Jan 19, 2025
Syndication terms
A Glossary of Passive Real Estate Investing Terms
Passive real estate investing has gained popularity as a way to generate income and build wealth without the day-to-day management of properties. To navigate this space effectively, it's essential to understand key terms:
Syndication: A group of investors who pool their money to purchase a larger property. A syndicator, often a real estate professional, organizes the deal and manages the property.
Crowdfunding: A platform that allows individual investors to contribute smaller amounts to a real estate project. This democratizes access to real estate investments.
Equity Multiple: A measure of the total return on a real estate investment, considering both cash flow and property appreciation.
Internal Rate of Return (IRR): A metric that calculates the annualized rate of return on an investment, taking into account the timing of cash flows.
Capitalization Rate (Cap Rate): A ratio that expresses the relationship between a property's net operating income (NOI) and its purchase price. It's used to estimate potential returns.
Cash-on-Cash Return: A measure of profitability that calculates the annual return on the cash invested in a property.
Leverage: The use of borrowed money to finance an investment. Leverage can amplify both potential returns and risks.
Preferred Return (Pref): A minimum rate of return that investors in a syndication or other real estate deal expect to receive before the sponsor or general partner receives any profits.
Promoter/Sponsor: The individual or entity that organizes and manages a real estate investment deal.
General Partner: the individual or company that is operating the
Limited Partner: an individual company or etc
Waterfall structure:
Liquidity:
Time Horizon:
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Understanding these terms will empower you to make informed decisions and assess the potential risks and rewards of passive real estate investments. Click Below to schedule a call and see if passive real estate investing is for you.
