Maximizing Returns: The Power of Real Estate Syndication Explained

Imagine you're interested in investing in real estate but don't want to deal with all the hassle of buying and managing properties yourself. That's where real estate syndication comes in. It's like pooling money together with other investors to buy and manage properties as a group. This way, you can still benefit from

real estate investing without having to do all the work.

Now, when you invest in a real estate syndication, you're essentially buying a share of a property or a group of properties. The returns you get from this investment can come from a few different sources:

1. Projected Hold Time: This is how long the group plans to hold onto the property before selling it. In this case, they typically aim for about five years. This timeline allows enough time for the property's value to potentially increase while minimizing the risks associated with holding onto it for too long.
   

2. Projected Cash-on-Cash Returns: This refers to the money you receive each year as a percentage of the initial amount you invested. It's basically the rental income generated by the property, minus expenses, mortgage payments, and fees. They aim for an average annual return of 6-8%, which is distributed to investors throughout the holding period.
   

3. Projected Profit Upon Sale: When the property is eventually sold, the investors receive a portion of the profits. This is typically around 40-60% of the initial investment. These profits come from the increase in the property's value over time, as well as any improvements made to the property.
   

So, let's say you invest $100,000 in a real estate syndication deal with these projected returns. Over the course of five years, you could expect to receive:

• Your original $100,000 investment back.

• Around $40,000 to $60,000 in cash flow returns distributed to you over the holding period.

• Another $40,000 to $60,000 in profits when the property is sold.
  

So, by the end of the five years, your total return could be roughly $175,000 to $200,000. This demonstrates how real estate syndication can potentially offer significant returns on your investment over a relatively short period compared to other investment options like savings accounts.

Now, lets compare the same $100,000 when invested in a High Yield Savings Account.

Let's compare investing $100,000 in a high-yield savings account with an interest rate of 4.6% (National average) compounded annually over the same projected hold time of 5 years to the real estate syndication investment described earlier.

For the high-yield savings account:

• Interest rate: 4.6% compounded annually

• Projected hold time: 5 years
  

Comparing the two options:

• High-yield savings account after 5 years: $126,248

• Real estate syndication investment after 5 years: $175,000 to $200,000
  

In this comparison, the real estate syndication investment potentially offers higher returns compared to the high-yield savings account over the same period. However, it's important to note that the real estate investment comes with risks, including market fluctuations and the possibility of loss, whereas savings accounts are generally considered safer investments.