As a passive investor, you want to make sure that your real estate syndication deals are worth your time and money. The good news is that there are several ways to evaluate these deals before you commit. In this blog post, we will discuss some of the criteria you should consider when evaluating a real estate syndication deal.

The Investment Opportunity

The first step in evaluating a real estate syndication deal is to understand the opportunity being presented.

  • What type of property is it? 
  • What are the current market conditions? 
  • How much capital needs to be raised, and what is the estimated return on investment?

Knowing the answers to these questions can help you assess the potential of this investment opportunity and whether or not it aligns with your financial goals.

The Sponsor

The success or failure of a real estate syndication often depends on who is sponsoring it. Make sure to do your due diligence on any potential sponsors before investing in their deals. Research their portfolio, track record, and experience level; read reviews from past investors; and ask for references if necessary. 

You want to make sure that you’re working with someone who has established credibility and expertise in this industry. 

Here is the simple list of tasks they must complete:

  • Evaluate potential real estate investments
  • Negotiate deals and contracts
  • Develop Exit Strategies
  • Manage funding sources and lenders
  • Perform due diligence
  • Handle financial reporting, accounting, and audits
  • Oversee the day-to-day operations of the investment property
  • Communicate with investors, governmental agencies, and all vendors.

Drone Image of New Multifamily Development in Central Texas. Credit to Henry Che

Financial Modeling

Before investing in any real estate syndication, it’s important to conduct thorough financial modeling on the potential returns from this deal. This includes analyzing cash flow projections, calculating cap rates, estimating expenses associated with running the property, determining how much debt will be taken out against it, and more. If done correctly, financial modeling can give you an accurate picture of what kind of returns you can expect from this particular deal—and whether or not they meet your expectations as an investor.  

As a passive investor in a real estate syndication deal, it’s important that you have all the facts before committing yourself financially. By evaluating each opportunity’s investment opportunity, sponsor’s credentials and track record, as well as conducting thorough financial modeling –you can make sure that each real estate syndication deal will bring maximum return on investment while meeting your personal financial goals. 

With due diligence upfront—you can ensure that your investments are safe and sound!