Syndication Basics: General Partner (GP) vs a Limited Partner (LP)
Real estate syndication is a partnership between several investors. They combine their skills, resources and capital to purchase and manage a property they otherwise couldn’t afford individually.
There are two primary types of partners involved in a syndication: A General Partner and a Limited Partner.
General Partners are the individuals who source the deal, secure the debt and equity, provide asset management and execute the overall business plan. The goal is to increase and maintain efficiencies in the operation of the property so that you give residents a great place to live while giving the partners a great return. Most syndications do not just have one GP. Real estate is a team sport and there are just too many tasks for one person to do it as effectively as possible. Typically, a team of 2-6 individuals come together to form the general partnership whose sole purpose is to purchase and manage a real estate portfolio. They have a constant pulse on the day to day operations on the property and the overall outcome of the investment relies heavily on the actions of the GP.
A Limited Partner is a passive investor who brings equity (cash) to the deal. They are not involved in the day to day operations and do not carry a vote on any decision making, but they also are not held liable any misadventures that may occur. It truly is a passive investment. LPs collect cash flow and enjoy the same tax benefits provided from owning rental real estate. Distributions of cash flow are normally given monthly or quarterly depending on the particular business plan.
If you have ever considered getting into real estate but have no idea of where to start, please feel free to reach out. There are SO many ways that you can get involved. Real estate syndications are only a small piece of the pie as there are other ways to structure deals. It is important to get crystal clear on what your goals are, then you can find the correct strategy to fulfill those goals.
The hardest part is getting started, but I’m here to tell you that it isn’t as daunting as it may seem!