5 Key Differences Between Real Estate Syndication and Crowdfunding

By Josefin Gatsby on 04/01/2024.
Reviewed by Dan Gatsby .
Syndication and crowdfunding are two similar ways of investing in real estate. High net worth individuals have been using these models to fund real estate projects with friends and family for a very long time. But the JOBS Act of 2012 made it possible for investment companies to promote their offerings to the general public, which ultimately opened the door for everyday investors to invest in real estate, with no prior experience requirements and less money down.

Real estate syndication and real estate crowdfunding are both methods of pooling capital from multiple investors to invest in real estate projects. But they have some key differences to be aware of. So before you start looking for your next investment, let’s do a syndication vs. crowdfunding comparison to find out which model is right for you. 

1.   Structure:

Real Estate Syndication: In a real estate syndication, a group of investors forms a partnership or joint venture which is typically led by a sponsor or syndicator. Each investor becomes a direct owner in the property and has a share of the responsibilities and potential returns. This is often a more traditional structure where investors have a more active role in decision-making. However, some of the larger syndication companies may offer an ownership in the deal and a complete passive experience, in which the sponsor/syndicate makes all decisions on behalf of its investors. 

Real Estate Crowdfunding: Crowdfunding often involves a larger number of investors, contributing smaller amounts of money through an online platform. Investors usually invest in a specific project or portfolio without direct ownership. The platform acts as an intermediary, and investors typically have a more passive role, relying on the sponsor or platform to manage the investment.

2.   Investor Involvement:

Real Estate Syndication: Investors in a syndication typically have more direct involvement in the decision-making process. They may have voting rights on major decisions, and their level of influence depends on their ownership stake. 
Real Estate Crowdfunding: Crowdfunding investors are generally more passive. They invest in a project but often have limited influence on the day-to-day decisions. The platform or sponsor manages the property, and investors receive returns based on the terms set forth in the investment.

3.   Minimum Investment:

Real Estate Syndication: Syndications often require larger minimum investments. The barrier to entry can be higher, making it more suitable for investors with some larger capital available. Most syndication companies are only able to offer its investment opportunities to Accredited Investors

Real Estate Crowdfunding: Crowdfunding platforms typically have lower minimum investment requirements, allowing a more diverse group of investors to participate. Those platforms and offerings are often times open to non-accredited investors.

4. Deal Sourcing:

Real Estate Syndication: Syndicators often source deals through their network, relationships, and industry expertise. The syndicator may also contribute their own capital to the project.
Real Estate Crowdfunding: Crowdfunding platforms act as intermediaries that source and vet deals. Investors select from the projects listed on the platform, and the platform handles the administrative aspects of the investment.

5. Risk and Return:

Real Estate Syndication: Investors in a syndication generally take on a more active role and, therefore, may have the potential for higher returns. However, they also bear a proportionate share of the risks and responsibilities.

Real Estate Crowdfunding: Crowdfunding investors typically have a more hands-off approach, which may result in more moderate returns. However, they also have less direct exposure to the day-to-day management of the property.

Which Type is Right for You? 

Both real estate syndication and crowdfunding have their advantages and are suitable for different types of investors based on their preferences, accredited status, and investment goals.

How to Start Investing in Real Estate Syndication

To get started, do your research of finding a crowdfunding/syndication service that is right for you.

Gatsby Investment, is a Los Angeles-based real estate syndication company, with a history of providing exceptional returns to investors. With a strong niche of focusing on value-add and ground-up construction projects, Gatsby has generated an average annualized return of 23% to its investors between 2017-2023. 

Sign up with Gatsby today and choose your real estate investment project(s) to be part of the real estate crowdfunding and syndication revolution.

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