“How Do I Fit In the Deal?

Finding Your Place in a Real Estate Syndication: Where Do You Fit In?

Real estate syndications have proven to be one of the most powerful investment tools available to individuals looking to grow their wealth in a stable, diversified way. Studies show that, on average, private equity deals, such as apartment syndications, outperform the stock market over time, with private equity averaging around 13.33% annual returns compared to the 8.16% seen in public equities. For savvy investors, the message is clear: diversifying a portfolio with these types of deals can significantly boost long-term returns while adding a layer of stability.

But here’s the thing—like everything that's truly valuable, these deals are rare. Apartment syndications, especially those run by experienced operators with high-performing properties, are often not available to the general public. Even if you're fortunate enough to get connected with someone who has access to these opportunities, you might still be asking yourself, "Where do I fit in? I'm not a seasoned real estate investor."

That’s where this article comes in. Real estate syndications are unique in that they allow multiple types of investors to participate in a deal. You don’t have to be the person managing tenants or handling financing. In fact, the role of a Limited Partner (LP) is designed for investors who want to grow their wealth passively, while learning from seasoned professionals. Let’s break it down using the three key stages of any real estate syndication: Find the deal. Fund the deal. Run the deal.

Find the Deal

The first step in any syndication is finding the right property, and it’s no small task. Identifying a property that offers value-add potential, is located in a growth market, and has favorable financials is essential to success.

1. Market Research The best opportunities don’t just appear; they’re uncovered through deep market research and analysis. General Partners (GPs) dive into key economic indicators like population growth, job creation, and housing demand. They also consider the broader trends affecting the market—everything from local government policies to transportation infrastructure.
   This is a time-intensive process that requires knowing where to invest, and when to act.

2. Network Relationships Another crucial aspect of finding deals is having the right connections. Deals are often sourced through relationships with brokers, property managers, and other real estate professionals. In the world of syndications, off-market deals—those that never hit public listing sites—are common, and only those with strong connections have access.
   Having a network means you’re the first to hear about prime opportunities. The best deals often come from brokers with exclusive access, and you need to have earned their trust and respect to get a call when something worth considering comes along.

3. Evaluating the Property Once the property is identified, GPs conduct a detailed evaluation to ensure it fits their investment criteria. This means combing through the property's current rent rolls, financial statements, and physical condition. They assess how much money is needed to make improvements, what rent increases are realistic, and how long the process of stabilization will take.

All of this may sound complex—and it is—but that’s why many investors start out as LPs. When you’re an LP, you don’t need to do the heavy lifting of sourcing deals. The GP handles it all, and you benefit from their knowledge and market experience. By partnering with an experienced operator, you get the upside of a great deal without the intensive research.

Fund the Deal

Once the right property is found, it’s time to fund the deal. Every real estate syndication requires capital to acquire the property and make any necessary improvements. Funding typically comes from a combination of debt (through commercial loans) and equity (money from investors).

1. Raising Equity While the GP secures financing from a lender, the equity needed for the deal comes from investors like you—the LPs. This is where LPs play a vital role—they provide the capital that allows the deal to move forward. Your investment buys you a share of ownership in the property, giving you a stake in both the income it generates and any appreciation that occurs.
   The beauty of being an LP is that while your investment helps make the deal possible, your role is completely passive. You don’t have to raise money, secure loans, or deal with bank negotiations. You invest your capital and benefit from the deal’s performance.

2. Tax Benefits for LPs Real estate syndications offer significant tax advantages to LPs. One of the key benefits is depreciation, which can be used to offset the income generated from the property. Depreciation is a non-cash deduction that reduces your taxable income, making the income you receive from the property more tax-efficient. This means that even as you’re earning passive income from the property, you’re also benefiting from reduced taxes on that income.
   For high-income individuals, these tax benefits can be a game-changer. You still get the same advantages as a hands-on real estate owner, but without the responsibilities.

Run the Deal

After the deal is funded and the property is acquired, the next step is to run the deal. This involves executing the business plan, managing the property, and ensuring that it meets financial expectations.

1. Asset Management Managing a property involves overseeing everything from tenant relations to maintenance requests. This is where the GP shines. They handle the day-to-day operations of the property, such as leasing, rent collection, and property upkeep.
   Asset management also includes executing the value-add strategy that was laid out before the acquisition. This could involve renovating units, improving common areas, or enhancing property management systems. The goal is to increase the property’s cash flow over time, ultimately increasing its value.
   As an LP, you don’t have to be involved in any of these operations. Your role is passive, but you still get to share in the property’s upside. While the GP is focused on property improvements, you’re receiving regular updates and financial distributions.

2. Cash Flow and Returns As the property generates rental income, that income is distributed to both GPs and LPs according to the terms of the deal. As the property's performance improves, so do the returns.
   Many LPs find this stage to be especially rewarding—not just because of the passive income, but because they get a clear view of how real estate investing works at a higher level. Being an LP is a learning experience, giving you exposure to deals you wouldn’t have access to on your own. Over time, you’ll build relationships with operators, gain valuable insights, and grow your understanding of the real estate investment landscape.

Conclusion

I hope this has been helpful! Real estate syndications offer a unique opportunity for investors to participate in large-scale apartment deals without needing to take on the time-consuming tasks of sourcing, funding, or managing the property. For those who want to diversify their portfolios, enjoy passive income, and still benefit from the tax advantages of real estate ownership, becoming an LP in a syndication can be an incredible way to grow wealth over time.

At Mission Multifamily, we’ve structured our deals to ensure that investors enjoy the benefits of steady cash flow, equity growth, and tax advantages—all while remaining passive. If you’d like to learn more about upcoming opportunities or how you can get involved, visit us at www.missionmultifamily.com.