How to Invest In Commercial Real Estate
Without being a real estate expert
Hey friends!
Quick announcement before we get into today’s newsletter:
Do you want to learn how to invest in commercial real estate?
Join me and the MAK Capital team on April 18 at 12 pm CST.
We’re breaking down our newest investment deal and sharing how you can invest alongside us.
“Real estate investing is not passive!”
I hear this a lot.
And it’s partly true.
If you buy a rental property and become a landlord, get ready to:
Fix leaky toilets
Get phone calls at 3 am
Deal with needy tenants
Manage all the heavy lifting
But what if you could enjoy all of the benefits of real estate without being a landlord?
As an LP investor in syndicated real estate funds — you can.
Syndicated Real Estate Investing 101
Mak Capital allows busy professionals to invest in multi-family and storage projects alongside us.
Our investors get all the benefits with none of the work:
We find deals to invest in
Our investors participate
We manage everything
Our investors collect a check
Curious to learn more?
Here’s how syndicated funds work.
What is syndicated real estate investing?
Syndicated funds pool resources from multiple investors to invest in a real estate project.
In a typical syndicated investment, there’s a sponsor (GP) who:
finds the investment opportunity
does the due diligence
manages the property
The sponsor brings expertise in real estate and acts as the quarterback.
They find deals, coordinate with the investors, negotiate the financing, and manage the property.
How is it different from owning rental properties?
Investing in a syndicated fund and owning a rental property are two different ways to invest in real estate.
Here are some differences:
1. Ownership
In syndicated real estate investing, investors own shares or equity in the property, whereas owning a rental property involves direct ownership.
2. Passive vs. Active Management
Syndicated investing allows you to passively invest in a property, relying on the expertise of the syndicator to manage the investment.
Owning a rental property includes finding tenants, property maintenance, managing finances, and dealing with day-to-day tasks.
3. Capital Required
Syndicated investing allows you to participate in larger or more complex projects than a single rental property for checks as small as $25,000.
4. Diversification
Syndicated funds allow you to invest in different types of properties, locations, and strategies.
A rental property, on the other hand, is a single property with less diversification.
5. Control and Decision-making
Syndicated investing involves fewer decisions for individual investors. The sponsor manages the investment.
Owning a rental property, on the other hand, provides more control for the owner.
What types of real estate can syndicated funds invest in?
Common types of properties include:
Raw land
Apartments
Office Buildings
Retail Properties
Industrial Properties
Hospitality Properties
Self-Storage Facilities
Development Projects
Student Housing Projects
What are General Partners (GP) and Limited Partners (LP)?
In a syndicated real estate investment deal, there are two types of investors:
- General Partners (GPs)
- Limited Partners (LPs)
Here are key differences between the two:
1. Role and Responsibilities
GPs are the sponsors or operators of the syndicated real estate investment deal. They’re responsible for finding, acquiring, managing, and potentially selling.
GPs are actively involved in the day-to-day operations of the property and make decisions on behalf of the partnership.
LPs are passive investors who provide capital to the syndication but generally do not have an active role in the management or decision-making of the property.
2. Investment Risk and Liability
GPs have more risk compared to LPs. They put their own capital at risk including debts, obligations, or liabilities of the partnership.
In contrast, LPs typically have limited liability and their risk is limited to their investment in the deal.
LPs are not personally liable for the debts or actions of the partnership beyond their investment.
3. Capital Contribution
GPs contribute capital to the syndicated real estate investment deal, along with potentially obtaining financing or debt on behalf of the partnership.
LPs, on the other hand, provide capital to the partnership in the form of equity, and their capital contributions are typically used to finance the acquisition, operation, and potentially the sale of the real estate asset.
4. Profit Sharing
GPs and LPs typically have different profit-sharing arrangements. GPs may receive a larger portion of the profits or returns from the investment as compensation for their active role in managing the property.
LPs, as passive investors, receive a share of the profits based on the terms of the partnership agreement, which may be negotiated during the syndication process.
5. Decision Making
GPs have decision-making authority in the syndicated real estate investment deal, including making decisions related to property management, financing, and potential sale.
LPs, as passive investors, generally do not have decision-making authority and rely on the GPs to make decisions on their behalf.
How do you become an LP investor?
Most syndicated funds require you to be an accredited investor.
If you:
Earn more than $200k annually
Have a net worth of $1M+
Work in the finance industry
You might qualify as an accredited investor.
Do you LPs get all the benefits of real estate?
Yes!
Cash flow
Appreciation
Tax deductions
Cost segregation
GP operators put their expertise to work to maximize the benefits of commercial real estate for all of their investors.
This flows directly to you, the investor, in the form of increased cash flow.
Here’s more on how investors are paid.
How do you get started?
You find the right partner.
Someone who:
Has a track record
Has unfair advantages
Has your interests at heart
Mak Capital partners with investors who love MidWest multifamily and storage as much as we do.
You can get started by joining our investor list and signing up for our next webinar here.
When you’re ready, there are 3 ways I can help you:
Do your next project with MAK Construction
Learn how to invest alongside me via MAK Capital
Explore 1:1 mentorship with me by applying here
Until next time, folks.
💸 🏡 📈
- Marc Kuhn
P.S. I would love it if you shared this with a friend.