How do I find Syndication deals?

Question

Brian Burke · Answer

@Troy Iversen you are approaching this all wrong. You don’t want to invest in deals. You want to invest with sponsors. There’s a difference.

You can find all kinds of “deals” to invest in.  Just post that you want to invest in syndications and watch your inbox fill up with “invest in my deal” emails.  But do those deals warrant the investment of your hard-earned dollars?  Maybe.  Or maybe not. Investing in syndications carries all of the same risks as investing directly in real estate. But there is an additional risk factor not inherent in direct ownership:  the sponsor bringing and managing the deal.

A good sponsor can finagle the best outcome from adverse circumstances, and a bad sponsor can screw up a perfectly good real estate deal.  You want to align with a group that produces results, and results aren’t measured by cap rates and projected returns. They are measured by performance compared to projections.  They are measured by surviving market cycles.  By making good decisions over time. By doing the right thing even when it isn’t the path of least resistance.

So I encourage you to stop looking for deals and start interviewing sponsors. Ask questions. Learn their story. Get to know the way they analyze, project and manage. Learn about their executive team and drill down to discover if that team is really their team or just a padded menu board of “strategic advisors” or consultants that aren’t fully involved in the day to day operation of the business.

Remember that the “deal” part happens over 60-90 days. The months and years that follow are where the rubber meets the road. Focus on that part, find a few good sponsors and patiently wait for their best deal flow, investing in “deals” with them over time. Pushing money out quickly with mediocre sponsors just to allocate cash will cause you to miss better opportunities in the future.

Mike Dymski · Answer

Network.  Cash is not King...deal flow is.

Search the BP forums for syndications.  Listen to podcasts from BP, Old Capital, Michael Blank, Rod Khleif, Cash Flow Connections, Kevin Bupp, and Wheelbarrow Profits.  Many of their guests are syndicators.  Check out the crowdfunding platforms.  Some RIA's have access to opportunities (mine does).  There are also investment clubs that have both sponsor and passive investor members.  Some BP members find opportunities by being active on the forums.  It's all a form of networking and can be done on your couch, in your underwear.

Ian Ippolito · Answer

@Troy Iversen, It's actually not hard at all to find thousands of syndication deals, and more than you could look through in a year. And I also agree with @Brian Burke that many people make the mistake of looking at the deal first, and only then the sponsor. The problem is that it's easy to "fall in love" with the deal, and overlook glaring issues with the sponsor. If you start with the sponsor first, you won't run into that problem.

However, even before you do that, you need to take one more step back and determine what percent of your portfolio should be in real estate. And then after that, take a look at what amount of risk is acceptable to you, and then use that to figure out what percent should be invested in equity versus debt, residential versus commercial, strategies (core versus value-added versus opportunistic) and subcategories (multifamily, mobile home parks, retail, etc.). If you don't, you're going to end up with a random mismash of investments that are most likely not ideal for your risk profile.

When you do that, then you can look at the sponsor intelligently. You want them to have considerable experience in whatever strategy and subcategory you are investing in. An All-Star sponsor will have full real estate cycle experience like that, and a history that you can look at. You want to see that they were careful with investor money and didn't take unnecessary risks. Best of the best are those that didn't lose $ through the downturn.

What you'll find is that finding these high-quality sponsors is the hard part, but in my opinion the most important part of due diligence.

Ivan Barratt · Answer

@Troy Iversen @Brian Burke is spot on. First, evaluate the sponsor. The deal is secondary. On that note, I'm happy chat sometime regarding our team and our past projects.

David Thompson · Answer

Hi Troy,

Deal flow looks pretty good in the TX markets currently.  Reach out if you'd like to share ideas.  It's always good to start w/what you are looking to achieve, if accredited or not, etc.  Experienced sponsors (team), strong diversified markets (pop/jobs ahead of natl avgs) and conservative  underwritten deals are what you want for instance.  Here's a quick top ten tips on vetting sponsors that might be a good start.

https://docs.wixstatic.com/ugd/fa41db_121a65362da1...

Steve Kontos · Answer

@Raul R.

Thank you Raul.  I hope to see you again soon!

How do I find Syndication deals?

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