Is syndicated co-investing (passive) right for me?

[Andy Port]

I'm currently looking to take some money out of traditional investments and begin investing directly into real estate as a passive investor on syndicated deals.

The internet is pretty much copy-paste with advice on how to access real estate and defaults to saying "Just invest in a REIT - its the same" except you pay for the entire pool of existing properties (even if they have low yields in less opportunistic areas), the entire management team's multi-million dollar salary and their private jet, etc... No thanks.

So I really have been interested in passively investing in good deals with experienced sponsors, but want to set my expectations to be realistic and right for this. Any advice would be great as well.


My rationale is below:

- I have a career and don't want to focus on real estate full time right now. I want to be "hands off" for the development/management phase.
- I would like to get a minimum of 12-15% irr on average, with potential for higher returns.
- I have some past experience working with sponsors from PE funds on non-real estate deals.
- I get an experienced sponsor/developer that can run the show so I don't run the risk of making any (very expensive) mistakes from my lack of experience.
- I can get exposure to large multi-family with many tenants. If the occupancy is high, then I have less risk/hassle with one or a few tenants.
- I can invest across different types of deals unusual or difficult for a smaller investor (multi-family, opportunistic/distressed offices, hotels, etc.).
- I don't need to put up as much upfront equity as I would need to for doing it myself and I can use that capital across multiple deals.
- Pricing 'should' be better from the perspective of fees, contractors, rates, etc. that the sponsor gets vs. me as a solo investor.
- I don't care if the investment is less liquid vs. an ETF or REIT and I would aim to hold it for 5+ years at the bare minimum.


Some other questions I had and would appreciate any advice:

- Is an average minimum of 12-15% irr reasonable for syndicated deals ($10mm - $100mm) with an experienced sponsor? Assuming the deals are value-add or new developments with moderate leverage/risk targets. It seems to be a more than reasonable average with potential for 20%+ on some deals from what I read, but I would love to hear from experience. So far I've read that it may be difficult to get some of the irrs that are marketed since there has been a bull run across real estate with a low-rate environment the last decade and I would love to hear thoughts.

- What are the "usual" investment minimums for a deal? I've seen anywhere from $25k - 50k, but can even be $250k with the bigger companies, but want to get thoughts. It seems to always be flexible and at discretion of their investors they are looking to take on.

- Do sponsors/developers generally just look for GPs or preferred investors? Or do they charge massive fees that private equity sponsors charge for their LP investors for buying businesses (2% management / 20% profit)? It seems like GP/preferred is the answer so I would avoid these massive fees on the profits since developers seem to market a deal-by-deal in real estate and I would actually be a direct GP investor.

- How would you exit an investment say after 10 years after a commercial property is developed for whatever reason? I assume you can be taken out by an existing investor or using a broker to find a buyer for your stake if the asset is a good cash-flowing one?


Really appreciate any advice, feedback, or respectful criticisms! Thanks in advance.