A public newsletter published by BDO Seidman, LLP. Accountants and Consultants, asserts:
The syndication process – aggregating capital from a group of investors to acquire property – is seeing new popularity as real estate increasingly is viewed as a fourth asset class in addition to stocks, bonds and cash. Real estate investment trusts (REITs) are an attractive way to invest in real estate, but their publicly traded shares are subject to a significant degree of price volatility that many investors seek to avoid. By contrast, shares in a private syndicate, typically real estate limited partnerships (RELPs) or a privately held REITs, are not priced to market on a daily basis and in addition offer the possibility of higher returns than publicly managed real estate. Finally, private syndicates offer some tax savings unavailable when investing in a public company.
There are two primary reasons for considering any group or syndication form of investing:
First of all, it offers an investor with limited investment capital the opportunity of getting involved in real estate investing and receiving all the benefits of owning real estate (like cash flow, and asset appreciation), as well as the benefit of tax savings that are not available to other types of income (like interest and dividends). In addition, he is able to join forces with others and “pool” resources.
The second reason for joining one of the larger groups is to completely free yourself from the task of locating, analyzing, purchasing and managing your real estate investment. The syndicate you join does all of that for you. So, use this as a basic background in investment in a real estate syndication.
Advantages Of Private Syndications
While investing in a real estate syndicate has certain advantages as compared to direct ownership of real estate, syndicates do offer significant benefits. These include the following:
Real Estate Skills
The most obvious advantage of a syndicate is that the knowledge and skills of a real estate professional are available to nonprofessional investors. Real estate investment is a far more complicated process than it may first appear, requiring skills in determining real estate values, negotiating purchase agreements, financing a purchase, negotiating leases and managing the property.
By pooling the investment capital of a number of investors, even a small real estate syndicate can achieve cost savings otherwise unattainable to the individual investor. The best legal, tax planning and investment advice does not come cheap. In addition, all else being equal, larger properties are more cost-efficient than smaller ones, since many expenses are lower on a per unit or square foot basis. These savings translate into significantly more profit being distributed to every investment partner.
A major advantage of the syndicate form is that it enables an individual investor with limited funds to diversify among a number of different properties. Diversification may well be the most important way to protect against significant losses in real estate.
The need for cash reserves is often overlooked when inexperienced investors buy real estate. Syndication can assure that sufficient capital is available to give the investment staying power, the ability to withstand economic downturns or temporary shortfalls.
Like public companies, earnings are reported per unit or per acre or square feet on the basis of Generally Accepted Accounting Principles (GAAP).
The capital gains (from unit value appreciation), and tax savings can result in very healthy overall returns for all participating investors. In addition, the group’s ownership of tangible assets with established values further reduces risk.
The Bottom Line
Land Syndicates, over time, have demonstrated a consistent track record of providing the benefits of the potential for unequalled long-term appreciation, and tax-efficient earnings. Whether your investment style is value-driven or growth-oriented, individual or institutional, syndicate participation can clearly be of benefit.
Syndication offers the smaller property investor, with limited available capital, the opportunity to invest in properties that would otherwise be out of reach financially. One of the important features of a property syndicate is you have control to choose the property being acquired and the property will not change throughout the life of the investment unless you and the other syndicate investors agree.
Choosing Your Investment Leader
Even more important than your decision to leverage the power of your investment within a professionally managed real estate syndicate, is deciding with whom you will invest:
Is the syndication team you are considering, experienced in Finance? Negotiating contracts? Buying and selling properties?
Does the team have the contacts, skills and experience necessary to bring your project to completion on time and on budget?
Is there a proven system in place by which they select the best properties and manage risk? Do they have a management system in place to enhance profitability, as well as the expertise to maximize the investment’s potential?
And most importantly:
Are they truly talented, or are they merely technicians?
All of these questions must be answered in the affirmative before you invest. You must feel absolutely certain that the team with whom you are investing, is both experienced and talented. If either of these elements is missing, it could mean the difference between taking home a big profit every period, or just breaking even.
Why invest with us?
Serious investing is best done with serious professionals shielding you from personal liability and exposure to taxation. So, with that said, if you’re still looking for reasons to syndicate with us, here are a few of them:
Real Estate Skills
Real estate investment is a far more complicated process than it might first appear. Are you skilled in determining real estate values, negotiating favourable purchase agreements, financing the purchase, negotiating leases and managing the property? If not, then the most obvious advantage of our syndicates is that the knowledge and skills of our team of extraordinarily talented real estate professionals has experience in the business of real estate investing through many different market climates. Together, we know what to do, and even more importantly, we know what not to do with an investment property. Our collective experience has provided us with all the necessary elements to put together incomparable real estate investment vehicles—the kind that we personally invest in.
Best Possible Legal Counsel
Are your current investment assets vulnerable to a legal attack?
Why bother making more money if doing so is going to leave you wide open to litigation? We live in an era when no investor can be without the protection of the best legal counsel, and no matter what your financial situation, no one can afford to make even the smallest of mistakes. That’s why we’ve taken steps to ensure that the specialists we select to make up our legal advisory committee are also extremely talented. As a result of their hard work and ingenuity, while participating in any Pratten Properties syndication, our syndicate member-partners have ZERO liability for principal debt.
Are your investments costing you more than they should?
Without professional guidance, serious investors can suffer serious tax repercussions. Now more than ever, even the most experienced investors need to have professional advisors working on their side of the ledger. We want to attract the very best investor-partners possible to every syndication, so we contacted the expert CA firm. We requested the CA firm to devise an array of comprehensive profit maximizing, and tax-minimizing strategies that would be sure to make even the stodgiest of investors smile. They succeeded, they’re available now, and yes, they’re all perfectly legal.
We Are Transparent
A well-explained business plan and accurate data are the lifelines of our business. And clear financial information is one of the major benchmarks by which the best companies are judged. We are committed to an open approach and to delivering accurate and comprehensive information from both the operational and financial dimensions of our company.
We provide our investors with a complete picture of how their syndication investment is performing via meetings, and we are further enhancing that performance, through timely e-mails & newsletters. As expected, our team members are also available to discuss any issues with your member-partners.