What Is An Apartment Syndication? | High Country Capital Partners
By: Alec Beardall
Tags: Investors, Investment, Apartments, Apartment Syndication, Investing

“I would love to own a rental property…. I just don’t have the time, money, or know how to do so!” We have probably all heard this, or some form of this from someone we know. Maybe you heard it from a doctor, dentist, a business owner, or maybe you heard it from Joe blow down the street. Maybe you said it yourself! Not that it matters who you heard it from, but I’m sure you’ve heard it. These people (and hopefully you) would love to own and benefit from an appreciating physical asset, like an apartment complex, that provides phenomenal tax benefits & cashflow. Apartment Syndication.

How many of these people actually go out and buy a rental property? That buy an apartment complex — “The Babe Ruth of rental properties!”? From my experience, the far majority of them never do. For various reasons, but the biggest being that few actually have the ability (money, time, expertise, etc.) to purchase an apartment complex on their own. They might have the money, but not the time or knowledge. They might have the time, but not the money, etc..

It is truly unfortunate these individuals never find an avenue that allows them to own and benefit from great assets, like apartments! Today, I want to offer a possible solution for these individuals! Remember “these individuals” includes YOU! Yes, YOU the person reading this! Maybe you have never thought about owning and benefiting from apartment complexes, but you’ll want to after reading this. The solution I am talking about is….

APARTMENT SYNDICATION!!

“AWESOME ….. But what does that mean Alec?” Whenever I use this term I’m usually met with blank stares. But that’s okay, because it’s not a common term, and I’m going to teach you about it today.

The best and most concise definition of an apartment syndication that I can come up with is this: A group of individuals or companies that combine their resources (money, time, expertise, etc.) to do something they couldn’t do, or at least would be very hard to do, on their own. In this case, buying a large apartment complex.

Like mentioned above, individuals typically have one or two parts to the puzzle, but not all. Time, capital, the know-how, etc.. There are specific roles within an apartment syndication to make it go round. Let’s go over them:

THE FIRST ROLE IN AN APARTMENT SYNDICATION IS THE: GENERAL PARTNERS (GP):

The general partners in short, are the deal operators or managing partners. These individuals have the time and know-how part of the puzzle. They are also commonly referred to as syndicators, sponsors, and active investors. The GP’s are active in the day to day operations of the business. They are responsible for researching and finding target markets. Finding apartment complexes within those markets. Sourcing capital from passive investors. Developing the business plan and hiring the various team members to run the apartment complexes. Then managing the day to day operations of the property. Basically making sure everything runs smoothly from A to Z.

The GP’s are usually a team of people (like High Country Capital Partners). A few common roles in a GP team are: an investor relations and capital raising person, an acquisitions and asset management person, and a loan package and high net worth person to sign on the loan. GP teams come in all shapes and sizes.

THE NEXT ROLE IN AN APARTMENT SYNDICATION IS THE: LIMITED PARTNERS (LP):

The limited partners, also known as passive investors, are an intricate part of an apartment syndication. They are responsible for investing the money needed to fund each deal. They are the majority shareholders in each deal and receive a large majority of the profits from the operation and sale of each asset. The profits are split in relation to the ownership percentage of each individual or company involved with the asset.

The limited partners have limited voting rights, which in turn limits any liability if there were to be a lawsuit. These are the individuals who have capital, want to own and benefit from real estate, but don’t have the time or know-how to do so. They complete a part of the puzzle!

LAST, BUT DEFINITELY NOT LEAST IS THE: PROPERTY MANAGEMENT TEAM:

Without this team the deals would simply not be profitable. This is typically a third party team, but can also be in house on the GP team. The property management team oversees the day to day operations physically on the property. They place and care for existing tenants, market the property to prospective tenants, and oversee any renovation projects on the property.

HOW DO PROFITS BREAK DOWN IN AN APARTMENT SYNDICATION?

A typical total deal split is a 70/30 split. This would result in 70% of the profits going to the Limited Partners and the remaining 30% of profits going to the General Partners. The total deal split can vary depending on the GP’s and the deal itself.

Let’s break a deal split down a little further. Say there was a deal that needed $1,500,000 in funding and there were 3 limited partners that all invested $500,000, for a total of $1,500,000. The 70% split, that goes to the limited partners, would be evenly split amongst the 3 of them for a total ownership percentage per person of 23.33%. The same goes for the GP side with the remaining 30%. That is a very simple breakdown of how the 70% could get split, but it usually does not split that evenly.

CONCLUSION:

Apartment Syndications provide a great solution to busy individuals that want to own and benefit from real estate, but are not able to do so by themselves. Apartment Syndications are an amazing way to become a part owner in an institutional grade investment that in the past, was only available to very large institutional investors.

Next time you drive past a huge apartment complex remember those types of assets aren’t only for the other guys! They can be for YOU too!! You now have a viable option and way to own the exact same assets the ultra wealthy own! So tell your family! Tell your friends, tell your neighbors! Tell everybody!

High Country Capital Partners is an investment company that structures apartment syndications like I’ve mentioned above! If you are interested in investing with us or have any questions, reach out anytime by clicking one of the buttons below to schedule a call or contact us!

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