Questions You May Have Always Wanted To Ask About The Other Investors In A Real Estate Syndication

Sep 13, 2020

A real estate syndication is a group investment, yet it can feel like you do not know the other investors in the deal. For security and privacy reasons, you may never meet or even know the names of the other investors, even though you’re pooling your money into the same asset alongside each other. 

It’s likely you are in touch with the syndication sponsor, or with a group like White FIRE Equity, but you won’t likely have the personal connection with many of the other investors. So, you may find yourself wondering what the other investors are like, where they come from, and how they chose the same deal as you. 

Today, let’s satisfy your curiosity by addressing a few questions you’ve probably always wanted to ask about the other investors:

  1. What is a limited partner investor?
  2. What makes limited partner investors “limited”?
  3. How many passive investors are there in a real estate syndication?
  4. Who are the investors in a real estate syndication?
  5. How can I meet and talk to other passive investors?

Let’s get to it!!

What is a Limited Partner Investor?

Limited partner investors in a real estate syndication are people (just like us) who want to invest in real estate without the hassles of being a landlord. These passive, limited partner investors and the capital they commit to the project are the most important part of any syndication. 

If a syndication deal were a car, the limited partner investors would be the gas that fuels the car. Without that fuel, the car would not go very far. 

Even though you may be reviewing the investment summary and sending your funds alone, it’s important to remember you’re part of a community. Most people investing passively in a syndication never have and never will meet each other. Yet, for the duration of the project, their money is pooled together to improve an asset, the community around it, and produce income for their own families.

What Makes Limited Partner Investors “Limited”?

The word “limited” in the phrase “limited partner investors” refers to the amount of liability in the project being limited. In a syndication project, there are general partners and limited partners. The general partners assume the majority of the risk and active responsibility while limited partners invest capital, are not actively involved in improvements and property management, nor will they be held liable if anything goes terribly wrong. 

“Limited” has everything to do with the liability at risk and nothing to do with the projected returns. In fact, deals are often structured so that limited partner investors receive 70%-80% of returns while the general partners share in the minority cut. Typically limited partners get paid first too!  So all of the benefits without any of the work.

Not a bad deal!

How Many Passive Investors Are There In A Real Estate Syndication?

The number of passive investors in any real estate syndication deal is dependent on a variety of factors including how much capital is needed and how much each person invests. Some smaller deals could have a dozen investors and some larger projects could have hundreds. 

Consider this, there are plenty of investors who commit the minimum amount required (typically $50,000). This means for every $1 million raised, 20 investors would have invested. However, some investors may contribute more than the minimum required.

So, for a $10 million real estate syndication, there could be as many as two hundred passive limited investors. 

Who Are The Investors In A Real Estate Syndication?

One of the coolest features of real estate investing is that pretty much anyone can get involved. Anyone in any stage of life – from fresh college graduates to highly experienced (we’re talking decades) investors, in any profession, whether they have young families or are retiring next month, single or married, with family money or their own personal savings – can invest.  The interesting thing is in some situations you can be investing alongside institutions, companies and other investment fund entities.

Some have had rental properties before and are interested in a more passive role. Others may have never even owned real estate at all. 

Mostly, they are everyday people, just like you, who have saved up and want to build wealth while improving a community without being a landlord. 

How Can I Meet And Talk To Other Passive Investors?

When you’re exploring the idea of investing with a new sponsor, a great way to learn more about them and have insight as to what it’s like to work with them, is to ask the sponsor for references. 

This is not only a great way to find out more about the sponsor, but also a great opportunity to chat with someone who was in your shoes not long ago. You’ll be able to ask questions about their experience and their insight on real estate syndications in general.

Here at White FIRE Equity, we are very aware of the power of community. We encourage you to continue to read and learn about investing in real estate syndications and connect with others who have invested in syndication deals before.  We understand it takes time to become comfortable with the real estate investing topic.

In closing

You never know, maybe one day you’ll be the experienced investor on the other end of the phone sharing your experience with a soon-to-be investor.

Through exploring some of these common-curiosity questions, it’s likely you’ve gotten a better sense of who passive limited partner investors really are. 

They are people, just like you, maybe with kids hollering “Mom!” from the other room as they’re trying to learn more about how to invest passively in real estate syndications. 

They are normal folks who wrinkle their forehead at the confusing legal jargon in the private placement memorandums. They are everyday citizens who nervously triple check the wiring information as they send out their first $50,000 investment. 

They are the same neighbors who stare in disbelief at their first cash flow distribution check as they start to grasp the power of the crazy world of real estate syndication investing and when they see the snowball effect occur.

So, the next time you begin to feel lost or lonely while flipping through an investment deck or think you’re the only one with these questions, remember you aren’t alone. 

You’re part of a community of investors who feel the same way you do.  The same people who are trying to do the right thing for their families, build wealth, and possibly make a positive impact on the community in the process.