Flip and Danny walk through six steps to invest in a real estate syndication: prepare first, check the deal against your goals, make a soft commitment, sign legal documents, wire funds, then wait for distributions. They explain how over-subscription and first-come-first-serve allocation work.
Hey, everybody. Flip and Danny here, founders of the Freedom Real Estate Group family of companies. And welcome to another episode of our.
Podcast called Freedom through Passive Income.
That's right. And today's episode is called Six Steps to Successfully Invest in a Syndication.
And a Real estate syndication at that.
And a real estate syndication, not a magazine subscription.
Oh, my goodness.
Yeah, Sorry. First, number one. That's always first, isn't one?
Yeah, we always start with one.
We start with one.
Yes.
Is go back to a previous episode and it's called the Three Critical Steps to Take Before Investing in a Real Estate Syndication. That is key. Go back and watch that. That episode. And because we talk about those three steps and it really helps you out in deciding if this is even anything you're going to do. So actually, one has more to it. It's not just one thing. It's a lot. It's a few things. But go back to that episode and watch that episode to see those three critical steps.
Yes. The second step is to decide whether it meets your investment goals. So there's many types of investment goals, and we've learned this as we talk to different investors. Some people want cash flow, some people want depreciation to get the tax benefits. Some people want to just preserve their capital. They don't even care about the cash flow. Some people want growth and they want to compound all the interest that they're receiving and not even get a distribution at all. So as you review the offering memorandum, which happens when you're presented with an opportunity in the first place, you're going to get a packet that gives you the details of the deal. That's called an offering memorandum. As you review that, you're going to come up with questions and decide whether it's going to meet your goals or not. You'll also have an opportunity to attend a Q and a call to get questions answered, if you have them right.
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Yeah. So again, at this point, this is your point or this is the point in the. While you're reviewing the syndication and checking it out to see if it's something you want to do, this is the point where you can do a soft commitment. This is when you basically you're raising your hand and said, hey, I've got, you know, 50,0001-000002-00000 that I would like to, you know, reserve my space. And now this doesn't become, you know, a hard commitment just yet because after that soft commitment, that's when you're going to get the legal docs. Now it's getting serious. So you're going to get all the documents in. This is when. This is your chance to review the documents. And then once you sign the legal documents, hard commitment.
That's right. That is your hard commitment. That is really important in syndications. Just so you know, because if we're raising $2 million, if people put in 3 million of soft commitments, suddenly we're over subscribed. That's what that word means if you've ever heard it. If you're over subscribed, you've got too much money, you've got too many people that want to invest in that opportunity. So ultimately what happens is it becomes a first come, first serve service situation. And if we had 3 million and we only needed 2, we would stop soft commitments. We wouldn't let anybody else soft commit, right? We would send out the legal paperwork so that everybody could read it. And ultimately the people that sign first are the people that are going to get into that 2 million slot. And then we will cut it off, everybody else will be on a waiting list. So those steps, number three and four are really, really critical for you to understand, right? So step five is you wire the funds. So as soon as you sign those legal documents and you're done with all your questions, you wire the funds in. That is the final step of being on a waiting list of sorts. So again, every single step is for us, for us to go, hey, you are committed, right? Even though you sign the legal documents, that's really a hard commitment. You need to wire the funds. If you don't wire the funds and somebody on the waiting list is like, hey, I can sign the docs and wire the funds. Right now you're probably going to lose your spot and you're probably going to have a conversation with one of the investor relations team members to say, hey, we need to fill this pot because we got to close. So either you wire your money or I'm giving the first person on the waiting list an opportunity to sign their docs and get the money in. So very, very important.
And that reminds me actually of real estate deals because we'd always say, oh, no, everything signed and closed at the title company. I'm like, did we get our funds?
Yep.
It's not closed until we get our funds.
That's right. And the very last step isn't really a step at all. It's just reminding you to celebrate. You just invested in a syndication and what's going to happen next is you're going to get quarterly updates. And if you're one of the people that liked cash flow and you invested in that type of investment, then you're going to get monthly or quarterly cash flow, depending on how it's received. Sometimes it's biannual. Every investment's different. That's why you do your due diligence, read the docs, know what you're investing in to make sure it's a match for what you want to do.
There we go. So I hope that helps in helping you to invest in a syndication. Real estate.
Real estate. Syndication. We love real estate.
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