Real Estate Funds Vs Syndications. What’s Best For Raising Capital?

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by PPM LAWYERS
Real Estate Funds vs Syndications What’s Best for Raising Capital?

Understand the difference between syndications and real estate funds — and how to choose the right structure for raising capital legally.

Raising capital for real estate is more than just finding investors—it’s about choosing the legal structure that best aligns with your goals, investment strategy, and compliance obligations. Two of the most common methods are real estate funds and syndications. While both can be viable, each comes with unique advantages, limitations, and legal considerations.

This blog compares real estate funds and syndications, unpacks their legal implications, and helps you determine which is the better fit for your next capital raise.

What Is A Real Estate Syndication?

A real estate syndication is a deal-specific investment structure where a sponsor (the person or company running the deal) pools money from multiple investors to purchase a single property or project. Investors are typically passive and receive shares of the profits, while the sponsor earns fees and a portion of the upside.

Key Legal Traits:

  • Structured as an LLC or LP
  • Governed by a Private Placement Memorandum (PPM)
  • Uses Regulation D exemptions (506(b) or 506(c))
  • Limited to a single asset or project

Pros:

  • Easier and faster to launch
  • Simple to explain to investors
  • Lower legal and administrative costs upfront

Cons:

  • Limits capital raise to a single property
  • Requires repeated fundraising for each new project

Key takeaway: Syndications are ideal for new sponsors or those focused on one-off deals. They allow for streamlined communication and manageable compliance burdens.

What Is A Real Estate Fund?

A real estate fund is a pooled investment vehicle that raises capital from investors to acquire multiple properties over time. Sponsors (fund managers) have discretion over which assets to buy, and investors trust the fund’s strategy rather than any specific deal.

Key Legal Traits:

  • Structured as an LLC or LP
  • Requires a detailed PPM and Operating Agreement
  • Generally raises under Rule 506(c) to advertise to accredited investors
  • Involves ongoing administration and compliance

Pros:

  • Can raise once and deploy capital across multiple deals
  • Offers diversification to investors
  • Positions you as a long-term fund manager

Cons:

  • May involve higher upfront legal costs
  • Typically more complex offering documents
  • Potentially harder to attract first-time investors

Key takeaway: Funds are best suited for experienced sponsors seeking to scale and manage a portfolio without raising capital for each deal.

Legal Considerations: PPMs, SEC Rules, And More

Whether you pursue a fund or a syndication, you must comply with securities laws. That means preparing a legally compliant PPM, selecting the appropriate Regulation D exemption, and ensuring all investor communications are transparent and accurate.

Syndication Legal Tips:

  • Use 506(b) if relying on existing relationships and allowing up to 35 non-accredited investors
  • Use 506(c) to advertise broadly but verify accredited investor status
  • Ensure your PPM clearly defines the project, risks, and compensation

Fund Legal Tips:

  • Use 506(c) for broader reach and fund discretion
  • Outline your investment strategy clearly in the PPM
  • Include a Subscription Agreement and Operating Agreement
  • Consider hiring a fund administrator

Compliance tip: Have a securities attorney draft your documents to minimize legal risk and ensure regulatory compliance.

Which Should You Choose?

Ask yourself:

  • Are you raising for one deal or many? One deal = syndication; many = fund.
  • Do you have investor trust? If not, syndications are easier to pitch.
  • Are you ready for fund complexity? Funds may require more infrastructure.
  • Do you want to market publicly? Use 506(c), but follow investor verification rules.

Key takeaway: Many sponsors start with syndications and move to funds as their business grows.

Raise Capital With Confidence And Compliance

Whether you’re planning a syndication or launching a fund, the legal foundation matters. From PPMs to SEC compliance, we help you raise capital the right way.

✅ Book a Free Strategy Call to Get Your Legal Docs in Place