Real Estate Syndication: How to Syndicate an Apartment Deal, Step by Step

A real estate syndication is a group investment: a sponsor finds, buys and runs a property, and passive investors supply most of the equity, usually through an LLC. Because investors rely on the sponsor's work for profit, the interests are generally securities, so most sponsors raise under Rule 506(b) or 506(c). If you are the sponsor, we built DoorRaise to handle the paperwork for apartment raises.

What is a real estate syndication?

A syndication is a partnership between one active party and many passive ones. The sponsor brings the deal, the work and usually some capital, and investors bring most of the equity. Both own the property through one entity, usually an LLC created for that single building.

Multifamily syndication, meaning apartment buildings with five or more units, is one of the most common types.

Why is a syndication a securities offering?

When you sell passive interests in a deal you run, you are selling securities. Every securities offering must be registered with the SEC or fit an exemption, and nearly all small sponsors use Regulation D.

The legal test comes from the Supreme Court's 1946 Howey decision: an investment contract exists when people invest money in a common enterprise and expect profits from the efforts of someone else. Passive apartment investors fit that description. Calling them "partners" does not change it, because courts look at how much control they actually have.

Two Rule 506 paths matter:

• Rule 506(b) bans general solicitation. You raise from people you already have a relationship with, and you may include up to 35 non-accredited but sophisticated purchasers in any 90 calendar days. See the SEC's Rule 506(b) page.
• Rule 506(c) allows public marketing, but every purchaser must be accredited and you must take reasonable steps to verify it. See the SEC's Rule 506(c) page.

We compare them in detail in 506(b) vs. 506(c). The full rule text is in 17 CFR 230.506.

How common is Rule 506?

Very. The SEC's Regulation D statistics page reports about $2,248.4 billion sold under Rule 506(b) and $142.6 billion under Rule 506(c) in 2025, based on Form D filings. One offering can claim more than one exemption and the totals cover all industries, so read them as a sign of how widely Rule 506 is used, not as an apartment deal count.

How to syndicate an apartment deal in 9 steps

1. Put the property under contract. The purchase contract sets your clock for due diligence, financing and closing, and every later step has to fit inside it.
2. Build the team. You need a securities attorney, a lender or mortgage broker, a property manager and a CPA who can prepare partnership returns. If you have never run a building, bring in an experienced operator as a co-sponsor.
3. Choose your exemption. Pick 506(b) if you will raise quietly from people you know. Pick 506(c) if you will market publicly. Our guide to 506(b) vs. 506(c) walks through the choice.
4. Form the entity and prepare documents. Most deals use a single-purpose LLC with an operating agreement, a private placement memorandum (PPM) and a subscription agreement. See what a PPM includes and costs.
5. Set the terms. Decide the minimum investment, the preferred return (if any), the profit split and every fee, then put them in dollars as well as percentages. See syndication fees and how they work.
6. Check bad actors, market the deal and verify investors. Rule 506(d) disqualifies certain people with specific past violations from using Rule 506, and the check covers more than the sponsor. Under 506(c) you must also verify each investor. See accredited investor verification.
7. Collect signatures and funds. Investors sign subscription documents and send money. Where that money sits until closing is one of your biggest decisions, covered below.
8. File Form D and state notices. File with the SEC within 15 calendar days after the first sale, then make state notice filings. See Form D filing for a syndication.
9. Close and operate. Fund the purchase, run the business plan, send updates and distributions, and deliver K-1s each year.

Steps 4 through 8 overlap, and drafting documents during due diligence is usually necessary.

What does it cost to syndicate a deal?

Legal work is the biggest upfront cost, followed by state filings, investor verification and yearly tax work. A syndication law firm's page says a complete Regulation D package with a PPM "typically ranges in price from $15,000 to $30,000." Another firm's 2026 guide puts specialist flat-fee firms at $12,000 to $25,000 or more and large firms at $50,000 to $75,000 or more. Both firms sell these services, so treat the numbers as quotes, not market data.

For comparison, DoorRaise's own estimates for a raise of about 40 investors, bought as separate pieces, look like this:

Those lines add up to about $20,000 to $49,500 in the first year, before state filing fees. These are our estimates, not a survey.

What does the sponsor earn?

Sponsors are usually paid through fees and a share of profits, and the mix varies widely by deal. A BiggerPockets article on common syndication fees cites acquisition fees of about 1% to 3% of the transaction value, asset management fees of about 1% to 2% of effective income, and income splits such as 70/30 or 80/20 in favor of investors. Treat those as examples of what you may see, not a standard.

Investors should see every fee in dollars before they commit. Our post on real estate syndication fees explains how each piece works, including the preferred return.

A worked example (illustrative)

This example shows how the equity gets sized. All numbers are illustrative.

A sponsor puts a 60-unit building under contract at $9,000,000. Closing costs are $200,000, reserves are $150,000 and planned renovations are $250,000, so the total capitalization is $9,000,000 + $200,000 + $150,000 + $250,000 = $9,600,000.

The lender offers a loan equal to 70% of that total: 0.70 x $9,600,000 = $6,720,000. Equity needed is $9,600,000 - $6,720,000 = $2,880,000.

The sponsor invests 5% of the equity, or $144,000, and raises the remaining $2,736,000 from investors. If 36 investors each put in $76,000, then 36 x $76,000 = $2,736,000. Investors hold 95% of the capital, and the sponsor's profit share depends on the operating agreement.

The example shows no return on purpose. Projections belong in your offering documents with their assumptions, not in a social caption.

Where should investor money sit before closing?

In an account that is separate from your own money and personal accounts, held by an independent third party. Regulation D itself does not require escrow, but holding funds with an independent escrow agent is a common way to show that money is only released at closing.

Escrow also matters if you describe the raise as all-or-nothing. SEC Rule 10b-9 says it is deceptive to represent that an offering is all-or-none unless the offering is conditioned on prompt refund of all money if the stated amount is not sold by the stated date.

Loose handling has real costs. In a case the Justice Department described in May 2025, a sponsor who raised more than $62.8 million through an online platform for two properties promised segregated bank accounts, then moved substantially all of it into personal and unrelated business accounts. He was sentenced to 87 months in prison. See the DOJ release.

What mistakes sink first-time syndicators?

Paying capital raisers per dollar raised

Pay tied to money raised is treated by the SEC as a hallmark of broker activity, and unregistered brokers can put your raise at risk. See how creators and capital raisers can be paid.

Promising returns in posts

Anything you say about a live deal can be treated as offering material. Keep numbers and projections inside the offering documents, and keep public posts factual.

Letting the exemption drift

In a 506(b) raise, a public post pitching the deal can break the no-general-solicitation condition. In a 506(c) raise, one unverified investor can break the all-verified condition.

Missing the dates after the money arrives

Late Form D filings, skipped state notices and late K-1s are common slips. The IRS charges a penalty per late or incomplete K-1 under its Form 1065 instructions, so calendar every date on day one.

Our take

Our take: most first-time sponsors lose more time to messy investor records than to hard legal questions. The sponsors we would back are the ones who pick one exemption, write every fee in dollars, keep investor money away from their own accounts and send an update every month.

We also think a first deal is easier with a co-sponsor who has operated before, has a real role and has money in the deal.

Trade-offs and who this is not for

Syndication gives you access to more capital than you could raise alone, and it costs you control, simplicity and some privacy. Every investor you add brings documents, reporting duties and expectations.

• Not for sponsors who want to avoid securities rules. If you pool passive money, plan to follow them.
• Not for a rush job. Offering documents, verification and filings take weeks, not days.
• Not for investors who need quick access to their money. Interests are usually restricted securities, so investors should expect to hold until the sponsor sells or refinances.

If you only need one or two experienced partners, a joint venture may fit better, though it can still be a security.

Decision checklist before you raise

1. Is the property under contract, with a closing date that leaves time for filings?
2. Have you picked 506(b) or 506(c) and written down why?
3. Does every covered person pass the bad actor check?
4. Is every fee written in dollars?
5. Does investor money go to an account held by an independent agent?
6. Has your attorney approved how anyone helping you find investors is paid?
7. Are Form D, state notices, K-1s and investor updates on a calendar?

If any answer is no, fix it before you take a dollar.

How DoorRaise fits in

DoorRaise helps sponsors raise equity for apartment buildings with 5+ units from people who already trust them, under Rule 506(b) or 506(c). We are software, legal document preparation, escrow coordination and verification services. We are not a law firm, broker-dealer, investment adviser, funding portal, bank or escrow agent, and we do not hold investor money. Funds go to an independent escrow agent named on each deal.

We charge three flat fees and take 0% of the raise or profits. The $500 setup fee, due when you submit the deal, covers forming the deal's LLC (including the registered agent), investor documents from attorney-approved templates, an escrow account in the deal's name, the deal page, live call sign-up and accreditation checks on every investor. The $500 is not refunded if the raise does not close.

The $5,000 closing fee is paid from the funds raised, only if the deal closes. It covers attorney review of the offering documents, checks on the sponsor, purchase contract, title and loan, the Form D filing and electronic signing, escrow paying the title company at closing, and the investor portal and document vault. The $3,500 yearly fee is paid from the property's income while you own it, and covers bookkeeping, the tax return and K-1s for every investor, payouts, investor updates and final tax forms when you sell.

State filing fees are included in the $5,000 closing fee. If the raise does not close, you never pay the closing or yearly fee and every investor gets money back from escrow.

As an illustration, a deal that closes and is held five years would carry $500 + $5,000 + (5 x $3,500) = $23,000 in DoorRaise fees, with state filing fees included.

Ready to raise? Create your free sponsor page or see pricing.

FAQ

What is a real estate syndication?

It is a group investment where a sponsor finds and runs a property and passive investors supply most of the equity through a shared entity, usually an LLC. The sponsor is paid through fees and a share of profits. Investors receive distributions and a K-1 each year.

How much money do you need to syndicate a deal?

You need enough for earnest money, inspections, loan costs and legal fees before closing, plus any equity you plan to invest. Offering documents alone commonly run $12,000 to $30,000 from specialist firms.

Is real estate syndication legal?

Yes, when the offering is registered or fits an exemption. Most syndications use Rule 506(b) or 506(c) of Regulation D and file Form D with the SEC. Antifraud rules apply to everything you say, even in an exempt offering.

Can non-accredited investors join a syndication?

Under Rule 506, only 506(b) allows them: up to 35 non-accredited purchasers in any 90 calendar days, each sophisticated on their own or with a purchaser representative, with extra disclosure required. A 506(c) offering is accredited-only. Other routes exist, but they come with their own rules and costs.

Do I need a license to syndicate?

Usually not to sponsor your own deal, but how you find investors and how helpers are paid can raise broker-dealer questions. Check with a securities attorney before you pay anyone based on money raised.

Sources

• SEC, Regulation D offering statistics
• SEC, Rule 506(b)
• SEC, Rule 506(c)
• 17 CFR 230.506
• SEC, Filing and amending a Form D notice
• 17 CFR 240.10b-9
• Syndication Attorneys, PLLC, private placement memorandums
• PPM Lawyers, Reg D PPM cost (May 2026)
• BiggerPockets, common syndication fees
• U.S. Department of Justice, sentencing in a $62.8 million investment fraud case
• IRS, Form 1065 instructions
• SEC v. W.J. Howey Co., 328 U.S. 293 (1946)

This post is general information, not legal, tax or investment advice. Talk to a securities attorney and a CPA about your deal. Figures are as of October 2026 and can change. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.