All About Syndications
Pro Tip: This is the detailed description. For a quick summary on how this works, go here.
What Are Syndications
One of the pillars of civilization is division of labor, specialization. And while this distinction has presumably been true for every civilization, it’s especially true right now. If you want to get your car fixed, you go to a mechanic; if you want to buy groceries, you go to a supermarket. Want some earrings with a picture of Chewbacca chewing bubblegum? No problem. Log onto Etsy, and there’s a specialist who does just that. Real estate syndicators are just another specialist. Our specialty is making the process of real estate investing simple and straight forward for people who aren’t real estate specialists and don’t want to spend their time being a landlord. We do the dirty work of real estate investing.
We do the dirty work of real estate investing.
Step 1: We find an opportunity
Finding a good investment opportunity is the sine qua non of being a good real estate investor/syndicator. Cloudline’s philosophy is that there are three critical components to finding a good investment. The first is to know what you’re looking for. There are properties everywhere. To find the right one, it helps to start out with some well-defined parameters, such as market, sub-market, size, property type, so on and so forth. The second component is to have a sound business plan for the investment. The business plan should be actionable and achievable. The last component is to look at a lot of different potential investment properties. A typical rule of thumb is that for every hundred potential investment properties, you end up thoroughly underwriting one third of them. And of those thirty-three, you typically only buy one.
Finding a good investment opportunity is the sine qua non of being a good real estate investor/syndicator.
Syndicators find investments by looking for properties that are for sale (“marketed”) or by finding properties that aren’t currently for sale (“off market”). Cloudline pursues a mix of both marketed or off-market properties. Neither is inherently better than the other. An investment’s success is all about how good of a price you’re able to pay, the efficacy business plan, and the execution. The investment doesn’t know the difference of how it was acquired.
Step 2: We invite you to invest
Once you register, you will automatically receive updates about any new investment opportunities that come available.
Step 3: You review
Each new investment opportunity will come with an investment summary, which details the investment and business plan. In addition, each has a Private Placement Memorandum, which further lays out the structure and risks of the investment. These are for you to review. This is also the best time to ask any questions you might have before investing. Then if you decide to you want to invest, there are some forms to review and sign, documenting the investment.
Step 4: You buy shares
Many commercial real estate investments are owned through a Special Purpose Entity (“SPE”), which is an entity whose sole purpose is to own a single commercial property and its associated bank accounts. In practice, most SPEs are Limited Liability Corporations (“LLCs”) because of the protections they provide to owners/investors. If you decide to invest in one of Cloudline’s investment opportunities, you invest by buying shares in that SPE. Prior to close, you wire your money to a bank account owned by the SPE, which then purchases the property at close. No money is ever wired to Cloudline directly.
Step 5: You sit back, we execute
After the investment closes, your work is done, and Cloudline goes about executing the business plan laid out in the investment summary. Over the course of the investment cycle, Clouline handles all distributions and tax documents. We’re available for any questions you have over the life of the investment, and we provide periodic updates and progress reports on the investment and business plan execution.
More Insights
Commerical real estate has a unique combination of attributes that make it an excellent investment class and a worthwhile addition to most investment strategies.
There are several different ways to invest in real estate. Take a quick spin through the pros and cons of REITs, single family rentals, commercial real estate, private equity, and syndications.
You’ve probably heard the term “Class A Building”. What do terms like this really mean? And better yet, what do they mean for investing?
A look at Cloudline’s market selection process. What are the demand drivers we focus on and how do they compare across major markets?
posted 2/18/2022
