Expected Returns on a Real Estate Syndication Deal

MARCH 05, 2024
Written by John Makarewicz

In the realm of investing, returns can never be guaranteed. Each investment carries its own unique blend of risks and potential rewards. However, by understanding how returns are structured, you can make informed decisions that align with your personal financial goals.


At Faris Capital Partners, we typically offer a preferred return to our investors of 7%. This means that our investors receive the first 7% of profits from the property before we, as the syndicators, take our share. We believe in the properties we invest in, and to prove it, we personally invest in each deal we make. Our skin is in the game right alongside yours, ensuring that our interests align with our investors.


Of course, not all real estate syndicators offer the same structure. Each operator may have a different investment approach, targeted return, risk profile, or profit-sharing structure. It’s crucial that investors perform due diligence and research before making an investment decision.


When we evaluate potential deals, we typically target a cash-on-cash return of 4-6% and an annual rate of return (ARR) in the 15-20% range.



But what do these terms mean?

Cash-on-cash return is a percentage that shows the cash income earned on the cash invested in a property. For instance, if you invested $100,000 into a property and received $8,000 in cash flow over a year, your cash-on-cash return would be 8%.


The internal or annual rate of return, on the other hand, is a metric used in capital budgeting to estimate the profitability of potential investments. IRR is the discount rate that makes the net present value (NPV) of all cash flows (both positive and negative) equal to zero. It’s an annualized figure that includes both the profits from operations (cash flow) and the eventual profits from sale, taking into account the time value of money.


Our investment horizon typically ranges from 3 to 5 years, during which we hold properties before refinancing or selling. However, this timeline can vary based on a variety of factors, such as market conditions. Our primary focus is always on maximizing returns for our investors while carefully managing risks.


As with any investment, it’s essential to remember that past performance is not indicative of future results. Each deal is unique and requires its own detailed analysis. But with careful planning, due diligence, and sound management, apartment real estate syndication can offer attractive opportunities for building wealth.



In conclusion, real estate syndication with Faris Capital Partners offers a clear path to potential returns, emphasizing aligned interests and careful risk management. While each investment carries its own risks and rewards, our focus on due diligence and strategic planning aims to achieve targeted returns of 4-6% cash-on-cash and 15-20% ARR over a 3 to 5-year horizon. Remember, past performance is not a guarantee of future results, but with informed decisions and solid management, real estate syndication can be a valuable part of your wealth-building strategy.



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