Is A Property Syndication Right For You?

If you’ve ever thought about investing in real estate and then quickly talked yourself out of it, I get it. Who wants to find a property, fix it up, deal with tenants, chase rent payments, and keep up with all the laws? People call it passive income, but it’s not. It’s work.

If you already have a full-time job like I do in tech, that’s not exactly appealing. I don’t want calls from tenants during my workday or on weekends. I’m lucky because my husband does that for a living. He’s been in real estate for over twenty years and knows it inside out.

But if you don’t have someone like that in your corner and still want to invest, that’s where property syndication comes in. I cover what it is below and how it compares to other types of passive real estate investments.

What exactly is a property syndication?

Property syndication is when several investors pool funds to buy a commercial property. It’s one of the best ways to invest in larger real estate projects without having to take on all the responsibility yourself.

And it’s a way for individual investors to own commercial real estate investments that would normally be out of reach. Because even if you have enough money to buy a large property, most banks won’t give you a loan without some kind of experience.

With a real estate syndication, an experienced investor, called a sponsor or general partner (GP), brings together a group of passive investors to buy a property.

Who is involved in a property syndication?

I explained that there’s a GP who brings everyone together. The other main role is the passive investor, who’s called a limited partner (LP). The roles and responsibilities of each include:

Aspect	General partner (GP)	Limited partner (LP)
Role	Active manager and decision-maker	Passive investor
Primary responsibilities	Sourcing deals, due diligence, financing, daily management, executing business plans	Contributing capital, little to no involvement in management
Liability	Unlimited personal liability for partnership debts and obligations	Liability limited to initial investment amount
Control	Full control over investment and operational decisions	Minimal control, may have veto power over major transactions
Capital contribution	Invests a minority share (usually 5–20%)	Provides the majority of capital (80–95%)
Profit share	Higher share relative to capital invested due to management and risk	Profit/loss share as per agreement, based on capital contribution
Risk exposure	Highest exposure, both financially and operationally	Losses limited to investment; no operational risk
Returns	Performance and management fees, profit participation	Receives distributions and share of profits
Activities	Negotiation, funding, asset management, investor reporting	Vetting sponsors, monitoring reports, receiving updates

How is a property syndication structured?

A property syndication gets organized by creating a separate LLC or LP that owns the property. Investors do not own the property directly. Instead, they own a share of this entity.

Operating agreement

An operating or partnership agreement defines the specific structure and sets various expectations, like:

How much each investor contributes.
Who has decision-making authority.
How the syndication distributes money.
What happens if the syndication sells the property or an investor leaves.

Most of the funding comes from investor equity and a loan from a lender. The entity receives rental income, pays property expenses and the loan, and then distributes remaining cash to investors based on the agreement.

Profit payouts (distributions)

The GP provides cash flow from operations to investors in the form of distributions. The way these get split is all part of the real estate investment syndicate’s operating agreement.

Key elements include:

Preferred return: Investors receive a set return first, before the GP sees any profits.
Return of capital: After the preferred return, investors usually receive their initial investment back.
Hurdles: Certain return benchmarks like IRR or equity multiple must be met before the split shifts in favor of the GP.
Profit splits (carry): After those IRR hurdles, profits get split between investors and the GP. You’ll commonly see a split like 70/30 or 80/20.
Catch-up provisions: Some structures allow the GP to “catch up” to a target split once investors earn the preferred return.

Sponsor fees

The agreement also outlines the fees the GP charges for acquiring, managing, or selling the property. Remember that the GP does all the work to find the deal, spends money on due diligence, and takes on the most risk. Fees cover some of those costs and risks.

Tax treatment

For tax purposes, the IRS classifies the entity as a pass-through, and each investor receives a Schedule K-1 that reports their share of income, losses, and depreciation. As a syndicator, it’s our responsibility to get those tax forms to our passive investors. And every year, we’re pushing our accountant to get the K-1s out by the March 15th IRS deadline.

Who can invest in a property syndication?

Most of the time, property syndications require you to be an accredited investor. This is due to the Securities and Exchange Commission (SEC) regulations. Basically, the real estate syndicate falls under SEC Regulation D, which includes exemptions that allow us to raise capital legally without going through full SEC registration.

The two options are:

Rule 506(b): Syndicators can include investors they already personally know and up to 35 non-accredited investors.
Rule 506(c): This is the route we take with our real estate syndications. We can publicly advertise the opportunity, but the SEC only allows for accredited investors to participate.

What is an accredited investor?

The SEC defines an accredited investor as someone who meets at least one of these income or net worth requirements:

Income: $200,000 a year, or $300,000 if filing jointly
Net worth: Over $1 million, not counting their primary home.

Types of real estate syndications

When you’re looking at different investment opportunities, there are two different ways you can invest in a real estate syndication deal.

Equity investments

Equity investments mean you own a share in the property entity. Like we talked about earlier, that’s usually an LLC or LP that holds the real estate asset. You make money from the rental cash flow and the property’s appreciation, and you also get the tax benefits that come with ownership.

This is the structure we use for all of our real estate syndications.

Debt investments

Debt investments are a popular asset class right now. The main difference is that you’re acting like the lender. It’s basically like being the bank. You provide the capital, earn interest on your loan, and get your initial investment back when the loan matures.

You’re not an owner in the property, so you don’t share in the appreciation or the other perks that come with real estate ownership. But, it can be a good strategy if you want to diversify your passive income investments.

I’ve been looking at a few debt funds. Most of them require a minimum investment and set time periods of one to three years. The longer you commit, the higher the return on your capital.

Benefits of property syndication

Why would you want to join a real estate syndication deal in the first place? Here’s the biggest reasons:

Passive income

To me, this is why you invest in real estate. The whole goal is to put your capital into investment vehicles that pay you a return and give you regular income. One of my friends in Rotary told me that if it weren’t for his investments in mobile home parks, he wouldn’t have been able to retire.

The best part about passive income is that you can still have a W-2 job (like me) and you don’t have to worry about daily operations like you would if you had direct property ownership.

Diversify investments

I’ve always believed in diversifying both investments and income. Sometimes real estate performs well, and sometimes it doesn’t. The stock market can hit record highs one year and drop to painful lows the next.

That’s why I think it’s smart to spread your money across different types of investments. It helps manage risk and keeps you from putting too many eggs in one basket.

Inflation hedge

In 2022, U.S. inflation spiked to around 8–9%. The Federal Reserve raised interest rates to bring it back to normal levels, but the impact is still with us. When you compare the cost of goods and services from 2020 to 2025, we’re paying about 25% more on average.

So how does real estate help? Let’s look at one of our smaller rental homes as an example.

We bought it in 2017 for $182,000, and today it’s worth about $350,000. To outpace inflation, the property only needed to rise more than 25% in value. Instead, it appreciated roughly 92%.

That’s way more than keeping up with inflation.

And that’s just the appreciation. We also get all the other financial benefits that come with that one property, like rental income and depreciation deductions.

Tax benefits

Tax benefits are the icing on the cake with real estate investing. They aren’t the reason to buy a property or join a real estate syndication, but they help you keep more of your income every year. Here are the main ones:

Depreciation

This is a paper expense that allows you to reduce your taxable rental income each year by writing off the cost of the property over 27.5 years. This lowers your taxes and allows you to keep more of your passive income. Plus, it reduces your taxable active income as well.

One of the strategies we use in our real estate syndications is to accelerate depreciation to take more up front. To do this, we pay for a firm to do a cost segregation study which we then submit with the property’s tax return. This greatly reduces taxes on your passive income in year one.

Deductions

These are tax write-offs for expenses relating to your real estate investment. Say you invested in our Barcelona Hotel Fund and wanted to go see the property for business purposes, you may be able to deduct travel expenses from your passive income.

I’m not a tax or financial advisor, but you could ask your CPA for more details.

1031 exchange

Finally, you can defer taxes entirely when you sell by using a 1031 exchange. This lets you move profits from one property into another without paying capital gains or depreciation recapture. Just note that if you don’t roll over the proceeds into a new real estate investment, you will eventually owe those taxes.

As of this writing, we’re in the middle of a 1031 exchange, and it’s definitely tricky. You have to identify the property early, before you’ve had the chance to do thorough due diligence. Because of that, some of the properties we were considering are no longer viable, and our options have narrowed.

It’s a bit of a catch-22. We don’t want to buy a property unless it’s a solid deal, but the 1031 rules could leave us in a position where we end up paying the capital gains tax consequences if we can’t find the right one in time.

Drawbacks of property syndication

I never want prospective investors to think that real estate investing is always perfect. And if you are investing in a syndication, there are some risk factors and drawbacks to consider. These are the main ones:

Illiquidity

You’ll need to commit your capital for several years. It’s not easy to get it back if you need it, so review the PPM and offering documents carefully and make sure you understand the expected hold period. For example, our U.S.-based hotel syndications usually have a seven to ten-year hold.

You can’t think of real estate like the fix-and-flip rental properties you see on HGTV. I’m not saying you won’t see your capital sooner, but property operations take time to get underway and for the syndicator to execute their plan.

Your options to exit are also limited. You might find another investor to buy your share, but the syndicator has to approve that, since they don’t want just anyone in the deal. Some funds have secondary markets, but that’s rare.

Lack of control

The reason many investors choose a real estate syndication is because it’s passive, but that can also be a drawback. As an LP, you don’t have control over management decisions and have to rely on the sponsor for managing properties and executing the business plan.

That also means you take on sponsor risk, since you’re depending on their experience, judgment, and integrity.

And let’s be real, not every deal works out the way you hope. We have a hotel that’s been hit hard by a series of challenges. Everything from COVID to being located in an office park where the major employer is struggling to rising labor costs for housekeeping and maintenance. It hasn’t been our strongest investment, and that’s part of the reality of real estate.

What matters in this scenario is how the sponsor responds. In our case, Mike paused all his fees, applied for grants and other funding programs, and negotiated with the bank to help improve the property’s financial situation.

Look at the sponsor’s past performance, and someone who steps up and actively works through these kinds of unforeseen challenges.

Market risks

All real estate carries market risk. You might buy your dream home, only to find out a few years later that the area is declining and no one wants to live there. Suddenly, you can’t even sell the property for what you paid. That’s the reality of real estate.

When you look at opportunities, ask questions about the downside. What risks exist? What could go wrong? There’s no such thing as a perfect investment. Higher returns usually come with higher risk, so you need to understand that these things can happen and they can impact your investment.

Syndications versus other passive real estate investments

You can also passively invest in real estate projects through these alternatives to a real estate syndicate:

REITs: Real estate investment trusts are publicly traded companies that own and operate a real estate portfolio. You buy shares in their company via the stock exchange, and you can buy and sell your shares whenever you want.
Crowdfunding: Real estate crowdfunding platforms are marketplaces where you pick and choose investment opportunities. Since it’s a platform, everything goes through that specific site. You don’t interact directly with the sponsor, and all your communications and returns go through the site.
Joint ventures: This is one of my favorite approaches to real estate investing but it doesn’t work in every scenario. One partner handles the day-to-day management of the property and the other partner provides the entire investment. Then, the partners split the profits. This is exactly how we got into our first hotel.

Comparing private real estate investments in a syndication versus other ways to invest in real estate:

Structure	Control level	Liability	Liquidity	Minimum investment
Real estate syndication	Limited/passive	Limited	Low	$25K-$100K+
Direct ownership	Full	Full	Moderate	Property value
REITs	None	Limited	High	$100+
Crowdfunding	None	Limited	Low	$25k-$100k+

Real estate syndication investment strategy

It might surprise you to know that even though Mike and I syndicate hotels, we also invest in other syndications. Why? The same reason I mentioned above, which is diversification. I don’t have experience with self-storage, commercial office buildings, or senior housing, but I think they’re all great ways to add portfolio diversification.

So I invest passively in other syndications to do just that.

Here’s how I look at any real estate syndicate:

Investment objective

This starts with why I’m looking to invest in the first place. My biggest goal right now is cash flow through rental income. That immediately rules out opportunities like owning land or building spec homes because those don’t generate regular income.

Risk tolerance

You should define your level of risk tolerance and how much of your initial investment you are willing to lose. For me, it depends. A project with lower investment minimums doesn’t get as much scrutiny here as those that have a higher initial level.

Asset class

I also look at my current investments across multiple properties and try to find ways to diversify into different asset classes or markets. I already mentioned my interest in areas like mobile home parks and self-storage.

And, although it’s not a real estate syndication, I recently invested in an oil and gas fund. For me, it’s about adding another layer of diversification and gaining exposure to a different asset class than what I usually invest in.

Funds available

Start by looking at how much money you have available for real estate. From there, decide how much of it you’re willing to put into alternative assets and how much risk you’re comfortable taking. Once you know that, you can figure out how to allocate those funds across different types of investments.

Personally, I like a mix. I’m looking at a debt fund as a less-risky option that pays more than a bank account but still feels relatively stable. I’m also looking at other syndications that help me diversify beyond hotels, since that’s been most of our focus.

Evaluating real estate syndication deals

Passive investors should vet the sponsor and the opportunity with a due diligence process before getting into any syndication. Here’s what I’d look at:

Sponsor track record: You want to understand the sponsor’s experience with the specific property type in the syndication. It’s not easy to jump from one asset class to another, so look for longevity and proven results in previous deals.
Property management: Get a picture of the operational team and their plan to execute the strategy. Even the best deal can fall apart if the team can’t manage expenses and maximize rental income.
Opportunity: Learn about the property itself. Why this deal? What makes it stand out in this market? And what’s the business plan behind it?
Capital stack: Ask about the property loan terms. This is what caught many multifamily projects off guard when the Fed raised interest rates so quickly in 2022. GPs with variable-rate loans saw their financing costs jump in a short amount of time, and many deals fell apart.
Offering agreements: The general partner shares key terms in the Offering Memorandum or Private Placement Memorandum. Look at details like profit splits, sponsor fees, investment periods, and potential returns.
Communication: I want to know the sponsor’s communication style, cadence, and level of engagement with investors. In our case, Mike meets with all of our passive investors quarterly and sends monthly updates.
Technology: Since I work in tech, this one matters to me. What investor portal or software do they use so I can check on the status of my investment anytime?

How do real estate syndications make money?

Here’s how a real estate syndication makes money and who benefits:

Cash flow: This is the profit left over, deducting operating expenses and loan payments from rental income. Both GPs and LPs benefit here. GPs have incentives to increase this cash flow as much as possible.
Appreciation: Both GPs and LPs can make money here in two ways. First, when we sell the property, we all receive a higher sale price than we paid for it. Second, if we don’t want to sell the property, we can also do a cash-out refinance.
Tax benefits: While you don’t exactly “make money” with tax benefits, they do reduce your taxes on passive income, so you get to keep more of it. Both GPs and LPs benefit here.
Sponsor fees: This is income for the GP from finding, managing and selling the property. The GP benefits here.

Metrics to evaluate returns on real estate syndications

Here is a high-level overview of what potential investors should look for when they see a syndicator advertising the projected returns on investment opportunities.

Cash on cash return

This is the pure return that you get each year compared to what you invested. So, let’s say you invested $100,000 and get $10,000 per year in distributions; that’s a 10% cash-on-cash return.

Equity multiple

Equity multiple measures how much total cash you receive compared to your original investment. It includes your annual cash flow, any profits from the property sale, and any payouts from a refinance. All of that together makes up your equity multiple.

As an example, we just sold one of our hotels in July 2025, and the equity multiple on that deal came out to over 3x. It included the annual profits plus the capital gains at sale.

Internal rate of return

Internal rate of return, or IRR, is the annualized compounded growth rate expected on your investment. It’s a complicated calculation that looks at both the timing and the amount of each cash flow. The idea is that money you receive now is worth more than the same amount in the future, and IRR takes that into account.

Should you invest in a commercial real estate syndication?

Whether or not you should invest in a syndication really depends. Have you always wanted to own a piece of commercial real estate? Are you looking to diversify your portfolio? Do you want something that could generate a higher return than your other investments?

As you can see, there are a lot of questions. I can’t answer those for you, but they’re worth thinking through. What I can tell you is this: investing in real estate has been one of the biggest wealth builders in my life. But it’s tough to do at scale as an individual investor. That’s where a syndication might make sense.

Barcelona Hotel Fund for accredited investors

If you have accredited investor status and want to learn more about our latest syndication, take a look at our newest project here. We’re curating a collection of small boutique hotels just outside of Barcelona that cater to people who want to get away and enjoy an elevated experience. These properties host events like corporate retreats, weddings, and wellness getaways.

Property syndication: FAQs

What is an example of syndication in real estate?

An example is when a group of people pool their money to buy multifamily, retail, or industrial properties. The syndicator handles property management and splits the profits with all of the investors in the deal.

Are real estate syndications worth it?

They can be if you want passive income with potentially higher returns. However, these are long-term investments that tie up your capital, so you want to make a good decision on which syndications to invest in.

How does syndication work?

A syndicator finds the opportunity, raises capital from passive investors to buy a property, manages it, and splits returns with passive investors.

The information in this post is for informational purposes only and should not be considered tax or legal advice. Please consult with your own tax professionals and advisors before making any decisions or taking action based on this information.