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How do I invest in a syndicate?

Wednesday, 4th May 2016

group investmentAs you might have guessed, investing in a syndicate can be somewhat of a different process to buying a property directly, so what exactly is the procedure?

While the process for investing in a residential development syndicate varies from company to company, one method is a capital first fund, where investors commit to a certain percentage or amount before the property is found.

These types of residential development syndicates typically follow the below steps.

1) Initial briefing of proposed syndicate. Potential investors are sent an Information Memorandum and invited to a syndicate briefing which outlines the goals of the syndicate, including targeted metrics, such as raising amounts, returns to investors, development size and composition etc.

2) Raising committed funds. Investors who are interested in participating in the syndicate then provide an initial deposit to the fund to secure their place. The deposit can vary but it can be around 5% of the amount they intend to invest.

3) Site search begins. With funding commitments meeting the specified raising amount, the search for a suitable development site begins. At Momentum Wealth, our in-house research team works with our syndicate team to constantly monitor the market and create weekly shortlists of potential sites. These sites are then subject to more analysis and initial feasibility studies are done to determine their profitability.

4) Offer placement. When a suitable site is found an offer is placed on the property and formal due diligence starts.

5) Information evening for investors. Provided the site meets the criteria under the due diligence process, an information evening is held for those investors who outlaid the initial deposit. Investors are provided with financial feasibilities (including forecast costs, profitability and returns), construction timelines and other key information pertaining to the site.

6) Final investment decision. Investors can elect to deposit the balance of their committed funds to proceed with the syndicate and the site is secured.

Once investors have made their final investment decision and the site is secured, project planning is finalised and presales and project construction begin.

Construction time will vary on the size of the development, but a boutique apartment complex (consisting of circa 30 apartments) should typically take about 18 months.