How long has your syndication been around?

Question

I saw on LinkedIn the other day that like 70% of syndications have less than 3 years of experience. WOW!

Evan Polaski · Answer

@Chris Webb, thank you for sharing.  This brings up a good point for many to think about.

There is some noise in this comment, but overall I appreciate it, especially on LinkedIn, where everything is an echo chamber of "I help create passive income for busy professionals", "Invest like the rich", "create financial freedom through real estate".   It bleeds onto these forums, as well.

From my perspective, the BEST syndicators, generally, are the ones that are the hardest to find.  They are not attending conferences that you commonly see on these forums, they are not running marketing constantly.  They are not posting about financial freedom on LinkedIn.  They are operating deals.  They are people like Arn, who have decades of experience, and investing in real estate like the rich: buy and hold long term.  Unfortunately for anyone looking for these investment groups, it is still a "who you know" game, or at least becomes a lot harder and entails more networking, typically higher buy-ins, and/or lots of research to uncover these groups.

Arn Cenedella · Answer

@Chris Webb

It’s a great question.

Lots of syndicators got into the business in 2018 and 2019 and simply got lucky when cap rates dropped from 7% to 4%.

Many of these now thump their chests on social media.

I’ve been in real estate my entire adult life since 1978 - that’s 45 years. I don’t just jump in when the market was hot. I’ve been thru several economic cycles and have successfully invested thru it all over 4 decades.

Like I said, great question.

Ian Ippolito · Answer

I see thousands of deals a year. In my opinion, it depends on your definition of a "syndicator".

1) If you mean anyone who tries to create a syndication and calls themselves one...then I believe it's probably true (and actually higher/worse). Look at all the people just here on Bigger Pockets who have no experience and are constantly trying it.2) On the other hand: most people won't invest in a syndicator they don't know who has so little experience (for obvious reasons). So often newbie syndicators are taking all or most money from friends and family. Whereas what I'll call "professional" syndicators are taking all or most money from 3rd party investors. And 3 years of experience here is still too green (because it means not enough time to develop a portfolio of exits...which takes years to develop). So for this group...no...not even close.

Also as a conservative investor, I want my sponsors to have at least real estate cycle experience with little to no money lost. So the idea of investing a fund of funds like Brian Underdahl was apparently running (where he says he was considering so many newbie syndicators),would be an easy "no way"..for me.

Chris Seveney · Answer

Aleksey is great person to follow. To answer your question: My latest fund has been around since 2022 but I have done five full cycle offerings prior to that starting in 2018. Prior to that I have been in real estate since 1997. Why has my latest one only been open two years? Because I launched it as a Regulation A+ offering and to do so needed to incorporate it as a new entity.

My asset class is very different since it is a debt fund. So, the interest rate issues and having to deal with comps does not come into play with us.

I think the big question to tag along with this is how long has the sponsor been in real estate. I know some who started their own gig in last three years but have been around for 30 and put a team around them with other experienced operating experience, thus I would invest with them 10/10 times than the person who graduated college five years ago and is already doing syndications.

The next few years are gonna remind me of the scene from the big short when he is with the stripper and she is talking about her five homes. Why? When I read posts on BP about people with no experience attempting to build a twenty home subdivision, or buy half a condo building and their first question is "where do I start...." They do not know what they do not know. Unfortunately some people are going to get crushed.

Todd Dexheimer · Answer

I'd be surprised if that is even close to being accurate. Syndication has been around for longer than anyone alive. There are tons of companies that have been around for decades that syndicate, but you've never heard of. If there is a 70% number, possibly it is for syndicators using crowdfunding.

Carlos Ptriawan · Answer

I thought Reg. D is only started in 2013 ?

Chris Seveney · Answer

@Carlos Ptriawan

We just had what’s called a “track record verification report” completed for our five prior funds.

That’s exactly what it is - a third party cpa firm goes in and verifies if we say investors got X they got it

Think of any mutual fund, when they publish there 1,3 and 10 year performance it’s not them doing it - it’s a third party that follows the same set of rules

In speaking with this firm it was kind blowing how they noted some people calculate returns.

Some will use depreciation in there analysis, some will go off costs per year and not at time of expense, some will note gross for entire fund not gross for investor or net for investor

It was very educational and informative.

Carlos Ptriawan · Answer

What's missing from entire syndication industry is kind of independent financial analyst and/or journalism that's focusing on syndication world only.For example if we have one magazine that can do and verify the legit aspect of all syndication that's available in the country, then that would be extremely helpful for common basic investor.

Meanwhile the independent financial analyst can give their insight to particular trend or syndication.

Dimitrius Kiritsis · Answer

Hey Chris, great question! Many syndicators mean well regarding their projected returns, but a lack of experience will trump any good intentions during hard economic times. One thing to consider is the combined experience of the executive team. If you have 5 individuals on an "about us" page, and their combined experience is only 10 years, this could be problematic. On the contrary, if an exec board has 50-100 years+ of experience they likely have seen some adverse economic cycles and know how to pivot in such environments. Definitely something to consider while vetting out potential GP's.

How long has your syndication been around?

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