Vetting Syndicate Offerings and Sponsors

[Jamie Turbyne]

Hi. I'm new to the RE investing world and am working on educating myself on real estate syndicates. In particular, how to best evaluate potential deals and the sponsors running those deals. This is from the perspective of coming in as a passive limited partner to a 506(c) fund. I do have a fair amount of experience evaluating stock market investments, but translating what I know there to evaluating syndicate deals and sponsors is what I'm hoping the community can help me with. Any links, books, searches, and particularly, personal experience and advice is welcome. 

Thanks in advance,

-Jamie.

[Alina Trigub]

@Jamie Turbyne

Not many posts here can beat what @Brian Burke already stated. :) Anyway that's not the point. I'm sure you can agree that just like with anything including the stock market, it takes awhile to understand the fundamentals, learn and become an expert (or somewhat of an expert) in any field. The same rule applies to real estate syndications business. So the way to go is to break it down into smaller pieces. What's involved: the syndication which as @Ronan Donnelly mentioned consists of 

1) the sponsor; 2) the market; 3) the deal

Let's look at it one by one:

1) So you evaluate the sponsor, talk to them. Here's a guide with questions to ask them: 

https://www.biggerpockets.com/member-blogs/10850/76728-questions-to-ask-a-syndicator

2) the market:

look at the metro demographics; job and population growth; supply versus demand; keep in mind that it will differ from one asset class to another. 

another guide is: 

https://www.biggerpockets.com/member-blogs/10850/81214-what-goes-up-must-come-down-or-market-cycles-fluctuation

https://www.biggerpockets.com/member-blogs/10850/86626-the-pros-and-cons-of-investing-via-real-estate-syndication

3) last but not least is the deal itself:

here is where you can leverage your stock market research and understanding background to see the full picture of the investment and look at such things as IRR, CoC, Eq Mpl, and etc... as a whole!

A few more resources:

https://www.biggerpockets.com/member-blogs/10850/87614-interpreting-the-private-placement-memorandum-ppm

https://www.biggerpockets.com/member-blogs/10850/84504-step-by-step-process-on-how-to-invest-in-a-real-estate-syndication

https://www.biggerpockets.com/member-blogs/10850/79257-deciphering-syndication-investment-terminology

Bottom line: take your time to understand the fundamentals, compare multiple offerings (but ensure you're doing "apples to apples" comparison and not "apples to oranges"!)

My best!