Real Estate Process | Syndication Investments for a Physician Investor
“If you’re going to be a winner in life, you have to constantly go beyond your best.” – Robert Kiyosaki
If you are a physician investor and made a decision to invest in your first Real Estate Syndication project, here is a basic outline of all the steps of the real estate process – syndication investments for a physician investor.
Prior to investing into a Real Estate Syndication project, learn about the Real Estate Syndication definition, Real Estate Syndication Structure, pros and cons of a Real Estate Syndication, and real estate returns for a physician investor.
Steps of the Real Estate Process – Syndication Investments for a Physician Investor
- Step 1 of the Real Estate Process: Contact a Real Estate Sponsor to Learn About Syndication Investments
- Once you decide to invest (if Real Estate Syndication the right investment opportunity for you), you start exploring opportunities that align with your investment philosophy. Contact an experienced real estate sponsor to learn about their on-going opportunities.
- Majority of real estate sponsors work only with accredited investors. According to the National Salary Database, most physicians qualify for the accredited investor requirements. Know the accredited investor definition here.
- Step 2 of the Real Estate Process: Real Estate Sponsor Will Brief You on Their Projects
- The real estate sponsor will provide you with details of a particular syndication investment. Real estate sponsors will usually hold a web-conference, or video presentation about the syndication investment.
- Some real estate sponsors share a pitch deck, while others share the Private Placement Memorandum (PPM)—a legal document that explains all the details of the project.
- Either way, plan on communicating in person/video conferencing/phone calls with the real estate sponsor to go over the project details, ask all your questions.
- Step 3 of the Real Estate Process: Perform Due Diligence and Evaluate the Project Offering
- This is the most important step in the investment process. You need to learn all you can about the real estate sponsor, vet them, and make sure they are legitimate business operators with adequate expertise and experience.
- It is mandatory to understand and negotiate the structure of the syndication investment. Understand the numbers (e.g. Profits, Fees, Projections, and etc).
- After your thorough due diligence, if you make a decision to move forward with the investment process, the real estate sponsor will offer a PPM to the prospective investors. I wrote a detailed article dedicated towards the importance of vetting your sponsor and most important 20 ways of vetting your sponsor.
- You must have your attorney review the PPM. Share the financial details with your CPA to get guidance on tax strategies.
- Step 4 of the Real Estate Process: Invest
- After you make a decision to invest, you transfer your funds to the syndication bank account under your personal name, or via your LLC.
- Typical minimum investments are $50,000 USD. In return for your investment, you own a part of the property (i.e you own certain shares of the LLC that owns the property).
- Step 5 of the Real Estate Process: Track the Investment
- Monitor the project and track your earnings. Real estate sponsors generally provide frequent scheduled project reports and updates.
- This is a passive process, won’t take more than 30 to 60 minutes per quarter.
- You will be receiving scheduled earnings, along with tax benefits (depreciation).
- Step 6 of the Real Estate Process: Enjoy Returns and Tax Strategizing
- This is the last step of the Real Estate Syndication investment process. As mentioned above, you will own a portion of the property for the investment you made.
- You will receive monthly or quarterly returns on the positive cash flow from the property, and you will receive proceeds from final sale of the property.
- Market average for the yearly cash on cash returns for Real Estate Syndication investments are between 10-20%, however sponsors get pretty creative in the way they structure the deals.
- As you begin to see profits roll in, it is important to have developed an effective tax strategy. Talk to your CPA in advance about setting up tax saving strategies.
- If you do not have a proper tax strategy, all this hard work and earnings cannot be realized (a.k.a taxes will eat you up).
Have you invested in a Real Estate Syndication so far? What real estate process did you go through? Did you experience a smooth work flow and investment process? Please share with us your investment experience by leaving a comment below!
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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