Becoming a Syndactor

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Becoming a Syndactor

Chris Sawtelle
Santa Clara, CA · Member since 2016 · 17 posts · 6 votes

Hello everyone! 

I am a real estate investor in California who started out researching single family homes and ended up investing in multifamily. I have been studying up on syndicating and really want to dig into the nitty gritty with someone who has experience. 

My intent is that I will collect investments from friends, family, and colleagues (all non-accredited investors). I understand the trials and tribulations of working with friends and family, but I am willing to take these on for my first deal.

My experience in real estate isn't super extensive but I am a data engineer for my day job with a background in statistics and finance. This is all to say that I feel confident that I can manage a distressed apartment complex with fairly good numbers and a few issues. I could be crazy, that is not what I want to talk about. :)

My question is what are the options for financing a project ~$1-2 million dollars if I can come up with agreements to collect a down payment of what I am assuming would be 30%. Also assuming the legal side is taken care of such as filing with the SEC, although advice on that is appreciated.

1) What kind of lenders would make this deal?

- Are there specific deals for this type of arrangement?

- Are interests rates similar to investment properties at this level of financing?

- Can it be done without a balloon-type loan? Ex traditional 30yr or even 20yr financing?

2) What are the personal requirements to get this kind of loan aside from property numbers like debt coverage ratio?

- Cash reserves requirements?

- Experience requirements?

I am sure this can be just a kicking off point for extended discussion if anyone is willing to engage. :) 

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Jessica Connor
Rental Property Investor · San Jose, CA · Member since 2021 · 13 posts · 4 votes
5y

Hi Chris, I think you would want to contact a syndication attorney to properly set up the syndication (i.e., collecting your non-accredited investors into the proper LLCs and such) (e.g., see content on this website: Syndication Attorneys) and then also talk to lenders as well. But probably better to have the syndication set up before talking to lenders, since you can read online about commercial financing requirements (these I think are more straightforward than setting up the syndication). Hope this helps!

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  • Chris Sawtelle
    OP
    Santa Clara, CA · Member since 2016 · 17 posts · 6 votes
    7y

    If this in the wrong place or anyone needs more details let me know!

    0Reply
  • Naseeb Hassaan
    Member since 2021 · 1 post · 0 votes
    5y

    Im am interested

    0Reply
  • Jessica Connor
    Rental Property Investor · San Jose, CA · Member since 2021 · 13 posts · 4 votes
    5y

    Hi Chris, I think you would want to contact a syndication attorney to properly set up the syndication (i.e., collecting your non-accredited investors into the proper LLCs and such) (e.g., see content on this website: Syndication Attorneys) and then also talk to lenders as well. But probably better to have the syndication set up before talking to lenders, since you can read online about commercial financing requirements (these I think are more straightforward than setting up the syndication). Hope this helps!

    1Reply
  • Paul MoorePro Member
    Commercial Real Estate Fund Manager · Lynchburg, VA · Member since 2015 · 1k+ posts · 1k+ votes
    5y

    Hi @Chris Sawtelle. Just saw this. Any update from your end?  

    I’ll just say I highly recommend going through a syndication coaching/mentoring program before starting down this road.  Good luck!  

    Podcast Guest on Show #533
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  • Chris Sawtelle
    OP
    Santa Clara, CA · Member since 2016 · 17 posts · 6 votes
    5y
    Hey all thanks for posting. I haven’t syndicated yet but I’ve gone through the process as a limited partner and as the principle but the deal fell through.

    Wow 2 years have gone by and I learned so much since this post. If you boil it down to first principles.

    First you need a property. So likely you need some contact who can get you a property before it hits the MLS or you will have to compete till the deal isn’t worth it. You could call them “The Insider”. Most likely a realtor but could be a friend of a friend of a friend who is thinking of selling. 

    Then you need someone who has a lot of experience with real estate. This person just needs to know how to run a rental, how to find a good property manager, how to tell if a property has potential, etc. “The analyzer”. The lender will do enough due diligence to make sure they don’t lose their investment but that doesn’t mean the deal is going to make money.

    If you want to do a syndication you need to have a high net worth or someone who will work with you to be the anchor for the loan. The lenders need the partners to have net worth equal or greater than the loan. This is “The high roller”

    So you could play all of these roles as the principle partner but more realistically you will need a team of people to fill these roles. Once you have these “a good deal funds itself”

    I am running 7 units now and getting ready to clean house and start syndicating something bigger. I am happy to chat about syndications with anyone whose interested. Thanks all
      1Reply
    1. AJ ShepardPro Member
      Real Estate Syndicator · Portland, OR · Member since 2014 · 453 posts · 312 votes
      5y

      @Chris Sawtelle

      Sounds like you have learned a lot in the last 2 years.

      One piece of advice that I would suggest in your journey. Mock up a deal, not just a pro forma, the entire thing. All the paperwork and pieces to the puzzle that are needed. This will give you ample time to do so and when you do have a good buy come along you can be confident and jump on it. It also gives you material to talk to potential investors. Such as “if I had something like this today, would you be interested”.

      1Reply
    2. Andrew FreedBusiness Member
      Investor · Worcester, MA · Member since 2020 · 1k+ posts · 1k+ votes
      5y

      @Chris Sawtelle - Great advice. I myself have moved forward on a syndication as a limited partner. I never thought about it, but everything you mentioned was an attribute of the deal. Good insight.

      Nonetheless, I think as you alluded to, its all about the deal. Not all syndications make money hence you really need to do your due diligence as a limited and general partner just like any real estate deal. For instance, for my syndication (thankfully it was local), I visited the property spoke to the property manager and vetted the deal / numbers. I think the most important part of a syndication is finding the deal and the other pieces fall into place. 

      [email protected]781-964-3200Podcast Guest on Show 69 Doors from ONE Real Estate Deal Using Other People’s Money
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    3. Chris Sawtelle
      OP
      Santa Clara, CA · Member since 2016 · 17 posts · 6 votes
      5y

      Thanks for the suggestion AJ that is a great idea. If I get some time I will post what I make here, in the meantime if anyone has any sources like lists of documents or mock-ups they can share here for people to come across starting out that would be awesome too. 

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