Suitable types of real estate properties for syndication.

The type of property chosen for syndication should meet the goals of the syndicator and the syndicates investors. The choice of property type and the particular property is the most important step in the ventures success.

 In considering the type of property to syndicate the syndicator needs to take into consideration the objectives of the syndicate, the possibility of leverage, the amount of leverage, the amount of capital required, the size of the property that can be acquired, and the profitability needed to attract investors.

 Property types 

• Vacant Land.

• Industrial

• Commercial

• Residential

• Multi family

• Vacant land to develop.

• Rehab.

• Specialty

Vacant land

 Vacant land has the potential for huge capital gains. Investing in vacant land requires considerable expertize and patience there for I will leave this subject for a later dissertation. Selecting the correct vacant land that will appreciate quickly is very difficult to do. The carrying cost of taxes, interest, insurance, maintenance and the difficulty of attracting investors makes this a special type of syndication.

 Industrial property

Industrial rental property can be very profitable. I know of one family that has rental income exceeding a million dollars a year from renting warehouses to small businesses. Each property consist of a 2,000 to 4,000 square foot (metal building) warehouse with a small office area. The floors are at loading dock height, with a fenced yard on a third to a half acre parcel. Each warehouse rents for $0.50 per square foot. Operation is simple and demand is fairly steady for these smaller warehouse type buildings. The key to keeping this type building rented is to buy the property at a good price and offer low rents. Capital appreciation is less on this type of building as leases can be for three to five years thus the rent increases at a slower rate then for offices or residential. You will want to make sure you have a good positive cash flow to meet your investors needs. Further gains will come by paying of any loans with the renters money requiring a longer holding period.

There are many other industrial property uses. Keep in mind that the more specialized the use the longer it might be in between renters should the property become vacant.

 Commercial Properties

Commercial properties types cover a wide variety of uses from strip centers to offices buildings. Improved income producing real estate presents a good money making opportunity for investors and thus are good candidates for syndication. The different types of commercial property require different expertize to manage and produce the highest and best return.

As a syndicator of commercial properties be certain to obtain competent expert advise and assistance in evaluating the properties and managing them.

 Disadvantages To Commercial Properties.

The disadvantages to commercial properties as investments include, long vacancies between renters, management is necessary and will need to be paid for, neighbor hoods can decline in desirability and this needs to be monitored, banks will want three year or longer leases from the tenets before lending on commercial properties. Selling commercial properties can take a longer time frame then residential properties.

 Residential Properties

Residential property offer good investment opportunities. Everyone needs a place to live so there is always a demand. There are to general types of residential properties. Single family homes and multi-family apartments.

 Single family homes

Single family homes do not generally offer a good syndication prospects except in multi-single family packages. Single family homes are often valued at a higher price then their income producing value indicates. This higher value often means the home can not be rented at a sufficient rate of return to satisfy investors. The exception is in a down market and where homes can be purchased at bargain prices for holding for three to five years for capital appreciation.

It is possible to create a syndicate to purchase bargain priced houses for rehab and resale. Expertize in remodeling properties would be required. I would recommend purchasing the homes and paying the remolding with cash to protect the investors if the re-hab and resale takes longer then anticipated. The uncertainty of the outcome of the projects would make it difficult to give the investors any reasonable estimation of profitability.

 Muti-family properties offer the best candidate for syndication.

Muti-family properties properties come in all sizes from duplexes to hundred unit complexes. They are located in every town and city so the selection is immense. The quality, types of buildings, rental rates and type of operations are all over the spectrum thus creating a wide variety of possibilities to make a profit.

Because a given properties condition and rental income can be determined, the value and profitability can be ascertained with some degree of certainty. The same valuations can be projected to what they might be after you make the improvements and changes you have in mind, and thus the future value and profitability of the property can be estimated with some degree of certainty. That makes for a determination of a given properties suitability for syndication.

 Because of the wide selection of muti-family properties in all price ranges, the syndicator can start with smaller projects until he or she can work up to larger projects. The syndicator is only limited bu the availability of investors cash, financing and expertize.

 Vacant land to develop.

Vacant land for development is best left to experienced developers. If you have the expertize this can be very profitable for the investors and the syndicator. It has been my experience that the cost will be more then anticipated and the time frame will be longer. The time to lease up can greatly increase the carrying cost so I recommend a high percentage of cash to borrowed funds.

The possibilities for development are many and cover a wide verity of property types. Warehouses, office, malls, storage, medical buildings and so on. There is something magic about creating something from the bare canvas of plain old dirt. Just keep in mind it is your investors money and it is your job to make them a profit with minimal risk so tread very carefully.

 I have included a example on this site of a mini storage limited liability syndication that was canceled just prior to construction so that you can see the structure of the deal. The developer/syndicator canceled the deal and with a bit of luck sold the undeveloped property for enough to repay the investors with interest. The syndicator was out two years of work and lots of expenses but he saved his reputation and sleeps well at night knowing his investors where not financially harmed.

 Re-hab properties

Properties needing rehabilitation are located all over the country. Many are bank owned or have set vacant for years. They include apartments, commercial buildings, industrial locations to name a few. The risk of syndicating this type of property is very high. There are a great deal of unknowns in taking on this type of project so that the profit potential should be equally high before you tackle re-habs with investors money. If you lack the experience to feel reasonably certain of your projects outcome I suggest you pass until you gain the necessary skills. If you do decide to move forward I suggest all cash deals until the project is cash flowing, then finance the project to get money back in your investors hands.

 Specialty Properties

Other property types. Sale leasebacks, build to suits, cell towers leases, bill board leases, parking lots, used car lots, etc.

 Example: I have a property with a cell tower on it that brings in a rental amount of $1,030.00 a month.

The rent increases 3% each year for fifteen years (a specialty ground lease deal). The tower was built by a mobile phone company on the property I lease to them They sold the tower subject to my lease to a company who leases the tower back to the cell phone company (a sell lease back deal). Several companies have approached me wanting to buy my lease (not the land, just the income from the lease) for a cash amount of $100,000. If I sell it to them they will make a 12% return year one and that return will go up each year there after. Both buying the tower and leasing it back to the phone company, or buying the land owner's lease income are potential syndicate deals.