Syndication, Can anyone do it?

[Dave S.]

Im looking to purchase a larger multifamily of 50+ units and my searches keep coming back to do syndication. So I would like to ask, can anyone do this? Is there a "step-by-step" guide / checklist to follow to ensure you have all your ducks in a row? Or do you simply start pitching your deal to investors and accumulate the funds needed to purchase the property?

Lets say I have 10 investors (not sure if there is a max number of people that can come onto any given deal or not). Do I just need to form an entity (LLC or the like), with each shareholder having the agreed upon % of that company (i.e. real estate)?

[Jonathan Twombly]

Originally posted by @Dave S.:

Im looking to purchase a larger multifamily of 50+ units and my searches keep coming back to do syndication. So I would like to ask, can anyone do this? Is there a "step-by-step" guide / checklist to follow to ensure you have all your ducks in a row? Or do you simply start pitching your deal to investors and accumulate the funds needed to purchase the property?

Lets say I have 10 investors (not sure if there is a max number of people that can come onto any given deal or not). Do I just need to form an entity (LLC or the like), with each shareholder having the agreed upon % of that company (i.e. real estate)?

Dave, anyone can do it, in the sense that there are no licensing requirements (that I know of, anyway) to be a deal sponsor.  You need, however, to learn how to structure these deals properly, use a qualified syndication attorney so you don't get sideways with the SEC or your state regulators, and to build a network of investors.

Building the network of investors first is the critical step.  There is an old saying in real estate, "find a great deal and the money will come," but this is ONLY true if you have dug your well before you need the water.

My advice to you, if you are serious about syndicating deals, is to first figure out the kind of deals you want to buy and develop an "investment thesis" - what you want to buy, where you want to buy it, and why you think this makes sense.  Then you should put together a pitch-deck with a sample deal, so you can talk with people about something concrete - i.e., "If I found a deal like this, would you be interested in investing?"  

Then you start collecting names and "soft commitments" of the amount of money people would invest if you found the right deal.  You need to assume that, no matter what they say, when it comes down to giving you the money, that 75-90% of the people who said yes won't be able to participate.  They weren't lying; life just happens.  (I can't tell you how many people have told me that they could not invest in one of my deals because they had decided to use the money to buy a new house instead.)

There are also strict rules about who you may let into your deals, to avoid trouble with the SEC.  Again, this is why you need a really solid syndication attorney when you are working on these deals.

Syndication is not easy, but it can be extremely lucrative.  If you are really serious about doing down this road, I am happy to talk more off-line.