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Get Rich by Pooling Real Estate With Friends and Family

Get Rich by Pooling Real Estate With Friends and Family

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Wednesday, 23 March 2016 07:20 AM Current | Bio | Archive


Sue Nelson had been a high school art teacher for 8 years in Connecticut before she quit and became a real estate maven.

“I started taking real estate classes and became a sweat equity partner,” Nelson told Newsmax Finance. “Within five months, I was off and running with my first property.”

Her first acquisition was a 104-unit apartment complex with a syndication of wealthy investors that included doctors and lawyers. Today, she owns 12 apartment complexes in eight states, including Texas, Louisiana, Tennessee, Mississippi, Ohio and Georgia.

While REITs are a collection of properties and mortgages offered as a unit investment trust that represent a fraction of ownership, groups of family or friends can pool their resources more easily to acquire property under a Limited Liability Corporation (LLC).

“It’s like a REIT but it’s not public and it doesn’t have the requirements that a REIT has,” Nelson said. “A syndication is more flexible and a REIT is a public offering, which requires shareholders to register with the SEC.”

Similar to a corporation, Real Estate Investment Trusts (REIT) are required by the IRS to pay out at least 90% of their incomes to investors who hold units much like shareholders owning stock in a company.

“We don't want to have to distribute 90% of our revenue under IRS rules.” said Adam Laufer, co-CEO of MJ Holdings, a public company. “We'd rather retain earnings to grow the business in different verticals.”

Although Nelson had no capital of her own, she got her start after pulling together a group of accredited investors who had money to invest.

“You don’t need money or even a real estate license,” Nelson said. “That’s why I got into this because I was broke.”

As a sweat equity partner, Nelson is the one who identifies the property to acquire, gathers paperwork and manages investors.

“A syndicate can work with family or a group of friends,” said Nelson. “One of the most prosperous thing you can do as a family is to invest in apartment buildings.”

A REIT requires more than 100 investors by the second year of inception but a real estate syndication needs only two or more investors.

“The owner of the deed is listed as the LLC and the LLC paperwork details each and every partner so that everyone is secure on that property deed because they own portions of the LLC that own the building,” Nelson said.

If someone leaves the syndication for any reason, their share becomes interchangeable.

“It can pass to the next heir or it can be sold and you can sell it for more than what it’s worth,” said Nelson. “There’s a ton of money to be made when buying property with a syndication.”

Juliette Fairley is an author, lecturer and TV host based in New York. To read more of her work, Click Here Now.

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Sue Nelson had been a high school art teacher for 8 years in Connecticut before she quit and became a real estate maven.
Real Estate, Friends, Family, Invest
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2016-20-23
Wednesday, 23 March 2016 07:20 AM
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