Insights

Why High Net-Worth Investors Are Choosing Syndications Over Crowdfunding

In recent years, both real estate syndications and crowdfunding have gained traction as alternative investment vehicles, offering access to private markets that were once reserved for institutional players. While these platforms might appear similar on the surface, high-net-worth investors are increasingly gravitating toward syndications. Here’s why:

1. Greater Control and Customization
Syndications typically offer a more personalized approach to investing. Investors participate alongside experienced operators and often have better visibility into the project’s strategy, structure, and timeline - something that’s rare in crowdfunding.

2. Higher Average Returns

Syndications generally outperform crowdfunding in terms of returns. According to a study by Preqin, real estate syndications have historically delivered annualized returns which are almost double those compared to crowdfunding platforms. This is largely due to better deal quality and sponsorship expertise.

3. Higher-Quality Deal Flow
Syndications are often led by established sponsors with a track record of success. These deals are typically sourced through extensive networks and deep industry connections, ensuring a level of vetting and quality that crowdfunding platforms may lack.

4. Stronger Investor Protections and Transparency
Crowdfunding platforms tend to cater to smaller investors and may rely on less experienced operators. Syndications, on the other hand, offer more robust reporting, better-defined investor protections, and direct communication with project sponsors, which appeals to those who prioritize transparency.

5. Larger Minimum Investments for Larger Potential Returns
Syndications require higher minimum investments, but this aligns with the goals of high-net-worth investors looking for meaningful exposure and higher returns - not just small, fragmented stakes in multiple projects.

6. Tax Efficiency
Real estate syndications often offer attractive tax benefits, including depreciation and pass-through deductions, that can be more complex or diluted in crowdfunding structures.

For high-net-worth investors seeking direct access, quality sponsors, and custom-tailored investments, syndications have become the preferred choice. While crowdfunding remains a viable option for retail investors, the advantages of syndications for those with significant capital are hard to ignore.