By Mike Heayn

How can I start investing in real estate without any cash? I have been asked this by many people and to be honest the most important thing in real estate investing is knowledge. Second and third places go to financing and cash on hand. Because of this, you can use a strong knowledge base and identify opportunities other investors fail to see. One way to invest in real estate with little or no cash is to become a syndicate.

A syndicate is a person or entity, which structures a real estate deal. A syndicate will orchestrate the purchase, management and eventual sale of a property. However, a syndicate can outsource most or all of these duties to other parties that maybe able to more efficiently complete their piece of the puzzle. The job of a syndicate is to bring investors together with a common goal, usually a specified return on investment. To be successful, most have a proven track record of successful acquisitions, management and sales of real estate assets. A person usually has to be involved with real estate and have a vast knowledge of properties before undertaking any type of syndication. Experience can come in the form of working with other syndicates.

Finding a good deal and knowing the exit strategy is how syndicates are successful. Investors say that if a good deal is found, the money will find its way to the deal. This is not far from the truth. If you were to locate a property below market and get the deal under contract you could, in theory, do many different things to make money. You could sell the contract to another investor. You could syndicate the deal bringing investors together. The investors could put up the down payment for a majority piece of the equity. However, investors want to see growth and returns each year. If you get into a real estate deal, make sure you know everything you can about it, especially if you are using other peoples money. Due diligence can mean the difference between a great deal and a horrible deal. If you prove that you can provide steady returns each year, you will not have a hard time finding or keeping new investors.

One way to structure a deal in a syndication is through a limited liability company or LLC. The following example is only for informational purposes. Consult an attorney before structuring any types of real estate transactions. After you locate the deal you could set up a management company in the form of an LLC, which we will call Management, LLC. Management, LLC would own a zero percent interest in the LLC holding title, which we will call Holding, LLC. Management, LLC would simply oversee the day to day functions of the property. As a syndicate you would divide up the remaining interest in Holding, LLC amongst the other investors while taking a small percentage for yourself. Investors will not care if you take a small percentage of the property’s equity because you are providing them with a return on the investment. Once you exit the property the percentage of equity you retained in Holding, LLC, can be used in a 1031 exchange to purchase a like property.

With any type of investing it is important to understand how the structure of the deal is set up and what return you would like to achieve. As a syndicate, you control what goes on with a real estate asset. However, as an investor involved with a syndicate you usually give up control of your money to another person in exchange for a set return annually. Experience and knowledge are two of the most important things to becoming a successful syndicate.

Mike Heayn is a Washington Mutual multi-family loan consultant. He can be reached

at (310) 428-1342, or e-mailed at michael.heayn@wamu.net.