Investing in real estate may be profitable, but it’s not a one-person job. Finding the right real estate investment opportunity can be tricky enough, but purchasing a property and managing it is even more difficult. Any investor can easily get overwhelmed.
However, multifamily syndication has been gaining popularity for quite some time now because of its continuous cash flow, equity growth, or both, and stress-free approach to real estate investing. It is an excellent source of passive income–without the usual headaches associated with managing a real estate investment.
Even with all the conveniences and benefits of multifamily syndications, it takes more than one person to put it all together. Multifamily syndication deals have a specific structure, and it involves multiple parties.
Here, we will discuss multifamily real estate syndication, what it is, and how it is structured.
WHAT IS MULTIFAMILY SYNDICATION?
Syndication is a real estate investment that involves several investors combining their funds to purchase a single property. [1]
While this can be done with any type of real estate investment property, multifamily syndication is the most popular version of this deal because of its many benefits.
Multifamily properties have more than one unit. Unlike single-family properties, these real estate properties can be occupied by more than one family. This includes duplexes, triplexes, apartment communities, condominiums, etc.
Because they have more than one unit, they can bring in more cash flow from monthly rental income. Multifamily syndication provides a steady income, making it one of the safest strategies for real estate investing.
A multifamily syndication is a syndication deal that involves any multifamily property. In a syndication investment, a sponsor locates the deal, coordinates the transaction and funding, locates passive investors to participate, and manages the real estate property once everything is in place. [1]
The general partner, also known as the syndicator, serves as the sponsor. Meanwhile, passive investors receive income, equity, or both in real estate in exchange for providing the majority of the funds needed to secure the asset.
COMPANIES & DEPARTMENTS INVOLVED IN PUTTING TOGETHER A MULTIFAMILY SYNDICATION DEAL
In real estate investing, multifamily syndication can be seen as an alliance between multiple investors pooling their resources to buy a single asset or pool of assets. Because of this arrangement, the initial investment for each investor is lower than if they were to purchase a real estate property all on their own.
Traditionally, a syndication investment involves a multifamily syndicator and the investors. Multifamily syndication investors are called Limited Partners (LPs). The syndicator is called a General partner (GP). Multifamily syndicators are also referred to as the deal sponsors. [2]
The syndicator puts the deal together, assessing the real estate market and locating premier investments for syndication. They underwrite the deal, secure the loan for financing, and handle everything until the deal closes. If they haven’t already, they will look for potential investors participating in the syndication investment deal. Oftentimes, a multifamily syndication investment is only available to accredited investors.
Once the multifamily property has been acquired, the deal sponsor manages it. The passive investor merely brings the equity. Other than that, they have no responsibilities. [2]
The investors and the syndicator often form a limited liability company (LLC) or a limited partnership (LP) for the sake of the multifamily syndication deal. The syndicator has already established the LLC or limited partnership before investors come into the picture. Investors join as shareholders or members of the LLC or LP, not property owners. Moreover, ownership is rarely split equally; almost always, LPs contribute 80% of the equity while GPs contribute the rest. [3]
In any case, the cash flow is generally split amongst the participants relative to the amount invested. This means investors receive passive income from rents and eventual property sales.
SYNDICATED LOAN & THE SYNDICATOR
A multifamily syndication deal is like a machine with many different parts involved. Here, we will break down each essential part of a multifamily syndication investment, starting with the syndicator.
Regarding real estate syndications, two parties are involved: the General Partner and the Limited Partners. The syndicator acts as the General Partner for a multifamily syndication deal. This means they are the plane’s pilot, while the Limited Partners are the passengers. [4]
This also means that the syndicator does most of the heavy lifting to unite the multifamily syndication. They will find and underwrite the deal for the multifamily real estate. They will then secure the financing and take out a loan for it. They will negotiate with the seller and complete the due diligence. [4]
After locating the deal, the syndicator also finds passive investors and educates them about the multifamily syndication deal. If there are renovations on the property, the GP will also manage it.
In terms of property management, the syndicator can either handle it themselves or hire a property manager to do it for them. Either way, the investors receive the benefits of multifamily syndication without having to take on the role of landlord. Generally speaking, when a syndicator hires a property management team, they work closely with them to make sure the real estate investment is well taken care of. [4]
THE PASSIVE INVESTORS
Sophisticated investors who want to enjoy financial freedom through real estate investing can turn to multifamily syndication. It allows them to purchase real estate properties they otherwise couldn’t. Many investors who invest in real estate can only afford single-family homes because of the high cost of multifamily real estate. However, more investors can participate because of how multifamily syndication is structured.
Limited partners play an important role in the syndication investment, although it is more passive. They put their money into a stable and growing real estate investment. The main benefit is that they do not have to put in the time and work needed to manage an asset. Limited partners should still do their due diligence as they look into the syndication investment, but other than that, they can sit back, relax, and enjoy the cash flow, capital appreciation, or both. [4]
THE MANAGEMENT TEAM
One of the biggest reasons multifamily syndication appeals to many investors is that they don’t have to take on the responsibilities of a landlord. Passive investments allow real estate investors to focus on other ventures like running their business or other investments.
This is why a property management team is essential to any multifamily syndication deal. These professionals can turn a syndication investment into a truly passive investment. Some syndicators choose to manage the real estate property themselves, while others hire a third-party management company to deal with the day-to-day needs of the apartment community.
Property management is how a third party maintains a real estate property’s status quo. They handle repairs, maintenance, and the residents’ needs. Property managers oversee the apartment building’s daily operations, addressing residents’ questions and concerns. [5]
Property managers are also responsible for collecting rent, marketing the property to limit vacancies, drafting and executing new leases, and keeping records of everything happening on the property. Property managers can even handle lawn care, plumbing issues, preventative maintenance, appliances, patching drywall, etc. They will effectively serve as the middleman between residents and property owners. [5]
If someone goes into real estate investing and purchases a property alone, they would have to take on all these responsibilities. The cost of hiring a property management company may convince them to become the landlord themselves. With a multifamily property, the cash flow and tax benefits can justify the cost of working with a property manager. You can still enjoy significant profits from monthly rental income even if you spend some money on property management.
With multifamily syndication, you don’t have to worry about property management. Either the syndicator will take care of the investment property, or they will hire someone else to do so. In any case, the problem is out of your hands.
HOW DO YOU STRUCTURE A REAL ESTATE SYNDICATION DEAL?
Structure is a very important consideration when it comes to multifamily syndication deals. This dictates how each syndication member is paid throughout the deal’s life. More importantly, the structure of the syndication deal guides the relationship between the general and limited partners. This means incentives need to be aligned. [6]
Syndicators should consider their investors’ risk tolerance and not include too many fees in the transaction. Building trust between the general partner and their limited partners is essential. This means syndicators should avoid hidden compensations. [6]
Real estate syndication may be a simple arrangement between investors to pool their resources for a single real estate investment. Still, legal considerations for syndication investments are helpful when building the syndication structure.
Most real estate syndications are formed as a limited partnership (LP) or a limited liability company (LLC).
LLCs are more straightforward to establish and offer flexibility in terms of taxes. They also limit the liability of each member. On the other hand, LPs establish a general partner (GP) responsible for the investment, as well as limited partners who are not considered liable for the debts and liabilities of the entity. The risk of limited partners is limited to their capital contribution. [6]
The syndicator qualifies investors carefully before joining a passive investment role. Some syndication investments are exclusive to accredited investors and sophisticated investors, meaning those who meet the income or net worth requirements or have enough experience in real estate to understand the risks involved. Accredited investors have a high enough net worth or income that does not require as much financial protection if the investment does not work out. [6]
If investors want to participate in the project beyond providing capital, a limited partnership may not be the proper legal structure.
HOW ARE PROFITS SPLIT IN A SYNDICATION DEAL?
Depending on the structure of the syndication deal, profits can be split in many ways. For example, straight split syndication is a simple and easy way to split profits among limited and general partners. A straight split refers to the net cash flow and profits divided between the limited partners and the syndicator.
Straight split syndication typically favors the limited partners. The GP may get 10% while the LPs split the remaining 90%. It can also be 20% for the GP, 80% for the LPs, etc. [2]
But the most common version is a 70/30 split where the LPs split 70% while the GP takes 30%. Essentially, the better the property performs, the more everyone can profit. [2]
Many multifamily real estate syndication deals today are structured with preferred returns. This means the passive investors must give a percentage return before the sponsor can earn anything. The preferred returns usually range from 6% to 8% of most multifamily syndications. This ensures the safety of the LP’s investment.
So, for example, if a deal is structured with an 8% preferred return, and the investors receive only a 6% return in year one, they are owed the 2% accrued preferred return for the next year, along with the 8% preferred returns for year two. The multifamily syndication will break into a profit split following the preferred return. [2]
With preferred returns, investors can enjoy an additional safety net. It also makes the general partner accountable for the investment, so they will do their best to make it profitable.
Finally, a waterfall structure describes how syndicators and investors are repaid through a share of the real estate property assets through equity distributions. In a waterfall structure, return hurdles must be met before you can progress to the next part of the waterfall.
Multifamily syndications have a variety of waterfalls. The waterfall becomes more complex as more layers are added. These are examples of return hurdles that can be used: a 6% preferred return; an 80/20 profit split until LPs can get a 10% internal rate of return; a 70/30 split until LPs reach a 12% IRR; and then finally, a 50/50 split for the remaining profits. [2]
This means that profits will change depending on how much income the multifamily syndication has generated. This means the initial investment has the potential to grow significantly under a syndication deal.
The multifamily syndication should clearly outline how the parties will split profits.
HOW DOES THE SYNDICATOR MAKE MONEY?
General partners can make money with a multifamily syndication deal in a few ways. The first is with an acquisition fee. This fee compensates the general partner for their time putting the syndication investment deal together. They take charge of the whole thing from start to close. [7]
The acquisition fee can be 1% to 5% of the purchase price. The fee can be above 5% or less than 1%, but these are much less common. Many multifamily syndications will have it within the 1 to 5% range. For example, if a syndicator’s acquisition fee was 2%, and the real estate property was $1 million, the syndicator would be paid $20,000 at closing.
Another way general partners earn from multifamily syndication is through the asset management fee. It can be collected in two different ways. It may be charged as a percentage of income. In this case, the standard is 2%. It may also be collected as a cost per unit per year. The standard is around $250 per unit per year. [7]
The first structure is more flexible because the sponsor receives a percentage based on monthly income.
Finally, general partners may also earn money from percent ownership. Ownership may range from 10% to 70%, depending on the deal and how much the sponsor invested personally. [7]
HOW DO INVESTORS MAKE MONEY ON REAL ESTATE SYNDICATION DEALS?
A limited partner can profit from a syndication investment based on their role and the exit strategy. This depends on the structure of the multifamily syndication deal and the equity splits. Because passive investors provide most of the capital for the real estate syndication, they may receive around 70% of profits upon sale, while the general partner receives about 30%. [8]
Some syndication deals split the profits equally, but this is less common. A limited partner earns more from this investment opportunity because they also put in more money. Some syndicators contribute around 5% to 10% of the investment, while others don’t put in anything at all. [8]
There are also numerous ways for syndicators and investors to increase their profits as they move forward with the multifamily syndication. This largely depends on the performance of the apartment community serving as the rental property. [8]
A real estate syndication is a potentially lucrative investment for sophisticated, accredited investors. Investors who want to get into real estate without taking on all the responsibilities of owning a rental property should consider multifamily syndication.
All you need to do is do your due diligence and get advice from other investors if it is your first time investing in multifamily. An accredited investor can generate passive income, capital appreciation, or both by pooling their resources with other investors. This is also a good way to diversify your portfolio if you already have investments in other markets.
CONNECT WITH AN INSTITUTIONAL REAL ESTATE OWNER/OPERATOR
Working with a syndicator you trust is important because, as this is a passive investment, they will make all the decisions regarding the investment property.
BAM Capital prioritizes accredited investors who want to enjoy passive income and all the other benefits of multifamily private placement. As the private equity arm of The BAM Companies, BAM Capital has been focusing on buying the most profitable assets and staying disciplined in its investment thesis. BAM Capital’s investment strategy creates forced appreciation while mitigating investor risk. To date, the brand has successfully managed over $1.7 billion in assets across ~9,000 apartment units.. [10]
Remember that no investment is without risk. Before making financial decisions, consult your investment advisor and schedule a call with a BAM Capital investment team member.
Disclaimer: All investments carry risk, including potential loss of capital. This content is for informational purposes only and is not financial, legal, or investment advice, nor an offer or solicitation to buy or sell any security. Consult an independent advisor for personalized guidance and contact BAM Capital for details on current offerings. BAM Capital and its representatives are not fiduciaries or investment advisors. The information provided is general and may not reflect individual financial goals. Any financial terms, projections, or forward-looking statements contained herein are hypothetical in nature and should not be interpreted as guarantees of future performance or safety. Such statements reflect Bam Capital’s opinion and are subject to market fluctuations, economic conditions, and investment risks. Past performance does not predict future results. BAM Capital and its affiliates do not guarantee the accuracy or completeness of this information. Bam Capital offers investment opportunities under Rule 506(c) of Regulation D exclusively for accredited investors as defined by the SEC. Verification of accredited investor status is required prior to participating in any investment.
© 2025 Bam Capital. All rights reserved.
SOURCES:
[1]: QC Capital. (n.d.). “Ultimate Guide To Multifamily Real Estate Syndication.” https://qccapitalgroup.com/ultimate-guide-to-multifamily-real-estate-syndication/
[2]: Forbes. (2020). “A Look Into Multifamily Real Estate Syndication Splits.” https://www.forbes.com/councils/forbesrealestatecouncil/2020/12/22/a-look-into-multifamily-real-estate-syndication-splits/
[3]: MasterClass. (2021). “Understanding a Real Estate Syndication Deal.” https://www.masterclass.com/articles/syndication-deal-explained#what-is-a-real-estate-syndication-deal
[4]: Goodegg Investments. (2024). “Multifamily Syndication In 2024 And Beyond.” https://goodegginvestments.com/blog/multifamily-syndication-2024/
[5]: Fortune Builders. (n.d.). “Do I Need A Property Management Company?” https://www.fortunebuilders.com/p/what-does-a-property-management-company-really-do/
[6]: Marsh & Partners Real Estate Solutions. (2021). “How to Structure a Real Estate Syndication.” https://marsh-partners.com/blog/how-to-structure-a-real-estate-syndication
[7]: Best Ever Commercial Real Estate. (2017). “3 Primary Ways an Apartment Syndicator Makes Money on a Deal.” https://www.bestevercre.com/blog/3-primary-ways-apartment-syndicator-makes-money-deal
[8]: Fortune Builders. (n.d.). “What is Real Estate Syndication? A Guide for Investors.” https://www.fortunebuilders.com/what-is-real-estate-syndication/
[9]: Thomson Reuters. (n.d.). “U.S. Practical Law.” https://us.practicallaw.thomsonreuters.com/9-382-3236
[10]: BAM Capital. (n.d.). “Current Portfolio.” https://capital.thebamcompanies.com
