For some people, real estate syndication is an efficient approach to profitability. It enables multiple investors to pool their resources in order to invest in properties and projects they could never afford or manage on their own. A real estate syndication offers many advantages, especially for investors with limited resources. A syndication can connect multiple investors, making it easier to buy and manage multi-family properties while still maintaining a higher income potential. Although there are many advantages to this type of arrangement, there are just as many myths.
Liquidity Isn’t Always the Biggest Concern
If liquidity is important to you, it’s important to note that stocks aren’t the only types of investments that can offer you easy liquidation. When investing with a real estate syndication, you can also sell your shares and back out of the investment. There’s also the added advantage of tax incentives offered to real estate investors. Expense deductions and property depreciation are just a couple write-offs you can claim on your investment.
Your Money Isn’t Necessarily Locked Down
There is a hold period during which the real estate syndication holds onto the investment property. Technically, this ties up the money each investor used to buy their shares in the property for five to seven years. However, there are no restrictions against selling your shares, so you can sell them to other investors already involved in the property, or you can sell to a new investor interested in joining the syndication. Either way, it’s not difficult to liquidate your shares.
Pricing Your Shares for Early Sale
Since the property hasn’t yet been sold, it’s more challenging to determine how to price your shares. One option is to go by the projected property sale, which was offered at the start of the investment deal. Alternatively, you can look at the average sale price for similar properties in your market and base your shares off of those values.
Investing with a real estate syndication offers investors the best of both worlds. They have the opportunity of benefiting from the property’s sale, or they can liquidate their share in the property early. In this way, it’s similar to investing in stocks. As long as investors make themselves aware of the potential risks, investing with a real estate syndicate can often be a more advantageous option.