5 Considerations for Syndication investing:

[Agostino Pintus]

While the General Partners are always on the hunt looking for deals, the Limited Partners need to also assess several fundamentals before investing in a syndication deal. That said, there are 5 considerations:

1) The Desired Market

There are many drivers that will make cities come into favor over time. Wise investors are looking at population growth, income growth, employment drivers and crime rates. There may be many sub-markets within the larger city. Knowing the market breakdown down to the city level, you can better select the project to invest in.

2) Look for Available Syndicators

When you select your markets, look for syndicators that are specialists in that market. Social media is a good place to start if you are not local. Otherwise, you can attend the REIA or look for meeting on Meetup or Eventbrite. Rather than running their pitch deck, a good syndicator will educate the group on the area and help others on their deals. Check out as many events as you reasonably can to get a feel for the experience level of the syndicators in that area.

3) Selecting the Right Syndicator

Once you visit with the syndicators and check out their meetings, find one that aligns with your business strategy. Maybe you are looking to build multifamily. If so, find a syndicator that does those sorts of projects.

The track record of the syndicator is important. Before committing your cash to the project, make sure the syndicator or the team at large has experience with the project you are looking to do. It is important that the syndicator has a history of success in the local market.

Besides all the technical aspects, liking the person running the deal is super important. You will be working with the syndicator and the team for a long time. If you don’t like them, don’t work with them.

4) Evaluate the Deal

When you attend the meetings, chances are you will be added to the syndicators email distribution list. When they get a deal, they will probably send you an investment summary of an upcoming project. The summary will typically contain project information, rent roll, business plan, proforma, expected returns, and the overall business plan describing the overall upside. For instance, it’s this is a value-add project, understand what the team plans on renovating and how soon they believe they can drive their increases. Use this information to run your own analysis to determine if the numbers they have is realistic. If you are not sure on how to do this, some syndicators will consult on deals and offer advice on deals. In any case, evaluating the deal yourself before committing your money is key for this step!

5) Commit to the Deal

Every deal and structure is different. It depends on the syndicator, the asset class, and risk level. Each will have varying equity breakdowns and investment minimums. Some will only give you equity depending on how much you invest. Most syndicators have minimums of $50,000 with a preferred return, adding equity for larger amounts. If you are starting out and have $200,000 to invest, perhaps you invest in 4 good deals in your preferred markets. This will allow you to invest in different markets and diversify your portfolio and minimize risk.

Be Bulletproof,

Agostino