Things to Do Before Investing in Your First Real Estate Syndication
Trying new things is exciting, but it can also be overwhelming and scary at the same time. Just like when handling your first real estate deal. Not everyone may know about it, but there are things to do before investing in your first real estate syndication. It is crucial to determine them as they can make or break your deal.
Real estate syndication does not end with putting money on a deal. Though syndications require minimal involvement from investors, there are steps that investors still need to do on their own. So, imagine if you are just a beginner investor, do you know how and where to start? It can be intimidating, right? In this article, we will discuss the important things to do before investing in your first real estate syndication to help you overcome your fear and gain peace of mind.
6 Things to Do Before Investing in Your First Real Estate Syndication
Identify Your Investing Goals
This is probably the most important step of all. There are lots of investment types you can invest in. From stocks, bonds, gold. Cryptocurrencies, to real estate. The first thing you need to ask yourself is, what do I want to achieve if I were to invest? What are my goals? Once you were able to identify them, they will tell you whether real estate syndication is for you or not. Doing this will give you a perception if the investment type you chose can help attain those goals.
Other than investment goals, here are other questions you can ask yourself:
- Am I looking for a long-term or short-term investment?
- Do I want a lump-sum profit or a steady passive income?
- How much money can I afford to invest?
- What is my risk tolerance?
Do Your Research
The key to overcoming fear of doing the first real estate deal is educating yourself. Getting scared is understandable as investing a huge chunk of money is not a joke. Like what they say, investing in yourself is the best return on investment you can have. It is perhaps the best investment you can make. By getting educated, you can gain confidence in starting the process. You can read books and articles, listen to podcasts, and connect with online communities. Take advantage of the resources available online that you can easily access.
You may listen to our podcasts where we feature highly experienced, educated, and successful investors. Each investor discusses different topics related to real estate investment they are inclined with. Besides, we also release blogs every week about real estate updates, statistics, and other real estate matters.
Find the Right Investment Opportunity
At this point, since you were able to identify your investing goals already, it is about time to find the first real estate syndication deal for you. The golden rule is, find an investment opportunity that fits your goals. There are several real estate syndication projects available that ranges from ground-up construction to value-add assets, and turnkey syndications.
Typically, the syndication sponsors provide an executive summary, full investment summary, and an investor webinar for investors. These documents provide a full perspective of the asset, market, business plan, sponsor team, and projected financials. Carefully read the investment materials provided and ask questions. It is important to thoroughly check if the business plan has multiple exit strategies, if the business plan itself is aligned with the asset class and current economic market, and signs of conservative underwriting.
Aside from those items, you also need to research the market trends in the job and the area’s population growth. As well as the investment requirements projected hold time, and projected returns. When in doubt, ask a question.
Reach Out to Other Investors
From the definition itself, a real estate syndication is a group investment. It consists of a group of real estate investors. Hence, networking is vital! Find and connect with other investors through online platforms. Whether they are new or experienced investors, they will be able to share the same questions and fears with you and how they were able to overcome them. You would not know that they might also help you find future investment opportunities. Remember, all successful investors also started from being newbies.
Additionally, local networking events are also beneficial. Attend boot camps that are available in your area and take that opportunity to build a connection with local investors.
Compare Investment Summaries
You are not obliged to sign with the first real estate deal you encountered with. The same rule applies if you were to hire a real estate agent. I bet you are already asking why. Simply because if you only review one investment summary, you may see it as a perfect deal already as you have nothing to compare to. There is nothing wrong with checking out several investment summaries. Go ahead and compare the details, how each sponsor communicates, and view each of them with an open mind. Doing this will help you decide and find a better deal.
Also, investment summaries can be overwhelming as they contain lots of information and unfamiliar words. But as you go through several investment summaries, you will be able to decode the lingo easily.
Take Your Time
No matter how overwhelming your first real estate syndication can be, remember not to panic. Doing so may lead you to decide impulsively. Take all the time you need to educate and gain confidence in doing your first deal. Mastery is not achieved overnight. Educating yourself and research takes time. Do all these according to your phase until you feel confident about yourself.
Summary
Investing in any real estate deal is not easy especially if you are a first-timer. It is completely normal to feel scared, worried, or confused in your first deal. As mentioned above, always remember that all successful investors were once in your position. Educate and prepare yourself in the next actions you will be taking. Mistakes can happen and inevitable, but use them to be a smarter investor.