Out of State Co-GP on a MF Syndication?

Question

Hi! I am studying to become a General Partner for Syndicating (60-120 unit) apartment deals. I want to begin in Dallas, TX where my MF mentor and mentoring group are based. (Why reinvent the wheel, right?) Anyway, I have received some doubt and concern from a few of my investor friends about being able to effectively GP a deal out of state (I am in Michigan). I am wondering if any other GPs have successfully syndicated deals OOS? I would love to hear your input! Thank you!

I told my friends that my plan is to partner with someone local and plan on flying down there every 60 days or so if needed. Still, they questioned me on what I could really bring to the co-GP table being OOS. Should I be worried about this? Thanks!

(FYI, Neither them nor I have ever syndicated a deal before. Also, I have experience in the SF flip and rental space and experience running small businesses)

Thank you so much! :)

Bruce Lynn · Answer

Plenty of investors including GPs on syndications do OOS deals.  I'm no expert...never plan to be a GP at this point, but am LP.  I think you have to think about what skills you bring to the deal as a GP.....is that underwriting, capital raising, finding deals and putting them under contract, operating the business plan, handling investor relations, or some other part of the process.   What is your skill, what is your strength?   Most of that does not have to be local to a deal.  Sometimes I think it helps a lot to know the market, know what you are buying, and knowing the nuances....like which school district you want to be in, what side of the tracks are the good/bad areas, is one area better or sell for more than another area....you have to know what is a deal or not a deal...that's often tougher to do long distance I think....

I've talked to a fundraiser that is based in Dubai, raising money for syndications in the US.  There is a new Capital raisers club based in El Salvador.    In your mentoring program where are people doing deals?  Are all of them local to the deal?

How about as an LP....what deals have you invested in as an LP?   Are they all local or did you invest OOS?   Either way, were all the deal sponsors local to the deal?   Do you trust them if they are not?   On a grand scale you can look at some of the big operators like Ashcroft and they are doing deals all over, multiple states, I think they even have a multi state fund.   So it can be done.....I think as a GP you just have to define the role you want that works long distance.

Jeffrey Donis · Answer

100% possible!

I live here in NC and have not been able to find a deal where I live but I have been able to work on deals in other states here in the Southeast. As mentioned up above, it is not so much where you are but what skillsets you can bring to your partners. If they already have someone that is going to be the boots on the ground, maybe you can help with other aspects that will be another form of value!

Hayden Harrington · Answer

Love the mindset! If the desire and passion is there, then it's only a matter of time before you make it happen. It's not an easy journey, but well worth it. Good luck on your new venture and feel free to reach out through FB or ask questions to the group anytime!

Hayden Harrington · Answer

Makes a lot of sense! I'm assuming you are a part of the Sumrok program? There are definitely a lot of great resources in the couching programs around here and they can be a great way to plug into a team. If you want to invest in Michigan, then it may not be a bad idea to build a team there, but if you are looking to invest in markets like DFW, then Id suggest focusing on building a team there. Having boots on the ground for your first syndication is going to be very important, so I'd suggest being highly focused on where you want to start investing.

If you'd like to connect with other operators, we have a FB group that has a lot of local operators in it as well. If you just search Momentum Multifamily on FB and groups you should find us and you're welcome to connect with the members! We do zoom networking with the members every other week as well so its a great way to connect with people from all over.

John Casmon · Answer

Absolutely! Focus on the skills you bring to the table. If you are OOS, you need team members who are on the ground and defined roles and expectations.

Percy N. · Answer

@Jacqueline Coombs, as others have said, it is pretty common for the sponsors to be OOS. The key is that they have the right infrastructure in place to manage the property. This includes resources centrally and at the property location.

Is this going to be 3rd party property managed or self-managed by the sponsor team?

IMHO, it is more important to have an experienced team than go with someone local and inexperienced.

Hayden Harrington · Answer

It is definitely doable! Dallas is an extremely competitive market right now, so just landing a deal is a battle on its own (I'm based here). To echo what Bruce has mentioned, multifamily is a team sport and the key here is to have a team that you can rely on and trust. Spend a lot of time vetting your potential partners and don't just jump into a deal because you can. Interests must be aligned and everyone needs to be on board for the game plan going in. I spent two years getting to know my business partner before we did a deal together, but patience pays off!

Know your market, have a good team and you can make it happen. I have not syndicated a deal out of state, but I have worked with co-GPs that are out of state, so I know it can be done well.

Jacqueline Coombs · Answer

@Hayden Harrington That would be great! I would love to join that group! Thank you very much for your response!

I truly believe Dallas is a great place to start out and gain the experience and credibility I need to make MF deal sponsorship my career. I have talked to dozens of successful people there and have access to an incredible network and ecosystem built into the Sumrok mentoring program. My thought was “Why start from scratch here at home when I don’t need to? This is why I took the leap of faith and paid for a mentorship program!” I was honestly disappointed in receiving that negativity from my friends. It’s been hard enough to keep a positive mindset as an entrepreneur. Upon reflection, I think my investor friends were trying to help me to avoid disappointment. I know that Dallas is incredibly competitive but I also know that I am a hard-working, fast-learning person of integrity. I truly believe that those qualities will end up being a HUGE advantage in the marketplace! I am willing to do whatever I need to to bring massive value and to gain trust and credibility! This is a HUGE leap of faith but I am taking it! :)

Jacqueline Coombs · Answer

@John Casmon Thank you for your response! I am looking at identifying my strengths and weaknesses and what I can bring to the table other than money. I am really hoping to bring as much value as I can to my future sponsorship team!

Jacqueline Coombs · Answer

@Percy N. Definitely! I agree that it will be most important to find a solid team. Realistically, 98% of the things I will be doing will be able to be done remotely.

And yes, I do plan on having 3rd party PM in place for the property.

Thank you for your response!

Out of State Co-GP on a MF Syndication?

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