Dispelling The Myth About Real Estate Investing

Dispelling the myth about real estate investing by Bill Roberts

How many times have you said "I just don't have enough money to invest in

real estate right now?" Well, its one thing to say that to someone else, but it is

an entirely different thing to say it to yourself.

Good property suitable for investment is expensive. Financing options are

limited. The necessary down payment can be enough to choke a horse. Is that

what is bothering you Bunkie?

 

Well, let's examine this. Good real estate investment property might be

expensive, but that doesn't mean that the traditional method of saving up

until you have a sufficient down payment, getting your credit score

maximized, searching for and finding the "right" property, negotiating a

"killer" deal, finding a lender that will make the loan, shepherding the "deal"

through escrow, and then managing the property in such a way as to

guarantee that it is a successful investment is the ONLY way to go about it.

 

As they say, there are many ways to skin a cat. Investing in real estate can

take many forms. It isn't all about traditional purchases. Some of the options

are: lease options; assignable options to buy; assignable purchase contracts;

tax deeds; tax certificates, Real Estate Investment Trusts (REITs); real estate

focused ETFs; and syndications.

Syndications

All of these strategies allow you to invest in real estate without all the

strictures of the traditional purchase. Any one of them could be your answer,

but I would like to spotlight one of my favorites: syndications.

 

A syndication is basically a partnership with other people who share some of

your concerns. Maybe they can't qualify for the necessary loan, maybe they

don't want to do all the research necessary to find that perfect deal, maybe

they just don't have enough money to go it alone. Whatever their motivation

is, teaming up with them can give you what you want: a seat at the table.

 

A syndication is put together by someone called the syndicator. The

syndicator gets paid for what he does. That payment can take the form of

commissions on the purchase and sale of the property, an equity interest in

the syndication, management fees, and other remuneration as the

partnership deems necessary and appropriate. All these fees doesn't mean

its not a good deal for you. A deal is only good if it is good for all involved.

A Good Deal

The syndicator has the responsibility to make the deal attractive to his

investors.

 

A syndication will generally take the form of a limited liability company

(LLC). The LLC will find and purchase the property. It will manage or arrange

management of the investment. It takes all the risk. Your risk is limited to

your investment. You can come in with a small investment. Your losses are

limited, but your gains are not.

 

How do you find a suitable syndication to invest in? Well, its not easy. Most

syndications cannot advertise to the generally public. Generally speaking,

they can only offer the opportunity to invest by private memorandum shared

with people that they already know and with whom they have a business

relationship.

Just like in Guys and Dolls, if you want in on the oldest established crap game

in New York, you need to know Nathan. If you want to participate in a real

estate syndication, you need to put yourself where the syndicator can find

you. The best way to go about this is to network. Join groups, go to meetings,

talk to your advisors, make it known that you want in the game.

 

Stay tuned. I'll discuss how you should hold title in your syndication in

another article. Its all about profits and taxes and how to handle this to your

best advantage. This is part of my series on Baby Boomer Retirement

Planning.