"Sophisticated Investor" to participate in MF syndication

[Martin Rubio]

I do not qualify as an "accredited investor", so I heard I might be able to participate as a "sophisticated investor" in a syndication as long as it is not soliciting (I am invited to invest privately).

I would like to join one of those, in a way I can learn from the principals (i.e. review reports, ask questions on how things are done, etc.)

Can you guys comment on how easy/difficult are those to find? I don't have any contacts in the Multifamily space ...

[Brian Burke]

@Martin Rubio you can invest in a private offering if you are not an accredited investor if:

• You are sophisticated enough to evaluate the deal and make an educated decision
• You can afford to lose your investment without compromising your financial well-being
• You find a sponsor that has an offering that is not advertised
• The sponsor is allowing non-accredited investors into the offering (they are limited to 35 or fewer non-accredited investors in any given offering)
• You have a pre-existing personal or business relationship with the sponsor

The challenge here is that you cannot invest in any offering that is using the 506(c) exemption, which allows them to advertise. So anything that is advertised is typically a non-starter (there are exceptions to this but I’ll leave that for the lawyers on BP to explain those—that’s not my area of expertise—I’m a syndicator not a lawyer).

This means that you have to find these syndications through word-of-mouth.  Even then, you’d need to establish a relationship before investing, so if you learned about the sponsor because someone told you about their offering, you’d probably have to wait until the next offering to invest.