Real estate syndication is a large part of the real estate commercial market place. Most people only hear of the Real Estate Investment Trust that are publicly traded. There are countless more syndications that are privately managed. These private placements are being invested in by individuals, insurance companies, retirement systems and foreign companies to name but a few.
These companies are investing in all forms of income producing real estate, apartments, office buildings, malls, strip centers, mobile home parks, medical buildings, industrial space, warehouses, factories, restaurant buildings, homes, bare land, cell towers plus every manor and use of real estate that you can imagine.
The rules of private placements have changed the JOBS Act created Rule 506(c) of SEC Regulation D, allowing private placement issuers to use “general solicitation” to raise money from qualified investors. The new Rule 506(c) allows issuers to advertise their offerings. There need not be a prior relationship with the investors who buy their securities. They can publicly promote the fact that they’re raising capital to anyone who will listen. BUT, they do have to verify that anyone who invests is an accredited investor, and investors must prove they are accredited to participate in the offering.
Typically a company raises equity money from accredited investors that equals 25% to 30% of the projects cost. Banks provide the other 70%-80% taking a lien on the properties and earning interest. The equity investors earn a preferred rate of return and a shared interest in excess profits or cash flow. Payouts to investors are made periodically as earned and when the project is sold or refinanced. The projects private placement offering materials spell out the details of the specific investment project.
We currently offer regulation 506C investment opportunities for accredited investors. The investment is set up as limited liability company (LLC). When we have identified enough accredited investors to raise between $500,000 and $2,000,000 we then look for an income producing property to buy (currently focused on Mobile Home Parks). This equity money is the basis for purchasing properties valued at three or four times the amount raised from investors.
After the purchase, we take the property to its highest and best use, (maximize the net income) and then sell the property at a profit sometime in the future.
That’s it, that is all there is to it. This process requires all of our real estate experience and management skills. This is where experience counts.
We look for properties that can be developed or repositioned, and that will have a financial return of double the amount of cash invested in five years (20% a year). This type of investment traditionally takes from 5 to 7 years. If your need is for cash flow or shorter term, then this would not be your best choice.
Real estate has two big advantages when it comes to investing. First, everyone needs or uses real estate. Second, there is a huge group of people and organizations just waiting to assist real estate investors. So, there you are, there is a huge supply of available properties in every imaginable condition and price range to choose from, lots of available help, a huge demand and we can help you participate.
A real estate investment syndication is accomplished in phases. First we locate the investors, the syndicate is planned out, we find a suitable investment property to acquire that meets the syndicate’s goals, we manage the syndicate’s affairs, and finally, we dispose of the investment, pay the investors and close out the syndicate.
Finding investors is the hard part. The problem is what comes first, the chicken or the egg. You can’t do the prospectus until you find a property and do the financial analysis, you can’t do the numbers until you get a loan commitment, you can’t do that until you know how much equity money you will get from investors for the down payment, and so it goes.
We start with finding investors, once we have enough investors lined up to raise a minimum of $500,000 we start looking for a property.
If you are interested in this type of investment, please fill out a form on this site or contact us by phone or email.
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Jim E Glasgow
Jim on the radio talking about real estate investing.
We are providing this for informational purposes only and it does not constitute an offer or solicitation to sell shares or securities in Gem rentals LLC, Texas Home Notes LLC or any related or associated company, or investment. Any such offer or solicitation will be made only by means of the Company’s (PPM) Private Placement Memorandum or investment prospectus, In accordance with the terms of all applicable securities and state laws.