partners (investors); manages the tenants; and provides property management, leasing, repairs or rehab. A GP should also put skin in the game—they should invest right alongside the limited partners. Being a GP is a full-time real estate investment business that involves staff, resources, and a load of expertise. The GP and their team handle the deal from start to finish. They also take care of investors, presenting investment opportunities, putting together the legal documents, presentations, investments, tax returns, investor distributions, reports, and all communication. IS SYNDICATION FOR YOU? So, should you just invest with the first GP or in the first deal you come across?
stock in a company. You invest (i.e., buy shares of the company), but you don’t have anything to do with operations. LIMITED PARTNERS Investing in syndications isn’t a fit for every real estate agent. The Securities and Exchange Commission (SEC) regulates this process of buying commer- cial real estate. The SEC is a government entity, so it has lots of rules, regulations, and restrictions about who has access to syndications. Agents who meet certain criteria (net worth over $1 million, income of $200,000 solo or $300,000 married, or extensive experience in real estate and business) are granted access to investing in syndications. Because the investment is in commercial real estate, we aren’t talking about small investment minimums. Most syndications have investment minimums in the $50,000-$100,000 range. This threshold isn’t a problem for the right real estate agent or broker; in fact, it’s a benefit. The higher investment minimums draw investors (not just agents, but doctors, business owners, etc.) who are high-income earners. These high-achievers are a natural circle for top-producing real estate agents to associate with. Nobody in this crowd will try to sell you on an MLM. Investors in syndications are often country club members with multiple homes, and they are looking for access to commercial real estate without adding more responsibilities to their full plates. When you invest in a syndication with an experienced operator who aligns with your financial goals and risk criteria, you get access to real estate ownership without the duties, tax benefits to offset your passive income, and diversity in properties across a variety of markets.
There’s a lot that goes into those two responsibilities. You need to define your criteria for vetting GP teams, define your risk criteria, know your financial goals, be able to make decisions, evaluate possible deals, stick to a long-term strategy, monitor all communication for deals you are invested in, and be able to account for your returns and losses. To be successful investing in real estate syndications requires no small amount of skill and savviness. You must ask yourself this question: Is it worth taking the time now to design an investment strategy that serves me so I don’t have to keep showing homes when I’m 75?
Most of us would answer that question with a resounding yes. So, what’s holding you back?
NEIL TIMMINS
Neil Timmins is a real estate syndicator, broker, and educator. He generates passive income opportunities through industrial real estate in “Cash Flow Country,” the Midwest. After spending years investing in houses and $300 million in transactions, he graduated to investing in commercial real estate. Now he educates others on how to do the same. Neil hosts the podcast “Passive Real Estate Investing with Mavericks.” His first book “Unicorn Hunting for Real Estate Investment Companies: The Complete Hiring Funnel” was released in 2021.
Absolutely not. There is work involved for “passive investors.” If investing in syndications is right for you, you have two primary responsibilities: 1. Invest in deals you like. 2. Pass on deals you don’t like.
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