Going it alone or syndicate?

Question

I see that syndication can allow you to acquire a larger property with investors that you know and trust well. What are the advantages of this as opposed to going it alone? Given the fact that there would be more hands in the pie and much less cash flow, it can take time to search for seasoned investors with a net worth higher than yours, let alone develop relationships with these people. Some don't want newbies tagging along and have limited patience in answering questions. How many out there were content to just dive in on your own, provided that you had enough money for a standard down payment?

Paul Moore · Answer

Hi @Rodney Lorenzo. Great discussion, you got some great advice above. One thing I would say is that it’s critical for you as an operator to have a great track record, team, and specific experience in your asset class before inviting investors into the deal. Some syndicators are better promoters than they are operators, and that can spell trouble for everyone.

Based on the conversation above, I would recommend a two step strategy. First, go out alone or with a team and get a lot of experience under your belt. Second, evaluate if you want to bring in other investors into a syndication model later. Like I said, that’s really the only ethical way to do it in my opinion anyway. Happy investing!

Jason Mileshko · Answer

In my experience REI is a relationship business and I've never seen anyone do it well alone.

Bruce Woodruff · Answer

Might be just me, but I prefer to go it alone (usually). Less mess, less hassles going forward. Now you could make a ton of money with the right group/right deal but that's a big maybe. Do what you feel comfortable with, but check your partners if you get into a group, there are lots of shysters out there.....

Lucas Miles · Answer

@Rodney Lorenzo this is a great question. I think it really comes down to the type of person you are, your risk tolerance, your end goals, etc. For me it was easier to start on my own with smaller properties and learn the process, how to find deals, how to manage tenants, contractors, etc. These skills are very valuable even as I start to get into larger properties. With smaller deals when things go wrong, its a lot less expensive and you can personally deal with these additional costs. Without this experience missing something in due diligence on a larger property could become a much larger issue. I also think your chances of long term success are much better off starting small and continue to grow and get into bigger properties and syndication if you choose. Jumping right into larger syndication deals is a much larger hurdle to jump over, and may prevent you from ever getting started. Not to say for some people jumping into something large may be a better fit for them.

That being said if you can find a great deal and have connections with more experienced investors, bring this deal to them and partner with them can be a great way to jumpstart your journey. You can learn the process with them while minimizing the risk of your inexperience. You will likely have to give up significant equity, but it will be worth it for the knowledge you will learn, and potential long term connections.

Robert Rainey · Answer

I dont think its that your being judged by those things. If your approaching me wanting to do a deal and you have little/no money, no experience and no assets to contribute, unless we are friends or family how could you ask me to trust you with my money?

As someone that got started in Real Estate in my 20's with no money and no credit, I literally mean no money and a fico in the 600's with no credit history, I feel like I can make that statement. I know own property in 3 different states and I just kicked off my first large ground up development project.....took me 9 years of all kinds of hard work but Im here.

What I tell everyone that asks how or where to get started....fill the gaps that investors around you are struggling with. I started off by bird dogging deals for myself and bringing them to investors to partner with me on. NOT WHOLESALING. I only put in contracts on properties I was closing on. (Nothing against wholesaling, I just wanted to focus on flipping). Having no credit or money, just my ambitions, I had to treat investors like partners and sometimes gave away 50% or more of my equity while I was doing all the work. LITERALLY. But, I saw it as people paying me to screw up because I did quite a bit of that, but I learned a lot and I made sure I always returned their money, even gave up my profit on a flip to cover my investor(I can call her for almost whatever I need now). So its about having a value add. Dont be so quick to jump on the soap box, everyone does that and most dont get started. Get in where you fit in (fill the gap). Just know why your doing it and make sure you get it. Besides that, just find the gaps and put in the work. Syndication or going it alone, find your value add and then work like hell!!!!

Rodney Lorenzo · Answer

Hi Jason,

I've met other investors that have done it alone by starting small and it worked out for them. Unless you don't know how to run the numbers, screen your tenants well or put money aside from expenses, then I think taking the risk to do it alone should be fine. And if you fail, oh well. One learns by their mistakes. It's bad enough that we already live in a discriminatory society that judges you based on how much experience you have, how much money you have or which zip code you live in. I can't let that stop me from pursuing my goals

Rodney Lorenzo · Answer

Hi Taylor L,

Well if bringing on inexperienced passive investors is not something most experienced ones do, then I really don't see how we even have a chance and pretty much tells me to go it alone, as the other posters on here have done and have preferred. In the time it takes to build relationships with other investors (and that's if they give you the time of day), I will have bought 2 or 3 properties by now. I'm going to take time to get to know these people and won't just make an offer to someone I met one time at a networking event. But that's just me.

Taylor L. · Answer

The advantages are that you can acquire properties that you wouldn't be able to acquire on your own. Really it allows investors to get into commercial real estate, which has preferable dynamics vs smaller residential. Commercial real estate has major advantages around the ability to force appreciation by raising the NOI.

"More hands in the pot" does not necessarily translate to lower cash flows. Everyone should be bringing something to the table to grow the gross and thereby not water down the returns.

I agree with you that it is not good to bring newbies into a passive syndication investment. Passive syndication investors need to understand the business plan and its risks.

Passive investing isn't for everyone, nor is bringing on passive investors.

Going it alone or syndicate?

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