Becoming a syndication sponsor/ finding the deals

[Micah Anderson]

Can anyone do a syndication deal or does the sponsor have to be accredited as well? 

I have been all over the internet looking up info on syndication. I know how it works. I know it is regulated by the SEC & so on, but can't find any info on what I have to do to sponsor the deal. 

Thank you all in advance

[Brian Burke]

@Micah Anderson there is a difference between what is legal, and what is practical.  Yes, it is perfectly legal to sponsor a syndication even if you are not accredited.  But is it practical?

Put yourself in the shoes of the investor.  Would you part with six figures, potentially a large portion of your life savings, to invest in a real estate deal that is controlled by someone you don't know, or just met?  Why?  Or why not?

Well, the reason why is because you see that this person has had a long history of success.  You have confidence, supported by evidence, that they won't lose your money and have a high likelihood of making you money.  If that person hasn't earned $200K in the last two years, or hasn't accumulated $1MM in net worth for themselves, does that demonstrate to you that they possess the long history of success that you'd like to see to give you that confidence?  Probably not...

The workaround is that most beginner sponsors start with friends and family as their investors.  Why?  Because their friends and family already trust that person for other reasons beyond real estate.  

There is also one more practical obstacle.  Lenders.  If you are looking to sponsor a large multifamily syndication, the lender on that property is likely to require that you have substantial financial resources.  It's not at all uncommon for the lender to require that the sponsor has a net worth equal to the loan amount, and liquid reserves of at least six months of payments.  Some people work around this by bringing someone else in as a partner who does possess that financial strength.

Speaking of partners, this is probably your best shot at getting into the biz if you don't have friends and family with deep enough pockets.  Partner with someone that has an extensive track record, and leverage that to build your own track record.  Or, build your track record on your own by starting with small properties, such as single-family homes, and work your way up to larger properties over time.  It's always easier to climb a ladder to the roof that to jump onto the roof from the ground.