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by Yarusi Holdings LLC on

Syndication is the pooling of capital from multiple investors in a single real estate opportunity. It is structured with a General Partner or Sponsor and non-managing members or Limited Partners. The investment is committed to one asset class, location, property manager, operator, and asset. The sponsor finds an asset that meets their investment objectives. They handle the due diligence, financing, and all written agreements: PPM, Operating Agreement. They identify the amount of equity needed for raising capital as well as debt financing before they close on the property. Once it is purchased, the sponsor serves as the operator on behalf of the investors.

A real estate fund is run by experienced sponsors that manage investor capital to acquire multiple properties, develop an overall investment strategy, and are responsible for the fund’s performance. Unlike syndication, the funds are not limited to a single asset class or single market. An advantage of a real estate fund allows managers to act quickly to close on transactions and make decisions on behalf of the investors.. An investor should carefully evaluate the track record of the operator and define their target criteria to fit their investment portfolio. It is similar to syndication but gives the investor diversification over a pool of assets. Some types of real estate funds include: 

  • Blind or semi-blind fund: Only some of the assets have been identified at the time investors commit their capital to a sponsor. 
  • Open-ended funds: Investors are able to enter and exit funds at different intervals determined by the fund’s sponsor. 
  • Closed-ended funds: Sponsors purchase properties with a value-add plan and exit strategy to give investors a return upon sale. 
    Evergreen funds: Investment returns are recycled back into the fund rather than being distributed to investors.