Agents Building Cashflow

EP 146: Funds Vs Syndications Revealed

• Randal McLeaird

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In this episode of Agents Building Cashflow, Randal breaks down the essentials of real estate funds, contrasting them with syndications to help listeners understand the key differences and benefits. He explains how funds pool capital from multiple investors to acquire a diversified portfolio of assets, offering greater risk mitigation compared to single-asset syndications.

Through clear examples and detailed illustrations, Randal highlights the structure of funds, the roles of general and limited partners, and the typical financial arrangements, including profit splits and preferred returns. To gain deeper insights into these investment vehicles and how they can enhance your portfolio, tune in to the full episode for more expert guidance.

Key takeaways to listen to:

  • Understanding how funds diversify risk across multiple assets.
  • Learning the roles and profit structures of general and limited partners.
  • Exploring the financial benefits of investing in a fund versus a syndication.

Resources mentioned in this episode:

If you’re interested in learning more about investment opportunities and multifamily funds, just contact Randal at podcast@agentsbuildingcashflow.com. 

To connect with Randal and learn more about passive investing, visit www.ridgelineig.com and follow our social media pages below!

To connect with Randal and learn more about passive investing, visit www.ridgelineig.com and follow our social media pages below!

[00:00:00] Intro: If you're a real estate agent earning 200, 000 a year and you want to grow your passive income, this show is for you. Learn secrets other agents use and hear from experts in our field who will guide you on your journey to investing in assets like apartment communities. So you can take your commissions and turn them into cashflow.

[00:00:20] Intro: Here's your host, Randall. Let's dive in. 

[00:00:22] Randal McLeaird: All right. Welcome back. Awesome to have you again today. Last week, we talked about syndications quickly and just did a recap on them. And we were talking about what they are and why you might want to invest in one of them. Today, I'm going to cover funds again, very brief episode, just to high level it so that you understand what funds are and the difference between a fund and a syndication.

[00:00:39] Randal McLeaird: So that if you're looking at some of these investments, you have a high level view on what it is. So let's dive in. All right, so if you're following on YouTube, this is a real awesome professional setup I've got going on over here with this whiteboard. But if you're just listening, I'll walk through it. A fund is essentially, again, like a syndication.

[00:00:56] Randal McLeaird: It's a group of people pulling their capital to go out and invest in multiple [00:01:00] assets, not a single asset. It's typically multiple assets. So for example, we have a crowd fund right now that we're raising capital to buy multiple single family properties or buy multiple notes that are single family properties.

[00:01:13] Randal McLeaird: We're going to buy multiple of them. And so you come in and you are investing one time, but you get the benefit of all the different properties that we are buying. So there's a number of reasons to go into this, but again, let me just quickly draw it out. So you've got, let's see, one, two, three assets, say in a fund.

[00:01:31] Randal McLeaird: And so the fund is raising money into fund LLC or LP limited partnership. Depends on how you structure it. And then you've got the general partners. Again, they are running the fund, managing the fund. And then you've got the limited partners who are investing into the fund. And the fund goes out and actually acquires these properties.

[00:01:53] Randal McLeaird: In its name and distributions are paid back to the limited partners and then there's a split at [00:02:00] the end. The, you know, typical fund, you can do a 70 percent to the limited partners. 30 percent goes to the general partners and then there's some kind of promote typically paid as well to the general partner.

[00:02:13] Randal McLeaird: Right? Well, that there are 30 30 is the promote. Um, there's typically some type of, uh, breath. So preferred return. Goes to the LPs prior to any payout to the GPs. Now there's a ton of different ways to structure this, the 70, 30, eight per F seven prep. There's a bunch of different ways. Again, we go into detail on some of those, but for now, it's just good to know that this is what a fund does.

[00:02:34] Randal McLeaird: A fund goes out and acquires multiple properties. So some of the differences and some of the reasons you may want to jump into a fund compared to a syndication is that you have diversification of assets. Within your single investment. So last week we talked about, Hey, if you throw 50, 000 into this deal, you get the benefit of potentially being one limited partner in a deal that buys a 10 million property, or, you know, if it's a 10 million raise, maybe that could be like a 20 million property, right?

[00:02:59] Randal McLeaird: And [00:03:00] your 50, 000 gets to go to work in that one deal. Awesome. So in this situation, if you're in a fund and you put in a hundred thousand dollars or 50, 000, or whatever that number is. Now you are getting the benefit of being in maybe five different assets, maybe 10 different assets, depends on how the fund is structured.

[00:03:16] Randal McLeaird: And so if one asset performs poorly, you have the ability for those other assets in the fund to outperform, right? And so you're diversified, your risk is spread out over more assets. And so it's, um, Potentially a better way, depending on what you're trying to accomplish with your investment. So again, fund high level, just what it is.

[00:03:34] Randal McLeaird: If you're getting value out of the show, go on rate and review. Appreciate it. Next week, we're going to talk a little bit more about some of the terms of return profiles. Again, I had a guest on and she started saying IRR, AIR. And I just want to make sure that we go and high level some of those terms that you understand what they are so that you know why they're important when you're looking at somebody's offering when you're going through it.

[00:03:53] Randal McLeaird: So thanks for jumping on. We'll catch you on the next episode. Did you know that 80 percent of the agents we speak with got into real estate in order to gain passive [00:04:00] income so they could obtain financial freedom and become work optional. If you want to stay up to date, the best way is to make sure you're subscribed.

[00:04:07] Randal McLeaird: So if you haven't done that, go ahead and do it now. We'll catch you on the next episode.

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Randal McLeaird

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