How multifamily syndication works
A plain-English guide for accredited investors considering a limited partner (LP) role.
The basics
A syndication pools capital from multiple investors to acquire a property that would be difficult to buy alone. Usually it's structured as an LLC or LP.
Finds the deal, arranges financing, oversees operations and reporting, and makes the decisions.
Contribute capital, have limited liability, and don't manage the property day to day.
The typical lifecycle
How sponsors are typically paid
Sponsors commonly earn fees, such as acquisition and asset management fees, and a share of profits after certain investor thresholds (a "promote"). Structures vary widely. Always read the offering documents to see exactly how a sponsor is compensated.
Potential benefits and real risks
Access to larger properties, professional management, possible tax advantages from depreciation (consult your CPA), and diversification away from public markets.
Loss of capital, illiquidity, long and uncertain hold periods, reliance on the sponsor, leverage risk, and the chance that distributions are reduced or suspended. An LP interest in a syndication is generally a security sold in a private offering. It is not registered with the SEC or any state, is not reviewed by any regulator, and can't be freely resold.
Questions to ask any sponsor (including us)
- What is your track record, including deals that didn't go as planned?
- How do you underwrite rents, expenses, and exit assumptions?
- What debt do you use, and what happens if rates rise?
- How and how often do you report to investors?
- How much of your own capital do you invest?
Questions about how we work?
Any offering will be limited to accredited investors whose status we verify.