How to Start a Real Estate Syndication Company
On this page
A real estate syndication company is normally two layers. The first is your sponsor company, an LLC you (and any partners) own, which finds deals, manages them and earns the sponsor's fees and share of profits. The second is a new LLC for each deal, which buys one property and sells membership interests to investors; your sponsor company is its manager. To start, form the sponsor LLC and open its bank account, get liability insurance, agree in writing how you split ownership with any partners, learn the two securities rules that shape the business (how you may market a deal and how you may be paid), build a small team, and grow a list of people who want to hear about your deals before you have one. No special license is needed to sponsor your own deals as long as nobody is paid a commission for raising money.
This guide covers the setup. For the steps of a single deal, see how to syndicate a real estate deal.
The two-layer structure
| Topic | Sponsor company | Deal company |
|---|---|---|
| What it is | Your LLC, owned by you and any partners | A new LLC for each property |
| Owners | The sponsor team | Investors plus the sponsor company |
| Role | Manager of each deal company | Owns the property, takes the loan |
| Income | Fees and the sponsor's share of profits | Rent, then sale or refinance proceeds |
| Lifespan | Ongoing | Until the property is sold |
This keeps each deal's investors, debts and liabilities apart. See LLC vs limited partnership for a syndication and manager-managed vs member-managed LLCs.
Step 1: Form the sponsor company
Form an LLC in your home state, get an EIN from the IRS, open a business bank account, and keep the sponsor company's money separate from every deal's money. If you sell courses or coaching, keep that business separate too. See the free EIN steps and separating your course business from your deal company.
Step 2: Write down the partnership
If you have partners, sign an operating agreement for the sponsor company that covers ownership, decisions, who guarantees loans, vesting and what happens if someone leaves. See how to split GP equity between partners.
Step 3: Learn the two rules that shape the business
- How you market. A live deal is a securities offering. Under Rule 506(b) you may offer it only to people you already know; under 506(c) you may advertise it, but every investor must be a verified accredited investor. See what counts as general solicitation.
- How you are paid. Sponsors earn fees for real work (finding, buying and managing the property) and a share of profits. Paying anyone, including yourself, a commission based on the money raised can require broker-dealer registration. See paying capital raisers and do you need a license to syndicate.
Step 4: Get insured
The sponsor company should carry general liability and, as it grows, directors and officers and errors and omissions coverage. Each property needs its own property and liability policy. See insurance for syndication sponsors.
Step 5: Build the team
You need a lender or mortgage broker, a property manager, a CPA who handles partnership returns and someone to prepare offering documents. See the syndication team you need and lawyer, DIY or platform for the documents.
Step 6: Build your investor list
Start talking about what you do, without pitching a specific deal, so people can raise their hand. Keep notes on who is interested and how much they might invest. See build an investor waitlist before you have a deal.
Step 7: Pick your first deal size
A smaller first deal is easier to fund and to run. See how many units for a first deal.
How DoorRaise fits in
DoorRaise gives a new syndication company the deal side out of the box for apartment buildings with 5+ units: a sponsor page where friends and followers subscribe, a deal page for each deal, the standard offering documents, LLC formation, Form D and state notices, and accredited investor verification for 506(c) deals. Escrow is at Enterprise Bank & Trust, an FDIC-insured bank, and investors fund by wire only. See pricing. DoorRaise is not a law firm, broker-dealer, investment adviser, funding portal or bank.
Raise your apartment deal from the people who already follow you.
DoorRaise is built for apartment buildings with 5 or more units: one link for the deal, escrow until closing and a standard fee card.
Ready to raise? Create your free sponsor page or see pricing.
FAQ
Do I need a separate LLC for every deal?
That is the common practice. A separate LLC keeps each deal's investors, loan and liabilities apart, and lenders usually require a single-purpose entity to own the property.
Should the sponsor company be an LLC or a corporation?
Most sponsors use an LLC taxed as a partnership or a disregarded entity, because the sponsor's share of profits from each deal then flows through. Ask your CPA which fits you.
Do I need to register as an investment adviser?
A sponsor managing its own real estate deals is usually not an investment adviser, but the answer depends on the facts. See investment adviser registration for syndicators.
When should I start a fund instead of single deals?
Most sponsors start with single deals, then consider a fund once investors trust their track record. See fund vs single deal.
Next step: see what the work looks like in what a first-time sponsor actually does.
Sources
This article is general information, not legal, tax or investment advice. Talk to your own attorney and CPA before you set up your company. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.