All Funds Are A Syndication But Not All Syndications Are Funds.
A fund has all the same documents that a syndication has (ppm, investor docs, etc.), however what makes a fund different is that it is not deal specific. When investing in a fund it is considered a “blind pool”. Essentially investors are trusting the jockey 🏇 and not the horse. This takes a great amount of trust and a proven track record for investors to invest alongside the sponsor. In a syndication it is usually deal specific, so although you need to trust the deal sponsor, you are able to vet the deal (location, size, numbers, etc.) and determine if you want to be a part of it or sit this one out.
As a baby boomer, I had grown up seeing only growth and opportunity. Success seemed a given. But working through the economic ups and downs of the 1970s and early 1980s, I had come to understand that success is about taking advantage of those rare moments of opportunity that you can’t predict but come to you provided you’re alert and open to major changes. - Stephen A. Schwarzman, Co-Founder of Blackstone
I believe the main benefit of being part of a fund is the ability to exit in and out of deals. Although some would argue that a syndication is a shorter time frame and able to receive initial capital and profits back sooner, I think the opposite holds true. You see when we sell an asset that is in a syndication most investors want to re-invest anyways so instead of having to wait and search for a new deal to a invest in, the fund structure allows the fund to sell the asset and 1031 into something else right away and continue paying investor returns. Hard money lenders deal with this issue often because they lend out money for a piece of property and earn a set return, but when the property is sold and they receive their return in 3-6 months they do not receive their full annual return and need to go search for another deal to lend to. The cost of time not having your money working for you is truly detrimental if you run those numbers yourself.
In all of our deals, we look to become “infinite”.
In all of our deals, we look to become “infinite” as soon as possible through a value-add cash-out refinance. Everything after that becomes the icing on top and we grow wealth using house money. Becoming infinite means getting your initial investment back and then keeping the asset for cash flow, depreciation and future appreciation in which you can then do another tax free cash out refinance. So while there are many ways to do a deal and structure it, we found the best for investors is through a fund model where we can buy amazing value add deals in prime locations and become infinite as soon as possible, we can then hold or sell some of the assets and keep growing the pot all while providing healthy cash on cash annual returns, tax shelter through depreciation, and long term portfolio appreciation.