Opinion: Main factor for passive multifamily deals to succeed?

[Dan Handford]

💡 Question: What do you think is the most important factor in a successful passive apartment investment?

I am personally invested in 18 different passive apartment syndications.

My opinion is that projections and investor offering memorandums don't always tell the truth when it comes to an investment.

I believe the number one factor that will cause a deal to perform well is the operator behind the investment.

You could have great return projections but if the operator takes their eye off the ball then it could go south rather quickly.

On the other hand, a solid operator can cause an investment to well outperform projections.

I personally look for operators that have some form of success in business in their background.

Why?

Because you must know how to successfully run a business when you are dealing with apartment syndication.

You must know how to manage people...

You must know how to implement systems, procedures, and processes...

AND you must know how to set certain KPIs (key performance indicators) on your assets to make sure it's performing properly and know when to make pivots when things start to go a different direction.

Bottom-line: Choose your apartment syndication operator wisely!

What say you???

[Ben Leybovich]

This is such an intellectually dishonest argument structure. It's like saying that because I am a good operator, I can walk into any under-performing asset, sprinkle my magic dust, and make it operate - this is, of course, a lie. 

Additionally, this argument presumes that just because some operators saw success with exits on assets that were purchased in 2011, this somehow means that they are genius operators. Obviously, this is not honest either.

I can sit here and crush the argument that success is solely a function of the operator all day long. There needs to be a good property, in a growth market, with a strong business plan managed by a good operator. You need all of the above!