3/9/14: Stepping Up to the Next Level through Syndication

Real estate is going to the next level.  Are you?

Raising money for real estate investing is a great way to become a full time real estate investorIn case you hadn’t noticed, real estate prices have been rising in many markets.  This is because money has been flowing steadily into real estate and driving prices up.  And this is in spite of a generally weak economy.

We could go into all the reasons why there’s still plenty of opportunity in real estate, but that’s not the focus of this episode.  Instead, we’re talking about how YOU can put yourself into the flow of money into real estate by aggregating capital to do more and bigger deals.  Sure, we’ve talked about this before…but do you ever get tired of doing more and bigger deals?  We don’t.

Stepping up to the microphones for this episode of The Real Estate Guys™ Radio Show:

  • Your syndicated talk show host, Robert Helms
  • His low level co-host, Russell Gray
  • The Godfather of Real Estate, Bob Helms

No money down real estate has been the fodder of late night TV infomercials for decades.  And we love it.  No money down, creative real estate is a great way for someone who is literally starting with nothing to get into real estate.

However, the vast majority of people who engage in real estate investing start out with their own cash, income and credit.  It’s just easier.  But when you have the real estate investing bug and market conditions are right, it doesn’t take long to run out of your own money.

When this happens, you can sit out until your personal financial batteries recharge.  Not a good choice…because when the market is great, it’s smart to get all you can.

You could order a late night TV course and go out looking for no money down scenarios.  A better choice, but very limiting.  While no money down deals certainly exist, they are undoubtedly more rare than the many other profitable deals where you will need to have funds available for earnest money, down payments and due diligence expenses.

Another option (our preference), is to leverage your experience and relationships to help other people put their money to work in real estate.  This is called “syndication”.

Real estate syndication is a great way for you to aspire higher and reach for the stars!Another great reason to syndicate is the real estate version of the law of attraction.  That is, if you have purchasing power (money), deals will come to you.  You just have to let the world know you’re open for business.

So “no money down” is exciting when you’re thinking small and don’t have anything to work with but want to get started.  But don’t expect to attract deals when you have no money.  You’ll need to turn over a lot of rocks to find a deal you can really do with no money.

All that to say, syndication is one of our FAVORITE topics.  Especially right now.

There’s a lot going on at the macro-economic level that is pushing money (currency…i.e., dollars) into the economy.  We won’t get into the mechanics here, but the evidence is in rising asset prices (stocks, real estate, commodities) when there isn’t robust underlying economic growth.

As a result, interest rates remain low…which is great if you’re a borrower.  But not so great if you’re a saver.  And with interest rates so low, bonds (IOUs which pay interest) aren’t attractive investments.  Worse, the downside risk on bonds is high because if interest rates rise, bond values drop.  Again, we won’t spend time on that here, but if you want to raise money, you need to understand other asset classes so you can explain why your offering is better.

So Main Street investors looking for decent returns often think they are stuck with “investing” in a stock market whose gains are largely speculative.  You have the opportunity to help investors get into an attractive alternative to stock speculation: income producing real estate.

Once you’re convinced of that (and we’re guessing if you’re reading this blog, you’re already a believer in real estate as an investment), then the bigger question is how do you do more, bigger and faster?

Syndication is the answer.  It’s where investing and entrepreneurship meet because what you’re really doing is setting up a business to invest.  In other words, you become a manager of other people’s money. If that freaks you out a little (or a lot) because of the responsibility of managing other people’s hard earned money, then you’re exactly the kind of person the business needs.  Sadly, lots of people get into the business who don’t really care about other people…they just want the money.

Now, once you decide to get into the business, there are essential steps you must take to get set up properly.  This is important both for your own safety and that of your investors.

You’ll need to set up an entity structure.  This will usually mean forming a management company which you will operate, and a holding company which will own your equity.  Later, when you find a specific deal, you’ll probably form a single-purpose LLC to hold the property.  We’re not lawyers, CPAs or investment advisers, so check with your own team.  But in our experience, this is usually the way it gets set up.

A word of caution…when you’re selling shares in an LLC, you’re dealing with securities, so you need to have professional advice.

Speaking of advisers, one of the most important things you need to do is build a team.  You’ll need lawyers, accountants and business advisers.  And all of these need to be in your budget.  So you may need to front some of the money, but once you start operating and raising money, you can usually be reimbursed for some or all of these expenses.  Just be sure it’s all in the budget and disclosed to your investors.

Does all this sound daunting…like a lot of work?  It is.  But that’s good.  Because once you get through it, it creates a barrier to entry which reduces the competition.  Getting a college degree is a lot of work too (more than setting up a syndication company), but a college degree gives you a competitive edge when seeking employment.  Same concept.  Seriously, if it was easy, then all the pretty people would’ve already done it.

So don’t be dismayed by the effort it takes to set up a syndication business.  You’ve probably successfully done other things in your life which are much harder.  Just make sure you take the process seriously and put in the time and effort to do it right.

This episode of The Real Estate Guys™ will help you understand the opportunity and some of the steps you’ll need to take step up to the next level through syndication.  This could be your chance to reach for the stars!

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Secrets of Successful Syndication

Tired of waiting for someone else to create a job for you or give you a raise?  Take control of your own future by discovering how to make big money doing big deals through real estate syndication.

Syndication is simply putting together a group of investors and use the combined resources to take advantage of more and bigger opportunities for everyone’s benefit.  And when you’ve fully deployed your own cash and credit, syndication is a great way to keep going.

Now is one of the greatest times we’ve seen to become a real estate syndicator. Distressed properties and notes are abundant.  Assets can be purchased for pennies on the dollar.  Best of all, you’re not preying upon the unfortunate.  You’re helping clean up a big mess and playing a vital role in revitalizing the economy.

With all the liquidity being pumped into the economy, there’s still time to take advantage of low interest rates.  Longer term, many economists expect inflation – which means rising asset values (equity!), rising rents and rising interest rates.  But inflation hasn’t hit real estate yet, so there’s a window of opportunity to snap up deals.

We could go on and on about why the next 2-3 years look to be among the best ever to be a buyer.  But that’s not the point of this article and we’ve discussed it many times on the broadcast.

The real point is that syndication is a great opportunity for sharp, hardworking people to become real estate entrepreneurs. In his new book, The Sleeping Giant, best selling author and Robert Kiyosaki Rich Dad Advisor Ken McElroy says a new American Dream is upon us: the age of the entrepreneur.  Gone are the days of working four decades for the same company and retiring on a comfortable pension.  And the last time we looked, Social Security isn’t looking very secure.  So you need a good paying job now AND a way to build up wealth over the the long term.

If you’re unemployed, under-employed or concerned about the future of your job or company, then you might want to give serious consideration to starting your own business. And while there are many different businesses to choose from, in most all cases you’ll need to organize capital to get started.  For the average Joe, that means using up his life’s savings, home equity and all his available credit card lines – literally betting the farm on the success of the business.  That’s one way to go.

On the other hand, wouldn’t it be better if you were or raise some private investor money where neither you nor any of your investors are ruined if things don’t go as planned?  Shared risk and shared reward.  That’s all a syndication is.

Of course, that begs the question: what kind of a business?

Obviously, we like real estate – and for many reasons.  First, it’s everywhere and not overly complicated – at least compared to starting a bio-tech firm or a software company.  That makes it possible for you to get up to speed and run the business effectively pretty quickly.  But it’s also a business that your investors should be able to understand and get excited about without needing Ph.D.’s.

Most people can see there are bargains galore in real estate right now, but because the dollars are big they can’t take advantage of them…by themselves.  They don’t have enough money, time, knowledge or connections.  That’s why so many people buy mutual funds instead of picking their own stocks.  They are effectively hiring a fund manager to do the hard work of investing.

When you organize a real estate syndication, your investors are essentially hiring you to buy, manage and sell the investments  – just like a mutual fund manager.  Except instead of investing in stocks, you’re investing in real estate or notes.  Now before you freak out, remember that you’ve probably already bought or sold a property, rented a property, gotten a loan or otherwise been involved in some real estate transactions.  So you already have some experience.  And if you’re a real estate agent, loan officer, appraiser, contractor or someone who deals with the business of real estate on a daily basis, you’re way ahead of the curve.  Remember, most mutual fund managers don’t have to know how to run the companies they invest in, they just have to know how to recognize good business models and managers.

Of course, in the spirit of full disclosure, if syndication were THAT easy, then everyone would be doing it, right?  True.  However, we bet there are many very capable people out there who would be very successful syndicators, but it never occurred to them they could do it.  And like any manager, it’s a huge responsibility to be in charge of other people’s assets.  Yet, many people do a fine job for their employers every day, but  just don’t think of it as asset management.  Yet if you’re a manager of any kind, you’re responsible for someone else’s assets –  their money, their customers, their reputation, their property, their information – on a daily basis.  If you do a good job there, the odds are good you will be successful in real estate – which is quite possibly a lot less complicated than your current day job.

Still, it’s important to be properly trained. And the task of organizing an investment syndication is not one to be taken up lightly.  There are laws to follow and lots of details to be aware of.  Again, if it was brain dead easy, than everyone would be doing it.

So where can you go to learn the secrets of successful syndication? You can and should read books, take classes, and get around people who are doing it.  Much of which you can figure out on your own if you have the time and motivation.  But if the gap between where you are and where you want to be looks to big to jump on your own, we have something for you!

We’ve imposed upon our outstanding Investor Summit at Sea™ Faculty, which includes Robert Kiyosaki’s Rich Dad Advisor Ken McElroy, plus international real estate developer Beth Clifford and attorney Mauricio Rauld, to conduct an all day training called The Secrets of Successful Syndication Seminar on April 3rd in Fort Lauderdale, Florida (you’ve been looking for a great reason to visit beautiful South Florida, right?).

Discover what it takes to organize and operate a real estate syndication business, where you can go from zero to a full time income (even part time!) in six months or less.

For more information and to enroll on-line, click here now.

The Real Estate Guys™ Radio Show podcast provides education, information, training and resources to help investors make money with their real estate investing.