H Squared Capital, LLC
5 Things You Should Never Do in Real Estate Syndication.
Before diving into the world of real estate syndication, you should know a few things. To be successful in this industry, avoid making these five common mistakes.
1. Not Assembling the Right Team
One of the most important aspects of real estate syndication is putting together a strong team of experts. This team should include a real estate attorney, a CPA, and an experienced real estate syndicator. Without these key players, your venture is likely to fail.
2. Not Doing Your Homework
Another common mistake is not doing homework before syndicating a property. Before you start soliciting investment capital, you need to be very familiar with the local market and the property itself. If you don't understand the project, you'll have difficulty convincing others to invest in it.
3. Overpaying for the Property
When you're syndicating a property, one of the worst things you can do is overpay for it. Remember that you're going to be sharing the profits from the sale or rental income with your investors, so you need to make sure that there's enough meat on the bone to make it worth their while. Paying too much for a property will eat your profits and make it difficult to recoup your investment.
4. Not Getting Enough Capital
Another mistake that novice syndicators make is not raising enough capital. It's important to remember that unexpected costs always crop up, so having a healthy reserve fund to cover them is important. If you don't raise enough money upfront, you may have to dip into your own pockets to cover these costs—and that's never a good idea.
5. Failing to Plan for Taxes
Last but not least, don't forget to factor taxes into your equation when you're Syndicating a property. Two expenses that are outside of your control. They are taxes and insurance. It's important to speak to a tax professional for a specific state, county, and city in which you are investing in. Each market has a set of laws that will determine your tax bill. Failing to do so could leave you with less money than you expected—and that's never a good thing.
These are just a few of the mistakes that novice real estate syndicators make. Avoiding them will put you in a much better position to succeed in this industry. With the right team in place and a solid understanding of the market, you can be well on your way to becoming a successful real estate investor!
If this article piqued your interest in investing in real estate, then congratulations:
Download your Operations Manual Here. In the Operations Manual, you will learn how passive investors leverage Syndication to create Passive Income to grow their wealth for their future generation and create the ability to make an impact!
For more information on getting involved in a value-add multifamily syndication deal, don't hesitate to contact me at Hutch@HSquaredCapital.com or Dr. Heath Jones at Heath@HSquaredCapital.com. You can also visit our website at www.HSquaredCapital.com. We'd be happy to answer any of your questions and help get you started on the path to financial success through multifamily investing!