What is real estate syndication?

A real estate syndication is a group of investors pooling their resources into a single investment through a partnership. In 2012, Congress passed a law that made it easier for syndicators to market real-estate investments online. The law was intended to offer financial opportunities to low-income people via syndication deals. However, syndicator investors have few legal protections. Syndicators are not required to give regular updates on financial performance. Investors are considered limited partners and have almost zero say in spending.
The South and Southwest were favored by syndicators because real estate prices were lower, rents were increasing, and there were less housing regulations.
Many of these syndicators financed their real estate loans with floating interest rates where the interest adjusts monthly. In 2021, the rates were as low as 3.5%. When the Federal Reserve began to raise rates in 2022, the monthly loan payments rapidly increased. Many syndicators could not make the loan payments and there properties went into foreclosure. Many syndicator investors did not even know the properties were in peril until the foreclosure was imminent. Currently, syndicators are in a race against the bank to raise funds or sell properties before foreclosure.
Works Cited:
https://www.wsj.com/articles/a-housing-bust-comes-for-thousands-of-small-time-investors-3934beb3?mod=hp_lead_pos7
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