The Pros and Cons of Real Estate Syndication

Since the Great Recession of 2008, we’ve seen numerous properties offered in the securitized real estate syndication industry, especially when it comes to the TIC and the 1031 space. From my vantage point as a 1031 sponsor, the landscape has changed dramatically. While some of the larger players have left the industry, others have taken advantage by accelerating growth, filling the void and expanding their presence. 

What hasn’t changed much, though, are the core objectives of the end-user investors. Capital preservation and stability are more important than ever. In the post-Madoff era, trust is a premium that is hard to earn, as is income. Investors want cash flow and tax benefits, and they have a difficult time finding them with traditional vehicles.

This component is steadily bringing in new investors who are learning that passive real estate can provide a wide array of benefits. But as it becomes increasingly easier for a client to invest in real estate, it has not been so easy for real estate sponsors. Barriers to entry are high. Due diligence officers, RIAs, savvy investors, and registered representatives want to see track records, strong balance sheets, healthy cash flow, and a proven back office. 

As more and more international funds and larger private equity firms drive up prices for prized real estate, the buying competition can be fierce — and that’s not even mentioning the lenders. 

With student housing in particular, more and more groups are viewing it as a compelling asset class worthy of increasing allocation of their portfolio. Roughly speaking, the volume of student housing transactions have more than tripled in the last five years. 

Read the entire article in Student Housing Business here