A syndication pools capital from many investors to buy a property none could buy alone. A general partner sources, underwrites, and operates the asset; limited partners invest passively and share in the returns.
GP and LP roles
The general partner (GP) finds the deal, arranges financing, executes the business plan, and reports to investors. Limited partners (LPs) contribute capital and receive distributions and a share of the profit, with no day-to-day responsibility and liability limited to their investment.
Where returns come from
Returns generally come from three places: ongoing cash flow from operations, appreciation as net operating income grows, and tax advantages such as depreciation. The eventual sale or refinance returns capital and realizes the gain.
