2 Capital calls in 2 weeks! Ouch

[Solomon Rosenberg]

Within the past 2 weeks I got 2 capital calls from different sponsors, I'm assuming that there are many deals in similar situations.

The sponsors are saying, If they have enough capital to bring occupancy to 90% they will have better options to refinance or sell. That's true, however what if they can't deliver on the occupancy in a short period.

They say it's not a good market to sell now. True again, but what if interest rates stay volatile for longer than expected, and the market stays locked up longer.

Meanwhile the property is bleeding 6 figures monthly, and the added capital will only go so far, unless there is a major change in the interest rates soon, and that doesn't seem likely.

They also say if we don't infuse more capital we may lose our principle too, as they will be forced to sell at a loss. That is possible, but this may end up happening anyway.

So, what's the call? Do I put more money into these deals, or do I accept a dilution of my shares and put my money elsewhere?

Here is the thing - our brains are wired to be more sensitive to a loss compared to the possibility of even a much larger gain and we are biased to try and stop a loss.

I think I need to take a step back and think about this like it's a totally new deal, and I have no stake in it, would I invest in this deal now based on all the facts?

What do you think?

[Josh Randall]

Quote from @Henry Clark:

Everyone on this post wanting the name of poor performing syndicators.  

Can you supply your risk reward matrix for evaluating syndication deals?

Can you provide your checklist for evaluating syndication deals?  

I have no problem investors losing money or all of it if they don’t have an approach or methodology.  They should stick to the stock market. 

    If you want to help future investors provide them with your matrix and checklist. .    

I have lost all of my money on an investment due to the arrogance of the CEO.  Was it his fault or mine?  Mine.  I was looking for a 30% gain and then he did the unthinkable.  What was his name?  I still remember after 40 years.  And it was still my fault.  

Here's part of my checklist...

Questions for syndicator:

1. Will you discuss deals that didn't go as planned?

2. Have you ever had any issues on a deal?

3. Have you ever made a capital call?

4.  How would a downturn impact your plan?

5. Have your LPs ever lost any of their investment? 

6. How are you avoiding making the same mistakes in the future?

If they're willing to lie then these questions are worthless. However, if LPs will speak up they can help keep syndicators honest.

[Henry Clark]

Quote from @Josh Randall:

Quote from @Henry Clark:

Everyone on this post wanting the name of poor performing syndicators.  

Can you supply your risk reward matrix for evaluating syndication deals?

Can you provide your checklist for evaluating syndication deals?  

I have no problem investors losing money or all of it if they don’t have an approach or methodology.  They should stick to the stock market. 

    If you want to help future investors provide them with your matrix and checklist. .    

I have lost all of my money on an investment due to the arrogance of the CEO.  Was it his fault or mine?  Mine.  I was looking for a 30% gain and then he did the unthinkable.  What was his name?  I still remember after 40 years.  And it was still my fault.  

Here's part of my checklist...

Questions for syndicator:

1. Will you discuss deals that didn't go as planned?

2. Have you ever had any issues on a deal?

3. Have you ever made a capital call?

4.  How would a downturn impact your plan?

5. Have your LPs ever lost any of their investment? 

6. How are you avoiding making the same mistakes in the future?

If they're willing to lie then these questions are worthless. However, if LPs will speak up they can help keep syndicators honest.

 @Josh Randall    The reason, I recommend not posting about GP's and their performance is two fold:  A.  Laziness on the part of the LP, using a list versus doing their due diligence., B.  Liability on the part of the poster.  I think we are in a land of Victimhood.  It's always someone else's fault.  They will degrade the GP, without explaining how they themselves screwed up.

To me being an LP (which we don't do) is the same as investing in the stock market.  If they want to make this type of investment, then they should invest in the Stock market where there already controls in place.

Please add another item to the checklist.  What happens if the GP dies or goes bankrupt on another deal?

The above action will be far more valuable to current and future LP's than who did or didn't have a bad deal.  We have had Bad deals, that we still made a lot of money on, because of our financial analysis and looking at potential cost over runs, occupancy slippage, locked in interest rate, and market rate slippage. But we did our due diligence on the deals we do.

You attached a list above.  For the benefit of other LP's.  Please make a separate post.  Ask them to improve on it, plus a Risk/Reward matrix.  Name some of the Syndications you have reviewed using your checklist and based on that why you did or didn't invest in them.  

[Melanie P.]

Quote from @Solomon Rosenberg:

Quote from @Melanie P.:

Quote from @Solomon Rosenberg:

 To answer your question @Christie Gahan to focus on the sponsor that screwed up, is missing the point. 

For sure there is plenty of blame to go around and we can choose to vent on them. Sharing names will not make you  or me better investors and will not prevent anyone from losing money in the future. 

My point is that if you're going to invest in something understand it enough to know what are the risks to look out for, and be disciplined, don't follow the herd.

I learned many lessons, and I believe it will serve me in my current and future investments. 

 Wrong. Naming the name of the fund where you lost 93% of the money you put in could help the next investor avoid placing money with that promoter. This guy has got to be one SMOOTH LOVER to disappear 93% of your investment and have you worried about his reputation. 

What did you learn, exactly? You have got to be net negative overall on your real estate syndication investments --- are you continuing to gamble with your money in this market?

 I respectfully disagree, first off I have made amazing returns on a few projects with this sponsor. #2 Investing in class C multifamily with a major value add component is riskier than some other types of deals as these deals had bridge debt and with the rates rising fast they couldn't get out in time, there are multiple deals from many sponsor that went south in the past year, I'm not whitewashing these sponsors they made some serious mistakes, just putting some context. 

And some of the lessons I've learned are, Class  B properties are safer investments. highly leveraged deals while they can have better returns are risky. Floating rate debt is dangerous. Among other lessons. 

And yes I am invested and continue Investing in mf, and i'm doing fine.

Investing has its risks and is not right for everyone.

 Amazing returns on a few other deals with this sponsor? So I was right about there being an odd attraction to help keep these honest performance results in the dark. The sad thing is it sounds like it's a combination of greed and FOMO...

Total nonsense. The past "spectacular returns" make you an overall net winner with them? I think not. Even a couple home runs cannot make up for a 93% loss. You suffer from the same fallacy many here do of believing that every open deal is going to work out. That is certainly not the case and you will see more of your syndication investments fail over time. 

Once a company has shown you a track record of a loser, averaging out multiple deals, it's not a mistake. They are a loser. And if you continue to send money to them they will continue to lose it. I strongly advise you to engage a fee-only financial advisor to discuss your specific investments and track record so they can help you understand what your actual numbers look like and bring to your attention safer alternative investments.

[Jonathan G.]

Did the Sponsor ever come out with this thread?

[Calvin Thomas]

I will never understand why people who know very little about syndications go with their eyes wide shut. Then, when sh!t hits the fan complain and come here to ask for advice.  Ask for advice before going into these "investment" tools; not after.

I will always recommend that YOU should own your real estate, and not get involved with these crummy and questionable deals.

If one cannot afford to buy their own real estate, purchase the Vanguard REIT and save until you have the down payment for a house hack or investment property. Rinse and repeat.

I will stand by what I said and bet my 40+ years of real estate experience to the test when I say a fool and their money shall part (Proverbs 21:20) when investing with these BS syndications.

[Melanie P.]

@Calvin Thomas It's impossible to say with certainty, but this site is a wonderful resource for someone who wants to learn about real estate. Frequently that is someone trying to figure out something better to do with surplus income and/or with a couple hundred thousand dollars they want to make an above-average return on with little effort. There's also a fair number of folks I've seen that have 1-5 units, hit a rough patch where they have to put in some work and want the "passive" income they heard about, but anyone with experience knows is not a true premise.

The syndicators promise the solution to bad tenants, midnight plumbing issues, etc. In fact syndicators websites generally feature images of beaches, golfers, a father out with his kids hand-in-hand, alcohol, etc. The message is HIGH RETURNS/ZERO EFFORT. 

Of course the truth is mediocre returns if things work out with a good possibility you won't even see your principal investment back. During the time period that the miniscule distributions are flowing and they're getting updates they can tell their friends they have an apartment building in Texas and give advice on investing and tax strategies. When they lose their money they refuse to name names and stop talking about it. 

[Chris Seveney]

Quote from @Jonathan G.:

Did the Sponsor ever come out with this thread?

 No they refused to name them. 

[Henry Clark]

Still don’t see one of you taking the positive approach to this discussion.  

So the syndication is XYZ syndication.  Who cares.  There are more out there every day.  Plus it would still be the LPs fault for not doing due diligence.  If they do their due diligence and they lose their money then that’s the risk reward they signed up for.

BP wants to play a role then sell training or develop checklists.  
.  
I asked for someones check list and they responded above. That’s not the type of questions you ask for due diligence.  Those are the type of questions you ask for someone to tell you what you want to hear. Are you going to lose my money????    No.  Trust me!!!

We do not do syndications but most of the issues apply to self storage.

1.  What is the investment window and does the financing match.  If you have a five year window you should not be doing interest only, ARMs, etc. do a 5 or better a 7 year financing term.  If an LP decides to invest with a Syndication that does not have matching debt to their time window, they should understand their risk reward.  We do interest only during construction and during rent up 18 months.  If we haven’t hit our occupancy rate for break even at 18 months, money comes out of my pocket.  If fixed term rates move up prior to us locking in, that’s fine.  We stress tested before we did the deal.  Just not as great of a deal but still profitable.  Plus our banker does the same stress test.  LPs need to
 do that stress test or get from GP.

2.  Occupancy strategy?  Time frame  and execution plans.  And funding needed.  Market study.  Can the market take that pricing for that offering?  What are the competitors pricing and occupancy within a X mile radius?  If you have to take pricing from xxx down to ccc how does that impact the projections and returns?

3. Capex: funding and timeframe. Contractor support? Do they control the contractors or are they outsourcing?

4. Syndication fee, and ownership structure. Potential Call strategies for LP. If xx happens or you happens on Capex, occupancy, etc. Financing terms should have been taken off the table by matching debt term to cash out period. LP and any investor should always calculate what failure means. Even at 65% occupancy for our self storage we win. But we calculate that up front before investing for a location.

5.  Returns- flip at  say 5 year plan or if you have to hold to ride out the market.  Verify both fit the LPs goals.

6.  Back ground check.  Who are these GPs?  Track record? Is this deal isolated or cascades with other investments and guarantees?

If your a GP, LP, lender, etc. make a separate post.  Clean the above up, add to them, etc.  If your BP develops package you can sell.

Was catching up with one of our bankers.  Part of the conversation was on syndications. They were approached but passed.  $28mm apartment deal.  Already had a capital call of $1.x.  They are now going to have to come back with a $4.x. Call or seek other funding such as bank loan or preferred.  Both interest rate increase and failure to meet occupancy rates caught the syndicator.  Both of these items should have been locked down, market study analyzed, pricing strategy adjusted.  They deserve to lose their investments.  

[Melanie P.]

@Henry Clark BP has a site in development that I think will attempt to do what you describe. This is a wonderful, easily searchable repository to say if a deal went bad what companies promoted to it people? What did they say during the raise? Who are the GPs? It's a sad truth that victims of these schemes frequently do not want to name names because there will be a post mortem and they do not want to look silly when the response is "why would you do that?"

The issues remain that SOME, not all, people who promote investments in real estate, events, sports picks, etc. are liars. I estimate the vast majority of those who would send in money to something along the lines of a syndication they fund online lack the skills to perform the necessary due diligence, would not take the time to learn or perform the verifications even if they knew how - the whole pitch is "trust me, zero effort." Who wants to screw that up after sending in six figures to "Jimmy" in "investor relations?"

Another HUGE problem for the investor, but a wonderful feature of these investments is from the day someone signs their PPM they become a walking sales rep for the syndicator. Without experiencing a single positive transaction from inception to completion they'll tell everyone they know or who will read about it online how wonderful the investment is, how impressed they are with the syndicator, how "conservative" they are, etc. They self validate their decision through proselytization. 

In addition to the issues you mentioned I've been reading reports here of the capital calls and even some deals on offer right now that rely on exit cap rates that will not be seen again for 8-10 years, if ever. The distributions are nowhere near high enough to tying up principal in perpetuity. 

[Don Konipol]

Quote from @Melanie P.:

@Henry Clark BP has a site in development that I think will attempt to do what you describe. This is a wonderful, easily searchable repository to say if a deal went bad what companies promoted to it people? What did they say during the raise? Who are the GPs? It's a sad truth that victims of these schemes frequently do not want to name names because there will be a post mortem and they do not want to look silly when the response is "why would you do that?"

The issues remain that SOME, not all, people who promote investments in real estate, events, sports picks, etc. are liars. I estimate the vast majority of those who would send in money to something along the lines of a syndication they fund online lack the skills to perform the necessary due diligence, would not take the time to learn or perform the verifications even if they knew how - the whole pitch is "trust me, zero effort." Who wants to screw that up after sending in six figures to "Jimmy" in "investor relations?"

Another HUGE problem for the investor, but a wonderful feature of these investments is from the day someone signs their PPM they become a walking sales rep for the syndicator. Without experiencing a single positive transaction from inception to completion they'll tell everyone they know or who will read about it online how wonderful the investment is, how impressed they are with the syndicator, how "conservative" they are, etc. They self validate their decision through proselytization. 

In addition to the issues you mentioned I've been reading reports here of the capital calls and even some deals on offer right now that rely on exit cap rates that will not be seen again for 8-10 years, if ever. The distributions are nowhere near high enough to tying up principal in perpetuity. 

Very good analysis.  Big problem is that fraud and unethical behavior can be very profitable short term in syndicating investments.  Other than outright fraud, here are the key areas of risk for the passive investor

1. Syndicator is promoting a deal that doesn’t meet risk/return minimums simply because he needs to syndicate deals to make money for himself

2. Syndicator is taking a large chunk of profits so that even in the event of success passive investors don’t receive the returns necessary to offset inevitable losers

3. Syndicator is taking a large chunk in upfront fees so that only 75-80% of investors capital is being “put to work”.

4. Syndicator’s share is back ended so much so that he loses interest if the investment turns out marginal

5. Syndicator is utilizing adjustable rate or short term financing leaving the investment vulnerable to rising interest rates

6. Property is purchased based on high occupancy levels and occupancy levels retreat downward

7. Projections are overly optimistic and not reflective of reality

8. Syndicator doesn’t have expertise or experience in the specific asset type, size or geographical area that reflects the subject property

9. Syndicator is a “one man” band and becomes incapacitated or disinterested 

10. Other investors become disenchanted and initiate lawsuits that result in tying up property in court and syndicators time in court rather than running the property. 

For careful, time consuming, educated and experienced analysis, investors may be able to obtain alpha plus returns investing in individual syndications.  Otherwise, for a passive investment REIT mutual funds or ETFs are probably safer and will provide a better return long term.  

[Henry Clark]

Quote from @Don Konipol:

Quote from @Melanie P.:

@Henry Clark BP has a site in development that I think will attempt to do what you describe. This is a wonderful, easily searchable repository to say if a deal went bad what companies promoted to it people? What did they say during the raise? Who are the GPs? It's a sad truth that victims of these schemes frequently do not want to name names because there will be a post mortem and they do not want to look silly when the response is "why would you do that?"

The issues remain that SOME, not all, people who promote investments in real estate, events, sports picks, etc. are liars. I estimate the vast majority of those who would send in money to something along the lines of a syndication they fund online lack the skills to perform the necessary due diligence, would not take the time to learn or perform the verifications even if they knew how - the whole pitch is "trust me, zero effort." Who wants to screw that up after sending in six figures to "Jimmy" in "investor relations?"

Another HUGE problem for the investor, but a wonderful feature of these investments is from the day someone signs their PPM they become a walking sales rep for the syndicator. Without experiencing a single positive transaction from inception to completion they'll tell everyone they know or who will read about it online how wonderful the investment is, how impressed they are with the syndicator, how "conservative" they are, etc. They self validate their decision through proselytization. 

In addition to the issues you mentioned I've been reading reports here of the capital calls and even some deals on offer right now that rely on exit cap rates that will not be seen again for 8-10 years, if ever. The distributions are nowhere near high enough to tying up principal in perpetuity. 

Very good analysis.  Big problem is that fraud and unethical behavior can be very profitable short term in syndicating investments.  Other than outright fraud, here are the key areas of risk for the passive investor

1. Syndicator is promoting a deal that doesn’t meet risk/return minimums simply because he needs to syndicate deals to make money for himself

2. Syndicator is taking a large chunk of profits so that even in the event of success passive investors don’t receive the returns necessary to offset inevitable losers

3. Syndicator is taking a large chunk in upfront fees so that only 75-80% of investors capital is being “put to work”.

4. Syndicator’s share is back ended so much so that he loses interest if the investment turns out marginal

5. Syndicator is utilizing adjustable rate or short term financing leaving the investment vulnerable to rising interest rates

6. Property is purchased based on high occupancy levels and occupancy levels retreat downward

7. Projections are overly optimistic and not reflective of reality

8. Syndicator doesn’t have expertise or experience in the specific asset type, size or geographical area that reflects the subject property

9. Syndicator is a “one man” band and becomes incapacitated or disinterested 

10. Other investors become disenchanted and initiate lawsuits that result in tying up property in court and syndicators time in court rather than running the property. 

For careful, time consuming, educated and experienced analysis, investors may be able to obtain alpha plus returns investing in individual syndications.  Otherwise, for a passive investment REIT mutual funds or ETFs are probably safer and will provide a better return long term.  

 Great.  Add these to the checklist.  BP or one of the LPs out there. Take the above checklist suggestions. Build a checklist. Post it in BP and ask people to help improve.  That’s positive traction.  

[Lane Kawaoka]

Second what @Henry Clark says. 2022-2023 was a really bad year for commercial real estate. Totally understand that investors are going to be low moral due to recency bias. That said those in the game now and until 2026 will be rewarded. 

Below is a comprehensive list of questions that I took from my personal checklist. However, before you delve into these, I'd like to highlight an important point for passive investors. When seeking connections with other accredited passive investors, remember that authentic relationships seldom stem from online forms, which are often cluttered with sponsored content and misleading reviews. But, having said that, here's the list to get you started. It’s a starting point, after all.

Basic Deal Information

1. Where is the project located?
   
2. What is the year of construction for the property?
3. How many units are there in total?
4. What property class is this project categorized under (A, B, C, etc.)?
5. What is the minimum investment required?
6. What is the projected hold time in years for this investment?
7. What is the total purchase price of the property?
8. How is the purchase price per unit calculated?

Financial Information

1. What is the estimated amount for capital expenditures?
2. What is the current average market rent in the area?
3. What is the occupancy rate at the time of purchase?
4. What are the projected gross rents?
5. How is the effective gross income calculated?
6. List all components included in the total operating expenses.
7. What is the projected net operating income (NOI)?
8. What is the debt service amount and how is it structured?

Investment Returns and Metrics

1. How is the internal rate of return (IRR) calculated?
2. What is the expected average annualized return (AAR)?
3. Explain how cash on cash return (COCR) is calculated.
4. What is the equity multiplier for this investment?
5. What are the expected break-even occupancy rates?
6. What are the entry and exit cap rates?
7. How is the yield on cost calculated for value-add deals?

Risk Assessment and Analysis

1. What is the default ratio and how is it calculated?
2. What are the stabilized loss to lease (LTL), concessions, and bad debts projected to be?
3. Are the stabilized non-revenue units accounted for in the economic vacancy calculation?

Income and Expense Projections

1. Are there reasonable assumptions for phased rent increases?
2. How do other income sources align with historical performance?
3. Are improvements or capital expenditures included in the financial projections?
4. Are the pro forma taxes accurately assessed post-acquisition?

Transactional and Oversight Fees

1. What is the acquisition fee and how is it justified?
2. Are there any other significant fees such as loan processing or guarantee fees?
3. What are the projected property management and asset management fees?

General and Market Specific Information

1. Is there a clear and viable exit strategy outlined?
2. Does the plan of distribution in the PPM match the executive summary?
3. How does this deal align with the sponsor's past or core business strategy?
4. Is there significant co-investment from the GP indicating alignment of interest?
5. Are the projected rents per square foot in line with the market comparables?

Debt Information

1. What is the principal balance of the loan?
2. What is the loan to value (LTV) ratio?
3. What are the interest rate terms and are they fixed or adjustable?
4. Is there a prepayment penalty involved?
5. Is the loan recourse or non-recourse?

Market Dynamics

1. Is the median household income approximately three times the forecasted rent?
2. Are all employment sectors within the market diversified (less than 20%)?
3. Is there evidence of job and wage growth in the metropolitan statistical area (MSA)?
4. Is there population growth in the MSA?
5. How does the crime rate near the property compare to other areas in the region?

[Henry Clark]

@Lane Kawaoka

You’re the man. Tell my brother in law Jim in Maui hello for me.

Everybody that is posting on LP syndications needs to up vote Lane and thank him.   

The rest of you just send me your money if you don’t have a due diligence process or checklist.

[Gino Barbaro]

@Solomon Rosenberg

Each property is bleeding 6 figures monthly?  I would take each deal individually, and look at the sponsor. Have they been through this situation? Does their plan look viable to be able to stabilize the deal.

I like your thought process, and I think you've answered your own question. It sounds as if you wouldn't invest in this deal today.

What I would do is to try and figure out what made these deals go bad, and to avoid it in the net market cycle.

There may be distressed deals upcoming where you can place the capital you were going to put into these deals into those deals.

Did you talk to any of the other investors to see what they were doing?

Gino

[Melanie P.]

Quote from @Lane Kawaoka:

Second what @Henry Clark says. 2022-2023 was a really bad year for commercial real estate. Totally understand that investors are going to be low moral due to recency bias. That said those in the game now and until 2026 will be rewarded. 

Below is a comprehensive list of questions that I took from my personal checklist. However, before you delve into these, I'd like to highlight an important point for passive investors. When seeking connections with other accredited passive investors, remember that authentic relationships seldom stem from online forms, which are often cluttered with sponsored content and misleading reviews. But, having said that, here's the list to get you started. It’s a starting point, after all.

Basic Deal Information

1. Where is the project located?
   
2. What is the year of construction for the property?
3. How many units are there in total?
4. What property class is this project categorized under (A, B, C, etc.)?
5. What is the minimum investment required?
6. What is the projected hold time in years for this investment?
7. What is the total purchase price of the property?
8. How is the purchase price per unit calculated?

Financial Information

1. What is the estimated amount for capital expenditures?
2. What is the current average market rent in the area?
3. What is the occupancy rate at the time of purchase?
4. What are the projected gross rents?
5. How is the effective gross income calculated?
6. List all components included in the total operating expenses.
7. What is the projected net operating income (NOI)?
8. What is the debt service amount and how is it structured?

Investment Returns and Metrics

1. How is the internal rate of return (IRR) calculated?
2. What is the expected average annualized return (AAR)?
3. Explain how cash on cash return (COCR) is calculated.
4. What is the equity multiplier for this investment?
5. What are the expected break-even occupancy rates?
6. What are the entry and exit cap rates?
7. How is the yield on cost calculated for value-add deals?

Risk Assessment and Analysis

1. What is the default ratio and how is it calculated?
2. What are the stabilized loss to lease (LTL), concessions, and bad debts projected to be?
3. Are the stabilized non-revenue units accounted for in the economic vacancy calculation?

Income and Expense Projections

1. Are there reasonable assumptions for phased rent increases?
2. How do other income sources align with historical performance?
3. Are improvements or capital expenditures included in the financial projections?
4. Are the pro forma taxes accurately assessed post-acquisition?

Transactional and Oversight Fees

1. What is the acquisition fee and how is it justified?
2. Are there any other significant fees such as loan processing or guarantee fees?
3. What are the projected property management and asset management fees?

General and Market Specific Information

1. Is there a clear and viable exit strategy outlined?
2. Does the plan of distribution in the PPM match the executive summary?
3. How does this deal align with the sponsor's past or core business strategy?
4. Is there significant co-investment from the GP indicating alignment of interest?
5. Are the projected rents per square foot in line with the market comparables?

Debt Information

1. What is the principal balance of the loan?
2. What is the loan to value (LTV) ratio?
3. What are the interest rate terms and are they fixed or adjustable?
4. Is there a prepayment penalty involved?
5. Is the loan recourse or non-recourse?

Market Dynamics

1. Is the median household income approximately three times the forecasted rent?
2. Are all employment sectors within the market diversified (less than 20%)?
3. Is there evidence of job and wage growth in the metropolitan statistical area (MSA)?
4. Is there population growth in the MSA?
5. How does the crime rate near the property compare to other areas in the region?

Your personal marketing checklist? Obtaining answers to these questions is not due diligence. All of your questions are answered with projections. Forward-looking, completely made up statements. I would not place any faith whatsoever in the projections of someone who thinks that the issues in the commercial & multi-family markets are contained to 2022-2023. 

Didn't you market a number of funds claiming they were "safe for retirement?" And then when the distributions got paused tell the same customers, who really needed those funds for retirement, they were being short-sighted to focus on de minimis cash flow and should wait for the real money to come in via appreciation?

Most Importantly: If a private placement offering gives you equity in exchange for bringing investor money into their fund ("bundling") do you believe they must disclose that expenditure on their Form D Item 15: Sales Commissions and FInder's Fee Expenses?

Last, I note that your resume doesn't list a Broker's License and your name does not appear on FINRA's Broker Check. Since you are unfamiliar the following is what the Series 7 Exam covers. It would seem that your investing "club" engages in every activity listed. What makes you believe you do not require licensure to engage in these activities:

Major Job Functions	Number of Exam Items
(F1) Seeks Business for the Broker-Dealer from Customers and Potential Customers	9
(F2) Opens Accounts after Obtaining and Evaluating Customers’ Financial Profile and Investment Objectives	11
(F3) Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records	91
(F4) Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes, and Confirms Transactions	14
TOTAL	125

?

[Evan Polaski]

@Melanie P., the short answer is yes.  And groups that want to stay fully compliant in the SEC regulations tend to only work with Broker Dealers and disclose estimated commissions on their Form D.  

The challenge is many syndicators like to play in the gray area of the SEC rules, and either educate capital raisers on how to structure a fund of funds, or bring the capital raiser into the GP structure as a co-sponsor or co-GP.  In this co-sponsor relationship, you can run into trouble depending on where the SEC comes down on "active involvement".  Do these co-sponsors sit on regular calls with the lead GPs?  Are they co-signing loans with the lead GP's?  

It has been a long time since I worked with any co-sponsors, but these groups many years ago used to maybe tour a property pre-acquisition, then forward updates to their investors and forward investor questions to the lead GP team.  Is this active involvement?  Maybe, maybe not. But it certainly seems like it is open to interpretation.  And more importantly, I like the saying:

"How you do anything is how your everything"

[Solomon Rosenberg]

Quote from @Gino Barbaro:

@Solomon Rosenberg

Each property is bleeding 6 figures monthly?  I would take each deal individually, and look at the sponsor. Have they been through this situation? Does their plan look viable to be able to stabilize the deal.

I like your thought process, and I think you've answered your own question. It sounds as if you wouldn't invest in this deal today.

What I would do is to try and figure out what made these deals go bad, and to avoid it in the net market cycle.

There may be distressed deals upcoming where you can place the capital you were going to put into these deals into those deals.

Did you talk to any of the other investors to see what they were doing?

Gino

@Gino Barbaro This post is from a while back, both of these deals ended with almost a complete loss, I took a few hard lessons that should serve me in the future. P s. I listened to some of your podcasts, buy right, finance right, manage right. These rules were not properly followed in these deals. (though these can be subjective)

[Gino Barbaro]

@Solomon Rosenberg

Lesson learned. At least you took action, and learned. Most people will make excuses never to take action. Now, you've learned an important lesson. You have the rest of your life to implement the learning.

I would almost guarantee every investor has lost money at some point in their career. 

Onto bigger things!
Gino

[Melanie P.]

Quote from @Solomon Rosenberg:

@Gino Barbaro This post is from a while back, both of these deals ended with almost a complete loss, I took a few hard lessons that should serve me in the future. P s. I listened to some of your podcasts, buy right, finance right, manage right. These rules were not properly followed in these deals. (though these can be subjective)

 Solomon, Please correct me with what you learned if I am incorrect, but the perception I'm getting is that you think you learned not to get involved in deals that aren't bought right and have too much leverage that cannot be refinanced. However, the lesson I think you should take is that the way to tell a syndicator is lying is his keyboard is clacking/lips are moving. 

IMO, The true lesson is that you lack the skills to properly evaluate the investment materials to know whether a property was bought right or wrong. If the financing will work out or not, Please do not take that as an insult. I do not believe anyone has the skills to evaluate these deals in the context of doing it alongside GPs you don't know and can't trust.