Real Estate Syndication Glossary: 80+ Terms Defined

This glossary defines more than 80 terms you will meet in a real estate syndication, in plain English. Each entry opens with a one-sentence definition, then adds the detail that matters when you read an offering or run a raise. Entries link to the full guide when we have one. If you are a sponsor, we built DoorRaise to run the raise and the paperwork, and the terms below are the ones you will see there.

For the whole process, read our guide to real estate syndication. The glossary is arranged by topic, not alphabetically, so related terms sit together. Use the table of contents or your browser's find tool to jump to a word.

Roles and structure

Syndication

A syndication is a way to pool money from several investors to buy a property that one sponsor finds, buys and runs. Investors receive an ownership interest, usually in a company that owns the building, and share in income and sale proceeds under a written agreement. Because investors expect profit from someone else's work, the interests are generally securities, so securities law applies. See what a multifamily syndication is.

The sponsor is the person or team that finds the deal, raises the equity, arranges the loan and manages the property after closing. Other names are syndicator, operator and general partner. A sponsor's track record, fees and own cash in the deal are the first things a careful investor checks. See what a syndicator is.

General partner (GP)

The general partner is the sponsor side of the deal, with authority to manage the property and the company. In an LLC the equivalent role is usually called the manager or managing member. See GP vs LP.

Limited partner (LP)

A limited partner is a passive investor who puts in money, has no day-to-day say and generally risks no more than the amount invested, unless the agreement says otherwise. In an LLC, investors are usually called members. People often say LP for any passive investor, whatever the entity type.

Passive investor

A passive investor provides capital and leaves operations to the sponsor. "Passive" describes the role in the deal. The IRS applies its own tests for passive activity, so the word does not decide your tax treatment. See passive real estate investing.

Key principal

A key principal is a sponsor team member whose experience, net worth or liquidity a lender relies on, and who often signs the loan guaranty. Lenders may require one or more. If your team lacks one, a partner who has done similar deals may fill the role. See raising your first syndication with no track record.

A co-sponsor is a second sponsor who shares the work, the risk and a share of the sponsor economics. The split should be written down before the raise begins.

Operating agreement

The operating agreement is the contract that governs an LLC: who manages, how money is paid out, what investors can vote on and what happens in a capital call or sale. For an LLC deal it is the most important document after the PPM. See what to look for in an operating agreement.

Special purpose vehicle (SPV)

An SPV is a company formed to own one asset, such as a single apartment building, so that its debts and risks stay separate from the sponsor's other businesses. Most syndications use a new LLC per property. See what an SPV is.

Membership interest (units)

A membership interest, often sold as units, is an investor's ownership stake in an LLC. The operating agreement states how many units exist, what each class is entitled to and how distributions are paid.

Joint venture (JV)

A joint venture is a deal between two or more parties who combine money, skills or property for one project. A JV that raises money from passive investors who rely on others' efforts can be a securities offering. See joint venture vs syndication.

Skin in the game

Skin in the game means the sponsor's own cash invested in the deal alongside investors. It is a signal of alignment, but how much and whether it is cash or fees converted to equity are fair questions. See questions to ask a sponsor.

Track record

A track record is the sponsor's history of past deals: what was bought, how it was run and what investors received. Ask for realized results, not only projections. A sponsor without one has options, covered in the guide linked under Key principal.

Securities rules

Regulation D

Regulation D is the set of SEC rules that lets a company sell securities privately without registering them with the SEC. Rule 506 is the part most real estate sponsors use. See what Regulation D is.

Rule 506(b)

Rule 506(b) is a Regulation D exemption with no dollar cap that bans general solicitation and allows an unlimited number of accredited investors plus up to 35 non-accredited purchasers who are financially sophisticated. Non-accredited purchasers must receive extra disclosure. See 506(b) vs 506(c).

Rule 506(c)

Rule 506(c) is a Regulation D exemption with no dollar cap that permits general solicitation if every buyer is an accredited investor and the issuer takes reasonable steps to verify it. See what a 506(c) offering is.

General solicitation

General solicitation is advertising or public promotion of an offering, such as a social post with terms, a podcast pitch or an ad. It is not allowed in a 506(b) offering and is allowed in 506(c). Whether a message counts depends on the facts. See what general solicitation is.

Pre-existing substantive relationship

A pre-existing substantive relationship is a relationship with a prospect that began before the offering, and gives you enough information to judge whether the person is accredited or sophisticated. SEC staff treats it as the usual way to avoid general solicitation in a 506(b) raise. See whether followers can invest under 506(b).

Accredited investor

An accredited investor is a person or entity that meets the tests in Rule 501(a). For individuals the main tests are net worth over $1,000,000 excluding the primary residence, or income over $200,000 ($300,000 with a spouse or spousal equivalent) in each of the last two years with the same expected this year. Some licensed professionals and entities with over $5,000,000 in assets also qualify. See the accredited investor definition or take our free accredited investor check.

Non-accredited investor

A non-accredited investor is someone who does not meet the accredited tests. In a 506(b) raise, up to 35 non-accredited purchasers may join if they are sophisticated, alone or with a purchaser representative. In a 506(c) raise, none may. See investing without being accredited.

Accredited investor verification

Verification is the set of steps an issuer takes to confirm that a buyer is accredited. It is required in 506(c) offerings and may include tax documents, account statements, a letter from a professional or, per March 2025 SEC staff guidance, a high minimum investment with written statements. See accredited investor verification.

Sophisticated investor

A sophisticated investor has enough knowledge and experience in financial and business matters to evaluate the merits and risks of an investment. The test matters for non-accredited purchasers in a 506(b) raise.

Purchaser representative

A purchaser representative is a person who advises a non-accredited buyer about an offering and meets the definition in Rule 501(i). A buyer can use one to meet the sophistication test.

Form D

Form D is the short notice a company files electronically with the SEC after its first sale in a Regulation D offering. It is due no later than 15 calendar days after the first sale. Use our Form D deadline calculator and read how to file Form D.

Blue sky laws

Blue sky laws are state securities laws. For a Rule 506 offering, states cannot require registration, but they can require a notice filing, a fee and consent to service of process, and the rules vary by state. See blue sky notice filings.

Bad actor rule (Rule 506(d))

The bad actor rule disqualifies an offering from Rule 506 if the issuer or a covered person, such as a managing member, a 20% owner or a paid promoter, has a listed disqualifying event, such as certain criminal convictions or SEC orders. See the bad actor rule.

Private placement memorandum (PPM)

A PPM is the disclosure document that describes the deal, its terms and its risks for prospective investors. It is the main document that protects both sides against claims that something material was left out. See what a PPM includes and how to read one.

Subscription agreement

The subscription agreement is the contract in which an investor applies to buy an interest, states they qualify and agrees to the terms. The sponsor accepts it for the sale to happen. See subscription agreements.

Investor questionnaire

An investor questionnaire is a form, often attached to the subscription agreement, in which an investor states their accreditation, sophistication and other facts the sponsor relies on.

Broker-dealer

A broker-dealer is a firm registered with the SEC and FINRA to handle securities transactions for others. Paying someone a commission tied to investment amounts may require this registration. See paying capital raisers.

Escrow

Escrow is a holding arrangement in which investor money sits with an independent agent until the closing conditions are met, then is released to the deal or returned. See how escrow works in a syndication.

Minimum raise

The minimum raise is the least amount of equity a deal needs before it can close. If the raise falls short, the money is typically returned, and the offering documents should say so. See what happens if you do not raise it all.

Integration

Integration is the SEC concept of treating two offerings as one if they are too similar, which can break an exemption for one of them. Rule 152 sets the framework. Ask your attorney when you run overlapping or back-to-back raises.

Money terms

Equity

Equity is the money investors and the sponsor contribute to buy a property, as opposed to the loan. In a syndication the equity raise is what the sponsor markets to investors.

Capital stack

The capital stack is the layers of money funding a property, ranked by who gets paid first: senior debt, mezzanine debt, preferred equity and common equity. Higher layers are paid first and absorb losses last. See the capital stack.

Senior debt

Senior debt is the main property loan, first in line for repayment and secured by the building. In multifamily it often comes from a bank, an agency lender or a debt fund.

Mezzanine debt

Mezzanine debt is a loan that sits behind the senior loan and ahead of equity, usually secured by the ownership interests in the property company rather than the building. It costs more than senior debt.

Preferred equity

Preferred equity is an equity layer that gets paid before common equity but after debt. Terms vary, and it often carries a fixed return and a priority claim on cash flow.

Common equity

Common equity is the last layer of the stack, paid after debt and preferred equity. Most passive investors in a syndication hold common equity or a class that behaves like it, with higher potential returns and higher risk.

Preferred return (pref)

The preferred return is the annual return investors must receive on their capital before the sponsor earns its profit share. It is a payout priority, not a guarantee: if the property does not produce the cash, the pref accrues or is lost, depending on the agreement. See what a preferred return is.

Cumulative preferred return

A cumulative preferred return carries forward. If the property cannot pay the pref this year, the unpaid amount is owed before the sponsor shares in profits later. A non-cumulative pref does not carry forward.

Waterfall

A waterfall is the order in which cash is paid out: typically return of capital, then the pref, then profit splits at stated tiers. It applies to both operating cash flow and sale proceeds. See the waterfall and promote, or use the profit split calculator.

Promote (carried interest)

The promote is the sponsor's share of profits above what its own capital would earn, usually earned after investors reach a return threshold. It is separate from fees. See the waterfall guide above.

Hurdle rate

A hurdle rate is the return investors must reach before the split changes in the sponsor's favor. A waterfall can have several hurdles with different splits at each.

Catch-up

A catch-up lets the sponsor receive a larger share of cash for a stretch after the pref is paid, until the sponsor has received its full promote share of total profit. Not every deal has one, and it increases the sponsor's take.

Pari passu

Pari passu means "on equal footing." Sponsor and investor capital that is pari passu is paid at the same time and on the same terms, rather than one ahead of the other.

Acquisition fee

The acquisition fee is a one-time fee paid to the sponsor for finding, underwriting and closing the purchase, usually a percentage of the purchase price. Read it together with the other fees. See syndication fees.

Asset management fee

The asset management fee pays the sponsor for overseeing the investment after closing, often a percentage of income or of invested equity, charged each year.

Property management fee

The property management fee is paid to whoever runs day-to-day operations, usually a percentage of collected rent. It is often paid to a third-party manager and sometimes to a company the sponsor owns, which investors should know.

Disposition fee

A disposition fee is paid to the sponsor when the property is sold, usually a percentage of the sale price. Some deals have no such fee.

Distribution

A distribution is cash the company pays out to its owners, from operations, a refinance or a sale. See how investors get paid.

Return of capital

A return of capital is a payment that gives investors back part of their original investment rather than profit. It usually lowers your tax basis. It is a different thing from a return on capital.

Capital call

A capital call is a formal request that investors contribute more money after closing. Whether it is mandatory or voluntary, and what happens if you do not fund it, depends on the operating agreement. See what a capital call is.

Equity multiple

The equity multiple is total cash returned to an investor divided by the cash invested. A multiple of 1.0x means you got your money back, with no profit. It ignores timing. See equity multiple, IRR and cash-on-cash.

Internal rate of return (IRR)

IRR is the annualized rate of return that makes the present value of an investment's cash flows equal to its cost. It rewards early cash and is sensitive to the assumed sale date. Compare it with the equity multiple, not instead of it.

Cash-on-cash return

Cash-on-cash return is a year's cash distributions divided by the equity invested. It measures income, not total profit, and not the sale.

Pro forma

A pro forma is a financial projection of a property's future income, expenses and returns. It rests on assumptions, so ask what they are. See building a projection investors trust.

Reserves

Reserves are cash set aside to cover repairs, vacancies or shortfalls, funded at closing or from cash flow. Reserve size is a sign of how much cushion the deal has.

Property and underwriting terms

Multifamily

Multifamily is a residential property with more than one unit. In lending, "multifamily" generally starts at five units; one to four units are treated as residential. DoorRaise is built for buildings with five or more units.

Underwriting

Underwriting is the process of testing a deal's numbers: income, expenses, debt, renovation costs and exit assumptions. See multifamily underwriting basics.

Net operating income (NOI)

NOI is a property's income minus its operating expenses, before debt payments, depreciation and income taxes. It is the base number for value and for loan sizing.

Capitalization rate (cap rate)

The cap rate is NOI divided by the property's price or value, shown as a percentage. A $500,000 NOI on a $10,000,000 price is a 5% cap rate. It compares properties on a pre-debt basis and says nothing about future income.

Debt service

Debt service is the loan payments due in a year, principal and interest, or interest only during an interest-only period.

Debt service coverage ratio (DSCR)

DSCR is NOI divided by annual debt service. A ratio of 1.25 means the property earns 25% more than the loan payments. Lenders set minimums, and a thin ratio leaves little room if income falls.

Loan-to-value (LTV)

Loan-to-value is the loan amount divided by the property's value. A $7,000,000 loan on a $10,000,000 value is 70% LTV.

Loan-to-cost (LTC)

Loan-to-cost is the loan amount divided by the total project cost, including the purchase, renovation and closing costs. Lenders use it for value-add and construction deals.

Recourse and non-recourse debt

Non-recourse debt limits the lender's claim to the property, not the borrower's other assets, except for carve-outs. Recourse debt lets the lender pursue the borrower or guarantor beyond the property.

Carve-out guaranty

A carve-out guaranty (often called a "bad boy" guaranty) makes a guarantor personally liable if the borrower commits specified acts, such as fraud or misapplying funds, even on a non-recourse loan.

Agency debt

Agency debt is a multifamily loan made through Fannie Mae or Freddie Mac programs. It is typically long-term, often fixed-rate and non-recourse with carve-outs.

Bridge loan

A bridge loan is a short-term, often floating-rate loan used while a property is renovated or leased up, with the plan to refinance or sell before it ends.

Value-add

A value-add deal buys a property with room to improve, through renovations, better management or lower costs, then aims to raise income and value. It carries execution risk if the work or rents miss the plan.

Stabilization

Stabilization is the point when a property reaches its target occupancy and income after renovations or lease-up. Lenders and investors use it to judge when the business plan is complete.

Occupancy (physical and economic)

Physical occupancy is the share of units that are occupied. Economic occupancy is the share of potential rent that is actually collected, which also reflects discounts, vacancies and bad debt.

Rent roll

A rent roll is a list of every unit with its tenant, rent, lease dates and status. It is a core diligence document.

T-12

A T-12 is the trailing twelve months of a property's income and expenses, used to check what the seller claims. See the due diligence checklist.

Due diligence

Due diligence is the period after a contract is signed in which the buyer verifies the property's financials, condition, title and legal status before committing. Passive investors perform their own diligence on the sponsor and offering.

Hold period

The hold period is how long the company plans to own the property before selling or refinancing. Plans change, so ask what happens if the hold is longer or shorter.

Refinance

A refinance replaces the existing loan with a new one, sometimes to return part of investors' capital. It depends on the property's value and lending conditions at that time. See how syndication exits work.

Exit

The exit is how the investment ends, usually by selling the property, sometimes by refinancing and holding. The exit determines when and how much investors get back.

Tax terms

Schedule K-1

A K-1 is the tax form the company sends each owner each year showing that owner's share of income, deductions and credits. It is often later than a 1099 because it depends on the company's return. See what a K-1 is and why K-1s run late.

Depreciation

Depreciation is a tax deduction that spreads a building's cost over its useful life. Residential rental property is generally depreciated over 27.5 years. It can create a taxable loss that offsets income while the property produces cash.

Cost segregation

A cost segregation study splits a property's cost into parts with shorter depreciation lives to speed up deductions. See cost segregation for syndications.

Bonus depreciation

Bonus depreciation lets a business deduct a large share of qualified property's cost in the first year instead of over many years. The percentage has changed by law over time, so check the current rule for your purchase date.

Depreciation recapture

Depreciation recapture is tax owed on a sale for depreciation deductions taken earlier. For real property, the recaptured portion is generally taxed at rates up to 25% federally, so ask your CPA.

Passive activity loss

Passive activity loss rules limit using losses from passive activities, such as most rental syndications, against other income like wages. Disallowed losses usually carry forward. See syndication taxes for beginners.

1031 exchange

A 1031 exchange defers tax on gain from selling investment real estate if you reinvest in like-kind property under strict timelines. Interests in a syndicate LLC generally do not qualify as the new property, but a Delaware statutory trust may. See DST vs syndication.

Delaware statutory trust (DST)

A DST is a trust that owns real estate and sells beneficial interests, which the IRS has said can qualify as replacement property in a 1031 exchange if specific requirements are met.

Basis

Basis is your tax cost in an investment: what you paid, adjusted by income, losses and distributions. It decides how much of a sale is taxed as gain.

How DoorRaise fits in

DoorRaise helps sponsors raise equity for apartment buildings with 5+ units under Rule 506(b) or 506(c). We are software, legal document preparation, escrow coordination and verification services. We are not a law firm, broker-dealer, investment adviser, funding portal, bank or escrow agent, and we do not hold investor money. Funds go to an independent escrow agent named on each deal.

We charge three flat fees and never take a percentage of the raise or profits. The $500 setup fee covers forming the deal's LLC, investor documents from attorney-approved templates, an escrow account, the deal page and accreditation checks on every investor. The $5,000 closing fee, paid from the funds raised and only if the deal closes, covers attorney review of the offering documents, sponsor and property checks, the Form D filing and electronic signing. The $3,500 yearly fee covers bookkeeping, the tax return and K-1s. State filing fees are included in the $5,000 closing fee. See pricing.

Ready to raise? Create your free sponsor page or use the free raise planner.

FAQ

What is the difference between a preferred return and a promote?

A preferred return is what investors are paid first, at a stated annual rate, before the sponsor shares in profit. The promote is the sponsor's extra share of profit once investors reach return thresholds. The pref protects investors' place in line, and the promote rewards the sponsor for performance.

What does LP mean in real estate?

LP means limited partner, a passive investor in a syndication. In an LLC the same investors are usually called members, but people still say LP.

What is the difference between 506(b) and 506(c)?

Both are Regulation D exemptions with no dollar cap. 506(b) bans general solicitation and allows up to 35 sophisticated non-accredited purchasers. 506(c) allows advertising, but every buyer must be accredited and verified.

What is a good cap rate?

There is no single good cap rate. It depends on the market, property quality and interest rates, and a higher cap rate usually reflects more risk or a weaker location. Compare it with similar sales and with the loan's cost, and ask what assumptions drive the NOI.

What is a good DSCR?

Lenders set their own minimums, and many multifamily lenders look for at least 1.20 to 1.25 at closing. The higher the ratio, the more room the property has if income drops. Ask the lender what it requires for your loan.

Is a preferred return guaranteed?

No. It is a priority in the payment order, and it can only be paid if the property produces the cash. If it does not, the agreement says whether the unpaid amount accrues.

What is the difference between equity multiple and IRR?

The equity multiple measures how many dollars come back per dollar invested, ignoring time. IRR measures the annualized rate, which depends on when cash arrives. Look at both.

Sources

This article is general information as of October 2026, not legal, tax or investment advice. Talk to a securities attorney about your deal and a CPA about your taxes. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.