Technology is changing the way that commercial real estate firms acquire, manage, and communicate with investors. While models such as real estate syndication may have been around for a long time, new innovative solutions are making processes more efficient and effective, and forward-thinking CRE sponsors are using software platforms such as real estate syndication technology to bring their firms into the 21st-century.
What is Real Estate Syndication?
Real estate syndication is a commercial real estate investment model and one that has been around for centuries. It refers to assembling a group of investors to pool their capital in order to fund a commercial real estate transaction. Today, commercial real estate firms can use real estate syndication technology, such as investor management software, to accelerate capital raises and effectively manage investor relationships.
Real Estate Syndication vs Crowdfunding vs Private Equity Funds
To understand how commercial real estate firms can use real estate syndication technology to drive success for their businesses, it’s first important to define some key industry terms. While these terms are often used interchangeably, they are actually unique models.
One of the biggest differences between real estate syndication and crowdfunding is the level of intimacy. Real estate syndication leverages personal relationships that the sponsor has forged and maintains. When they have an investment opportunity, the sponsor reaches out to their personal network of potential investors and invites them to participate. Crowdfunding, on the other hand, uses as many investors as possible, a vast majority who are outside the sponsor’s personal network, to fund an opportunity. In real estate syndication, a small number of investors make sizable investments, whereas as in crowdfunding scenarios, a large number of investors make smaller investments. (Think $50 million vs $50,000 or even $5,000). As such, crowdfunding has a much lower barrier to entry.
With both real estate syndication and crowdfunding, investors know exactly what properties they are investing in. In a real estate private equity funds scenario, investors place their blind trust in the sponsor based on his pitch, objectives, credentials, reputation, and track record. The sponsor then goes and invests in properties on behalf of his investors. But like
Benefits of Real Estate Syndication
Real estate syndication offers many benefits for both the sponsor, or syndicator, and the investors.
Benefits of real estate syndication for the sponsor:
- There is lower personal risk since you can leverage other people’s capital.
- You have control over the property and how it is managed.
- You can achieve cost savings that would be unavailable to an individual investor.
- You can compete more effectively with larger players in the market.
Benefits of real estate syndication for the investor:
- It’s a passive source of income with a minimal time investment.
- You do not need to have expertise to be involved in a commercial real estate project.
- You can diversify your investments among more asset classes, geographic locations, etc.
CRE sponsors can streamline the real estate syndication process with investor management software
Real Estate Syndication + Technology
Commercial real estate sponsors can streamline the real estate syndication process with real estate syndication technology, or investor management software. A technology solution, such as the IMS Platform, expedites, simplifies, and streamlines the capital raise process so you can quickly acquire the capital you need.
- Market the Opportunity – Create a compelling deal page right on the platform with information such as pictures, maps, investment criteria, performance expectations, and funding progress.
- Identify Targets – Pinpoint which investors in your personal network would be the best fit for each particular project. Use the CRM to search, categorize, and rank potential investors based on criteria such as investment size, region, asset type, and other custom tags.
- Invite Investors to Participate – Easily email your identified targets with information about the opportunity and an invitation to explore and invest in the new deal.
When investors are ready to participate in a new project, an investment wizard will walk them through the investment process, from commitment, investing entity selection, and accreditations to electronic signatures and remittance instructions. Additionally, investors can receive post-funding updates and track property performance digitally, with 24/7 access to this information.
Investor management software increases the efficiency and speed in raising capital for real estate syndication scenarios. Additionally, it provides a tool that distinguishes your brand and solidifies your reputation within the community.
Ready to Get Started?
Investor Management Services (IMS) is the leading investor management software platform for CRE owners and investment firms. Today, we have over 250 customers who have been able to reallocate thousands of hours back to value-add activities for their 30,000+ investors. The IMS Platform is being used to calculate $1+ Billion in distributions and $16+ Billion in equity.
To learn more about how commercial real estate firms have used the IMS Platform to expedites, simplifies, and streamlines the capital raise process, click here. Ready to go ahead and take the next step?
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