A successful real estate syndication operation is a huge undertaking with many moving parts. Although exhilarating, just wrapping your head around taking a multimillion-dollar property from acquisition to renovation to rebranding to profitable sale can be overwhelming.
Cue the real estate syndication team! The key to any successful multifamily syndication project is a strong team. They are collectively responsible for keeping the integrity of the business plan intact and handling any issues that may arise throughout ownership.
In a real estate syndication, the team is made up of several crucial players. Everyone has specific tasks and responsibilities to ensure the project goes off without a hitch. Some members of the team are actively involved throughout the lifecycle of the investment project and others are only involved during certain portions of the syndication process.
The team is carefully and strategically formed so that all of the moving parts cohesively align into a shared vision that’s beneficial and lucrative for everyone involved.
In this article, you’ll learn exactly who those players are, as well as their respective roles in a given real estate syndication.
Key Players in a Real Estate Syndication
Here are the key roles that come together to make a real estate syndication happen:
- Sponsor team
- Mentorship & coaching team
- Due diligence team
- Legal team
- Lending team
- Cost segregation team
- Property management team
- Energy solutions team
- Property tax consultants
The Sponsor Team
The sponsor team synchronizes with the real estate broker and lender to secure the loan and acquire the property in addition to managing the asset throughout the life of the project, which is why they are often also called the lead syndicators. The sponsor team are the ones signing on the dotted line for the loan and are often involved in the acquisition and underwriting processes.
The sponsor team includes the following members:
Asset Manager – this role is responsible for implementing the business plan. They are boots-on-the-ground and visit the property at least once a week.
Underwriter- they’re responsible for analyzing the deal to see if the numbers work for a viable business.
Capital ExecutionManager- they oversee all unit remodels and upgrades, as well as any construction that takes place on the property.
Capital Raiser/Investor Relations- they’re responsible for offering opportunities to investors and raising the capital to fund the project. This team member also educates the investors.
Broker Relations – this role is responsible for communicating with the broker and sourcing the investment deal.
Passive investors – this group of people provide the capital to fund the deal, but have no active role in the project. They simply invest their money in exchange for a share of the returns. What a great position, they just put their money in, sit back, and enjoy the ride!
The real estate broker is the person or team who surfaces the property for sale, either as a listing or as an off-market opportunity (i.e., not publicly listed).
Having a strong real estate broker is crucial, as they are the main liaison between the buyer and the seller throughout the acquisition process.
Mentorship & Coaching Team
This team confirms that the underwriting of the deal is conservative and will perform to the guidelines that we follow. This ensures capital preservation during the life of the deal.
Due Diligence Team
Just as the name suggests, the due diligence team makes sure there aren’t any major problems on the property. They walk through every unit and all the buildings before purchase, in an effort to discover deferred maintenance for our budget.
The legal team prepares all legal documents and the private placement memorandum (PPM) for the investors. The PPM clearly outlines how investors and the sponsor team receive compensation, defining structures for fees, preferred returns, and the distribution of rental income and appreciation.
The lender is the biggest money partner in a real estate syndication because they provide the loan for the property. The lender performs their own due diligence, underwriting, and gets a separate appraisal to make sure the property is worth the value of the loan requested. The lending team is not part of the purchasing entity, nor do they share in any of the returns.
Cost Segregation Team
The cost segregation team studies all assets that can be depreciated and creates a bonus depreciation schedule. A cost segregation study identifies and reclassifies personal property assets to shorten the depreciation time from 27.5 years to 1 year.
Property Management Team
Once the property has been acquired, the property manager becomes arguably the most important partner in the project because they handle all aspects of maintenance, budgets and leasing according to the business plan.
The property manager works closely with the asset manager to ensure the business plan is being followed and that any unexpected surprises are addressed properly.
Energy Solutions Team
In an effort to maintain a reasonable bottom line, the energy solutions team analyzes how to help conserve electricity and water on the property.
Property Tax Consultants
Property tax is one of the largest expenses in a multifamily real estate syndication. The property tax consultants are responsible for protesting the property tax bill of the asset.
There’s No “I” In Team
As much as I’d like to take credit, no real estate syndication is dependent on just one person. It takes a team to make it all happen. After all, a real estate syndication, by definition, is a group investment.
It takes the expertise and talents of multiple people to make the syndication project a success. There are other behind-the-scenes roles needed to bring a real estate syndication to life. Some other important roles often required during the life of a syndication project include appraisers, inspectors, insurance agents, CPAs, and more. While everyone has their own role, each role is essential in ensuring the success of the real estate syndication.