Pros and Cons of Real Estate Syndication for a Physician Investor

Pros and Cons of Real Estate Syndication for a Physician Investor

“Success in real estate starts when you believe you are worthy of it.” – Michael Ferrara

What are the benefits of investing in real estate? Physicians as investors, are presented with numerous investment opportunities. It is a wise idea to understand the pros and cons of Real Estate Syndication for a physician investor. The previous blogs on the basics of Real Estate Syndication discussed the Real Estate Syndication definition and the Real Estate Syndication structure. It is important that you understand the basics of Real Estate Syndication deals before reading this article on the pros and cons of Real Estate Syndication for a physician investor. 

In this article, we will discuss the pros and cons of Real Estate Syndication for a physician investor getting into a syndication investment. We will answer a frequently asked question: ‘What are the benefits of investing in real estate?’

Pros and Cons of Real Estate Syndication for a Physician Investor

• Advantages of Investing in Real Estate

  • What are the advantages of investing in real estate? When you invest in a Real Estate Syndication, you own a piece of property. It is a hard asset, and you make money on it. You make Returns on Investment (ROI) – monthly or quarterly distributions of cash flow, along with proceeds from sale of property. 
  • Tax Benefits: Real estate tax deductions will be passed on to the investors. Profits from the sale proceeds will be taxed at long-term capital gains rate (this is a relatively a lower tax rate).
  • Semi-Passive Investment: After the initial due diligence, it takes very minimal time and effort to keep track of the investment. Read here on how to vet your sponsor.
  • By teaming up with an experienced real estate sponsor, you are able to leverage the real estate sponsor’s expertise to be a part of deals that produce above average returns.
  • Real Estate Syndication investments are a time-tested way to diversify your assets. 

• Disadvantages of Investing in Real Estate

  • Liquidity: Since there are other investors involved in the deal, you do not control the duration/term of your investment. Usual investment term of a commercial real estate project is 5 to 10 years. You usually get your money back when the property is eventually sold. If you need to exit before that, you need to have a clause included in the agreement that can allow someone else to buy your share. 
  • As with any investments, a commercial Real Estate Syndication investment is subject to be influenced by market fluctuations. You can try to minimize the risks by using smart investment strategies and market knowledge. 
  • You will not have much control over the day-to-day operations of the property. Majority of the day-to-day decisions will be taken by the real estate sponsor. It is not similar to owning a Single Family Rental property by yourself, where you make all the decisions. In syndication investments, important decisions are usually made by the real estate sponsor after consultation with the investors. Difference of opinions or deadlocks are usually resolved by a voting system agreed upon at the time of initial investment. 

Every line in this blog post deserves a separate article. Relevant points that require detailed explanation are provided with a hyperlink. Please continue to read through the hyperlinked articles to get more detailed and comprehensive understanding of the topic. 

After you understand the pros and cons of Real Estate Syndication, it is also important to learn about how syndication investments are compared with other forms of investments. In the next part of this series, you will learn about real estate returns – how much profits you can make by investing in syndication investments. 

You will find the rest of the topics regarding Real Estate Syndications for a physician investor here.

Here at PhysicianEstate, we welcome all physician entrepreneurs to learn about commercial real estate investments, rental property investments, and wealth generation. We encourage all physicians to eventually become real estate physician investors. We know a great deal about Who – What – Why – How. 

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