# 14 – Syndication
# 15 – EquitySharing
SO MANY WAYS TO BUY( PART 2) BRUCE KELLOGG
# 14 – Syndication
When investors get together to buy a property, it is commonly called a“ group investment”, which is legally termed a“ syndication”. This is usually done to allow the purchase of a larger property and provide“ passive” ownership benefits for the investors. The common types of syndications are: 1) Limited Partnership 2) LimitedLiability Corporation( LLC), and 3) TenancyinCommon( TIC). Each one has an organizer who usually becomes the manager of the project. An“ offering circular” is prepared describing the project, including financial projections, organizations, management, and risks. Investors sign a“ subscription agreement” and contribute their“ share” of the project. Syndicatiions are a“ security” under federal and state laws, so there are regulations to be followed concerning marketing, disclosure, handling of investor funds, management, and reporting. Larger projects typically require the investors to be“ accredited”, which necessitates a substantial income and net worth. Syndications are easy investments, but investigation of the project and the organizer is essential due to the potential for the promoter to take advantage of the investors through
slick marketing. Additionally, if the organizer is honest yet inexperienced, the project could fail. Don ' t be afraid, but be careful with syndications.
# 15 – EquitySharing
Another method of investing with lots of potential is“ Equity Sharing”. This is when an investor and a potential homeowner buy a singlefamily residence together, and the aspiring homeowner occupies it. They are called the“ resident coowner”( RCO), and the investor is called the“ investor coowner”( ICO). Percentage shares are negotiable with the RCO paying the property taxes, insurance, loan payment, and routine repairs, while the ICO puts up the down payment. There is a“ Shared Equity Agreement” or“ Joint Ownership Agreement”, which sets the term, allocates the incometax benefits, and specifies how the arrangement is to be woundup. One party could buy out the other, or the property could be sold and the net proceeds divided.
EquitySharing works well between relatives. One Lockheed engineer has seven of these going to help his children, nieces, and nephews become homeowners. College housing is another application where the son or daughter owns part of the house with the parents then rents bedrooms to other students.