Fund Vs Syndication for track record

[Scott Holland]

I'm looking at my first deal, and it seems like this is their first fund, when normally they do syndications. If a company is good at value-add MF syndications, does it make sense that they would be good at a Fund to acquire and renovate 3 different properties?

Thanks,

Scott

[J Scott]

Is the operator looking to acquire multiple deals through the fund that they will be leading?  Or will they be using the fund to invest in deals led by other operators?

If they will be leading the deals, the biggest question is how much do you trust them to acquire the right deals. The downside with a fund is that the acquisitions are typically "blind," meaning that investors don't know what assets will be added to the fund before they invest.

And if an operator raises a lot of money they may start to feel pressure to add assets to the fund prematurely, just to keep the money moving. That can result in sub-optimal deals and higher risk.

If the operator is planning to use the fund to invest in other people's deals, there's less risk of the operator getting impatient (there is a larger pool of deals out there when you're looking at other operators to invest with), but there's more risk of the operator not doing appropriate due diligence and not having enough insight into the deals.

Either way, there is some risk. But depending on how the fund will be used, the risk changes.

My biggest recommendation is to ensure that the operator you're playing to invest with is trustworthy, conservative in their investments, and has a track record of consistent success.