If you are thinking of starting a business with huge returns on investment, then one of your best bets is to venture into the real estate industry. There are several money spinning business opportunities in the real estate industry and one of them is real estate syndication. A real estate syndication company is a company that has a group of income property investors coming together to finance a property investment.
Aside from the fact that these investors pool together their financial resources for real estate investment, they are also in business partnership that ensures that they share any other real estate resources at their disposal. Just like all other investment vehicles, there are potential down sides that you need to look out for if you run a real estate syndication company.
One of the major risks in the real estate industry is a sudden down turn in the economy. Selling properties could take a period of two to three years from conception to completion depending on the size of the project and the cash flow. As a matter of fact, some real estate projects can even take much longer than that. Because of the time frame involved in renovating or construction of a property, loads of unanticipated things could crop up.
Other factors that are of major concern in the real estate syndication business are inflation, currency devaluation and economic challenges. Unforeseen delays from the part of government agencies, litigation and also delays from contractors could lead to substantial cost increase especially if the project is heavily dependent on bank loans. If perhaps during this period, there is a change in the supply and demand dynamics of the property sector, the project could be affected negatively.
If indeed you want to start your own real estate syndication company, all you need do is to read this article and you will be well informed. You can start your real estate syndication company from a small town in the United States and if you are consistent and creative, it won’t be too long before your brand becomes nationally recognized.
20 Steps to Starting a Real Estate Syndication Company in the United States
Table of Content
- 2. Conduct Market Research and Feasibility Studies
- 3. Decide What Niche to Concentrate On
- 4. Know the Major Competitors in the Industry
- 5. Decide Whether to Buy a Franchise or Start from Scratch
- 9. Discuss With an Agent to Know the Best Insurance Policies for You
- 10. Protect your Intellectual Property With Trademark, Copyrights, Patents
- 11. Get the Necessary Professional Certification
- 12. Get the Necessary Legal Documents You Need to Operate
- 13. Raise the Needed Startup Capital
- 14. Choose a Suitable Location for your Business
- 15. Hire Employees for your Technical and Manpower Needs
- 16. Write a Marketing Plan Packed With ideas & Strategies
- 17. Work Out a Reasonable Pricing for your Services & Products
- 18. Develop Iron-clad Competitive Strategies to Help You Win
- 19. Brainstorm Possible Ways to Retain Clients & Customers
- 20. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
1. Understand the Industry
The Real Estate Investment Trusts industry of which real estate syndication line of business is sub set of is indeed one of the many industries that is a major contributor to the growth of the economy of many nations of the world; there is hardly any country where the real estate industry is not pretty active.
The Real Estate Investment Trusts industry is made up of legal entities that are categorized as real estate investment trusts (REITs). REITs use the pooled capital of many investors to directly invest in income-yielding properties. To qualify as an REIT, a company or trust must distribute all of their taxable income to shareholders annually in the form of dividends. Income is largely generated from rent, interest and capital gains.
If you are a close watcher of the Real Estate Investment Trusts (REITs) industry, you will agree that the demand for the industry is closely tied to the general health of the overall real estate sector and the economy. Prior to the subprime mortgage crisis in 2007, the industry benefited from the real estate boom as relaxed lending standards and rapid property value appreciation drove up industry revenue.
Similarly, market capitalization for publicly held REITs decreased significantly during the same period; this decline is significant because the market capitalization of a publicly traded REIT is often used to determine a firm’s ability to raise new capital for operations. Further economic growth and a rebound in the real estate market will drive up industry revenue over the next five years to 2023.
The Real Estate Investment Trusts (REITs) industry cum real estate syndicate business is indeed a large industry and pretty much active in countries such as United States of America, United Kingdom, Germany, France, Italy, Holland, Switzerland, Australia and Canada et al.
Statistics has it that in the United States of America alone, there are about 2,468 registered and licensed companies scattered all across the United States responsible for employing about 22,509 and the industry rakes in a whooping sum of $96 billion annually.
The industry is projected to grow at 4.7 percent annual growth within 2013 and 2018. It is important to state that Host Hotels and Resorts LP and Simon Property Group Inc. are the companies with the lion market shares in this industry.
Starting a real estate syndication company is indeed capital intensive. Property investors need to raise money to purchase property, develop land, and run operations. Moreover, mortgage REITs need to raise capital for lending purposes. Access to capital market is often restricted based on the size, diversification and repayment history of the REIT.
Thus, new entrants may experience difficulty in obtaining adequate financing from the capital markets in their acquisition of real estate. Some of the factors that encourage entrepreneurs to start their own real estate syndication company could be that the business is a highly thriving and profitable business.
The Real Estate Investment Trusts (REITs) industry is highly regulated in the United States of America and anyone who aspires to start a real estate syndication company must apply and obtain a license before they can legally operate in the industry.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic composition of those who do business with real estate syndication companies cut across individuals and businesses. The truth is that when it comes to purchasing, leasing or renting properties, there is indeed a wide range of available customers. In essence, your target market can’t be restricted to just households within your location, but all the businesses in and around the city where you have your business presence.
3. Decide What Niche to Concentrate On
It is safe to say that there is no niche area in the real estate syndication line of business, every player in the industry primarily engages in acquiring, constructing, remodeling and renovating the interiors and exterior of residential buildings (i.e. single-family homes and multifamily apartment building units) and then put them up for sale.
So, if you are looking towards starting your own real estate syndication business, then you should clearly define your market so that you will be able to know how to get to them.
On the other hand, a real estate syndication company may decide to major on any of the under listed;
- Equity REITs – Residential properties
- Equity REITs – Retail properties
- Equity REITs – Other commercial properties
- Mortgage REITs
- Hybrid REITs
The Level of Competition in the Industry
The competition that exists in this line of business goes beyond competition amongst real estate syndication businesses in your location; you are expected to compete with other businesses in the real estate industry that are also into property purchasing and selling. So, it will be right to say the competition in the real estate syndication line of business is tough.
The truth is that no matter the level of competition in an industry, if you have done your due diligence and you brand and promote your services or business properly, you will always make headway in the industry. Just ensure that you invest in attractive properties, you can deliver excellent customer care services and you know how to attract and reach out to your target market.
4. Know the Major Competitors in the Industry
In every industry, there are always brands that perform better or are better regarded by customers and general public than the others. Some of these brands are those that have been in the industry for a long time, while others are best known for how they conduct their businesses and the results they have achieved over the years.
These are some of the leading real estate syndication companies in the United States of America and in the globe;
- Host Hotels and Resorts LP
- Simon Property Group Inc.
- Blackstone Group
- Starwood Capital Group
- Lone Star Funds
- Brookfield Asset Management
- Colony Capital
- Carlyle Group
- Open Source Capital LLC
- Fortress Investment. Dynamics Capital Group
- Next Endeavor Commercial Real Estate
- PASSCO Companies, LLC
- Beacon Hill Property Group
- Tom Wilson Investment Properties
- Keiretsu Capital, LLC / Keiretsu Capital’s Syndication Network
- Gibraltar Syndication & Development Company
If you are planning towards successfully launching a business and maximizing profits, then you need to ensure that you get your economic and cost analysis right and try as much as possible to adopt best practices in the industry you choose to build a business in.
Real estate syndication business is not a green business, as a matter of fact; you will come across several real estate syndication companies and other players in the real estate industry when you drive through town, search through directories and browse through the internet.
So, if you are mapping out your economic and cost analysis, you should carry out thorough market survey and costing of what is required to rent a space where you are expected to open your real estate syndication business, working capital and also the running cost of the business.
Over and above, if you are considering starting a real estate syndication company, then your concern should not be limited to the cost of renting an office space, securing your license, and working capital et al but also on branding and on how to build a robust clientele base. The truth is that if you are able to build a robust clientele base, you are sure going to maximize profits in the business.
5. Decide Whether to Buy a Franchise or Start from Scratch
If you are looking towards starting a real estate syndication company, you would have to start from the very scratch because you can hardly get the franchise of a real estate syndication company to buy. Besides starting a real estate syndication company from the scratch is less stressful when compared to other small scale businesses which usually require detailed groundwork before launching the business.
With a real estate syndication company, you should just try as much as possible to get the right employees, build business relationship with key stakeholders and then leverage every marketing tool within your disposal especially the internet to market your properties.
Please note that most of the successful real estate syndication companies around started from the scratch and they were able to build a solid business brand. It takes dedication, hard work and determination to achieve business success.
6. Know the Possible Threats and Challenges You Will Face
If you decide to start your own real estate syndication company today, one of the major challenges you are likely going to face is the presence of well – established real estate syndication companies and other players in the real estate industry. The only way to avoid this challenge is to create your own market.
Some other challenges and threats that you are likely going to face is economic downturn. If the economy is in a bad shape, real estate syndication companies and other players in the real estate industry usually struggle to maintain their old customers or even welcome new customers.
Unfavorable government policies can also hamper the growth of your real estate syndication business. There is nothing you can do as regard these threats and challenges other than to stay positive that things will work well for you.
7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
When considering starting a real estate syndication company, the legal entity you choose will go a long way to determine how big the business can grow; some real estate syndication companies design their business for neighborhood market, some for city wide market, while others for national market via franchising.
You have the option of either choosing a general partnership, or a limited liability company for a real estate syndication business.
Setting up an LLC protects you from personal liability. If anything goes wrong in the business, it is only the money that you invested into the limited liability company that will be at risk. It is not so for sole proprietorships and general partnerships. Limited liability companies are simpler and more flexible to operate and you don’t need a board of directors, shareholder meetings and other managerial formalities.
These are some of the factors you should consider before choosing a legal entity for your real estate syndication business; limitation of personal liability, ease of transferability, admission of new owners and investors’ expectation and of course taxes.
If you take your time to study the various legal entities to use for your real estate syndication business with the ability to sell franchise and having offices and corporate clients all across the United States of America, you will agree that limited liability company; an LLC is most suitable. You can start this type of business as a limited liability company (LLC) and in future convert it to a ‘C’ corporation or an ‘S’ corporation especially when you have the plans of going public.
Upgrading to a ‘C’ corporation or ‘S’ corporation will give you the opportunity to grow your real estate syndication business so as to compete with major players in the industry; you will be able to generate capital from venture capital firms, you will enjoy separate tax structure, and you can easily transfer ownership of the company.
8. Choose a Catchy Business Name from the ideas Below
When it comes to choosing a name for your business, you should be creative because whatever name you choose for your business will go a long way to create a perception of what the business represents.
If you are considering starting your own real estate syndication business, here are some catchy names you can choose from;
- Roof Top® Real Estate Syndication Company
- Luke Greene® Real Estate Syndication, LLC
- TY Marriot© Real Estate Syndication, Inc.
- Kings Court® Real Estate Syndication Company, Inc.
- Great Tower™ Real Estate Syndication Company, Inc.
- Mark Legend & Co™ Real Estate Syndication Company, Inc.
- Jasper Krieger© Real Estate Syndication Company, Inc.
- West Coast® Real Estate Syndication Company, LLC
- Vintage Group© Real Estate Syndication Company, Inc.
- Leo Maximus & Sons© Real Estate Syndication Company, Inc.
9. Discuss With an Agent to Know the Best Insurance Policies for You
The practice in the United States and in most countries of the world is that you can’t operate a business without having some of the basic insurance policy covers that are required by the industry you want to operate from. So, it is important to create a budget for insurance and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your real estate syndication company.
Here are some of the basic insurance covers that you should consider purchasing if you want to start your own real estate syndication business in the United States of America;
- General insurance
- Health / Medical insurance for your employees
- Liability insurance
- Workers compensation for your employees
- Property / Building Insurance
- Overhead expense disability insurance
- Business owner’s policy group insurance
- Payment protection insurance
10. Protect your Intellectual Property With Trademark, Copyrights, Patents
If you are considering starting your own real estate syndication company, usually you may not have any need to file for intellectual property protection/trademark. This is because the nature of the business makes it possible for you to successfully run it without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.
But if you just want to protect your company’s logo and other documents or software that are unique to you or even jingles and media production concepts, then you can go ahead to file for intellectual property protection. If you want to register your trademark, you are expected to begin the process by filing an application with the USPTO. The final approval of your trademark is subjected to the review of attorneys as required by USPTO.
11. Get the Necessary Professional Certification
Aside from the results you produce as it relates to running a real estate syndication company, professional certification is one of the main reasons why most real estate syndication companies stand out. If you want to make an impact in the real estate investment trusts industry, you should work towards acquiring all the needed certifications in your area of specialization. Certification validates your competency and shows that you are highly skilled, committed to your career, and up-to-date in this competitive market.
These are some of the certifications you can work towards achieving if you want to run your own real estate syndication company;
- Real Estate Professional Assistant (REPA) Certification
- Certified Commercial Real Estate Advisor (CCREA)
- Chartered Real Estate Professionals – CREP
- Degree/Diploma in Real Estate and Building Engineering Related Courses
Please note that you cannot successfully run a real estate syndication company in the United States and in most countries of the world without necessarily acquiring professional certifications and business license even if you have adequate experience cum background in the real estate investment trusts industry.
12. Get the Necessary Legal Documents You Need to Operate
The essence of having the necessary documentation in place before launching a business in the United States of America cannot be overemphasized. It is a fact that you cannot successfully run any business in the United States without the proper documentations. If you do, it won’t be too long before the long hand of the law catch-up with you.
These are some of the basic legal documents that you are expected to have in place if you want to legally run your own real estate syndication business in the United States of America;
- Certificate of Incorporation
- Business License
- Tax Payer’s ID/Tax Identification Number
- Business Plan
- Contract Document
- Employee Handbook
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Company Bylaws
- Memorandum of Understanding (MoU)
- Building License
- Franchise or Trademark License (optional)
13. Raise the Needed Startup Capital
Starting a real estate syndication business is capital intensive even if you choose to start on a small scale. Securing a standard office space in a business district, and raising working capital et al are part of what will consume a large chunk of your startup capital. If you choose to start the business on a large scale, you would need to go source for fund to finance the business because it is expensive to start a standard large scale real estate syndication business.
When it comes to financing a business, one of the first things and perhaps the major factors that you should consider is to write a good business plan. If you have a good and workable business plan document in place, you may not have to labor yourself before convincing your bank, investors and your friends to invest in your business.
Here are some of the options you can explore when sourcing for startup capital for your real estate syndication business;
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell of shares to interested investors
- Applying for loan from your bank
- Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
- Source for soft loans from your family members and your friends
14. Choose a Suitable Location for your Business
In business, it cannot be overemphasized that the location you choose to start your business is key to the success of the business; hence entrepreneurs are willing to rent or lease a facility in a visible location; a location where there are high real estate activities and households with the required purchasing power, and lifestyle. If you make the mistake of renting or leasing an office facility for your real estate syndication business in a not too visible or hidden location simply because it is cheap, then you must be prepared to spend more in promoting the business.
It is important to note that a business facility in good location does not come cheap hence you should be able to allocate enough fund for leasing/renting in your budget. You can also feel free to talk to a business consultant or a realtor who has a full grasp of the city and perhaps country you intend starting your real estate syndication business.
Most importantly, before choosing a location for your real estate syndication business, ensure that you first conduct a thorough feasibility studies and market survey. The possibility of you coming across similar businesses that just closed shop in the location you want to open yours can’t be ruled out.
These are some of the key factors that you should consider before choosing a location for your real estate syndication business;
- The demography of the location
- The level of real estate activities in the location
- The purchasing power of the residence of the location
- Accessibility of the location
- The number of real estate syndication companies and other players in the real estate industry in the location
- The local laws and regulations in the community
- Traffic, parking and security
15. Hire Employees for your Technical and Manpower Needs
On the average, there are no special technology or equipment needed to run a real estate syndication company but you will definitely need computers, internet facility, telephone, fax machine and office furniture (chairs, tables, and shelves) amongst others and all these can be gotten as fairly used.
As regards leasing or outright purchase of an office facility, the choice is dependent on your financial standings, but the truth is that to be on the safe side, it is advisable to start off with a short – term rent / lease while test running the business in the location. If things work out as planned, then you go on a long – term lease or outright purchase of the property.
When it comes to hiring employees for a standard real estate syndication company with plans to have clients all across major cities in the United States of America, you should make plans to hire a competent Chief Executive Officer (you can occupy this role), Admin and Human Resources Manager, Project Manager, Company’s Lawyer/Secretary, Head of Construction, Head of Assets Management, Head of Acquisition and Disposition, Sales and Marketing Officer, Accounting Clerk, and Front Desk Officer. On the average, you will need a minimum of 5 to 10 key staff to run a small – scale but standard real estate syndication company.
The Service Delivery Process of the Business
On the average, the way real estate syndication companies work varies from one company to another company, but ideally, a real estate syndication company is expected to first and foremost build a robust company’s profile, and pool investment capital from investors before going out to acquire properties, renovate the properties and then put the properties for sale, lease or rent.
Before a deal is sealed, a real estate syndication company is expected to carry out inspection on the location. This will enable them know the amount needed for renovating the property and the current market value of same properties within the geographical location.
16. Write a Marketing Plan Packed With ideas & Strategies
Generally, running a business requires that you should be proactive when it comes to marketing your goods or services. If you choose to launch a real estate syndication business, then you must go all out to employ strategies that will help you attract customers or else you will likely struggle with the business because there are well – known brands that determine the market direction for the real estate investment trusts industry cum real estate syndication line of business.
Your marketing strategy should center on reliability, swiftness, safety, pricing, secured payment platform, and above all excellent customer service. You should ensure that whenever your customers purchase or rent or lease properties from you, they will get great value for their investment. The truth is that if you are able to put the above stated in place, you won’t struggle to retain your old customers and at the same time win over new customers.
Businesses these days are aware of the power of the internet which is why they will do all they can to maximize the internet to market their services. In other words, a larger percentage of your marketing effort will be directed to internet users.
These are some of the marketing ideas and strategies that you can adopt for your real estate syndication business;
- Introduce your real estate syndication company by sending introductory letters alongside your brochure to households, estate managers, corporate organizations, small scale businesses, medium scale businesses and other key stake holders throughout the city where your real estate syndication company is located.
- Advertise on the internet on blogs and forums, and also on social media like Twitter, Facebook, LinkedIn to get your message across
- Create a basic website for your business so as to give your business an online presence
- Directly market your services
- Join local real estate syndication business associations for industry trends and tips
- Join local chambers of commerce and industry with the aim of marketing your services
- Advertise our business in community based newspapers, local TV and radio stations
- List your business on yellow pages ads (local directories)
- Encourage the use of word of mouth marketing (referrals)
17. Work Out a Reasonable Pricing for your Services & Products
One key factor that will help you sell / rent / lease your properties at a price that is highly attractive is to ensure that you source your startup capital from sources that won’t put pressure on you or give you high interest rate. So also, it is important that you purchase your properties directly from the owner of the property as against buying from a third-party dealers. When it comes to building materials, it is advisable that you also purchase them directly from the manufacturers or from wholesalers.
Another strategy that will help you get the right price is to ensure that you cut operational cost to the barest minimum, and channel your efforts towards marketing and promoting your brand name. Aside from the fact that this strategy will help you save cost, it will also help you get the right pricing for your services.
You can also try as much as possible to work with independent contractors and marketers, it will help you save cost for paying sales and marketing executives.
18. Develop Iron-clad Competitive Strategies to Help You Win
The availability of a huge working capital base, your business process and of course your pricing model et al are part of what you need to stay competitive in the industry.
Another possible competitive strategy for winning your competitors in this particular industry is to build a robust clientele base and business network. Over and above, ensure that your organization is well positioned, key members of your team are highly qualified and your services can favorably compete with the some of the best in the industry.
19. Brainstorm Possible Ways to Retain Clients & Customers
When it comes to business, no matter the industry that you choose to pitch your tent in, one of the easiest ways to increase customer retention and perhaps to attract new customers is to produce results and satisfy your customers always. If your customers are satisfied with your properties and services delivery, they can hardly source for alternative service provider or products.
Statistics has it that one of the major reasons why clients source for alternative service providers or product is when there is a drop in quality. Another reason is poor customer service.
If you can continue to put up excellent and affordable properties for sale / lease / rent and your customer service delivery is top notch, then you won’t struggle to maintain loyal customers.
Part of what you need to do to achieve this is to track progress, results or outputs with the aim of improving on them quickly as the case demands. When it comes to managing your customers and building loyal clientele base, you should purchase a customized CRM software. With a customized CRM system, you can easily stay in touch with your clients (you can carry out quick surveys, you can introduce new products and prices to them without any hitch, you can felicitate with them on their birthdays and other anniversaries, you can keep track of their progress, you can send bulk sms and customized e – mails and above all, you can easily receive feedback from them).
20. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
If you are in business and you are not deliberate about boosting you brand awareness and communicating your corporate identity, then you should be ready to take on whatever the society portrays your business to be. One of the secret of larger corporations is that they are willing to spend fortunes to boost their brand awareness.
If your intention of starting a real estate syndication company is to grow the business beyond the city where you are going to be operating from to become a national and international brand, then you must be ready to spend money on promotion and advertisement.
No matter the industry you belong to, the truth is that the market is dynamic and it requires consistent brand awareness and brand boosting to continue to appeal to your target market.
Here are the platforms you can leverage on to boost your brand awareness and create a corporate identity for your real estate syndication company;
- Place adverts on both print (newspapers and magazines) and electronic media platforms
- Sponsor relevant community based events
- Leverage on the internet and social media platforms like Instagram, Facebook, Twitter, YouTube, Google + et al to promote your properties
- Install your billboards in strategic locations all around your city or state
- Engage in roadshows from time to time in targeted neighborhoods to create awareness of your real estate syndication company.
- Distribute your fliers and handbills in target areas
- Contact families who are interested in acquiring a home, corporate organizations who are interested in acquiring their own property, home owners who are interested in selling off their home, properties owners who are interested in selling off their properties, foreign investors who are interested in owning properties in the United States of America, the government of the United States of America (Government contracts) and managers of public facilities within and outside the location where your company is located informing them about your business and the properties you have for sale
- List your real estate syndication company in local directories
- Advertise your real estate syndication company in your official website and employ strategies that will help you pull traffic to the site.
- Position your Flexi Banners at strategic positions in the location where your real estate syndication company is located.
- Ensure that all your staff members wear your branded shirts and all your vehicles are branded with your company logo