Lone Wolf vs. Syndication

[Callaway Pate]

Hey BP Family!

I hope everyone is preparing themselves for the future and ready to make the best of it. This question has been on my mind a lot recently and I thought I'd share. Can someone break down the benefits of syndication vs. solo-investing? I see often that in these multi-million dollar deals there is a group of investors pooling their money to acquire properties. Right now I don't see the point in that from an investment perspective. Why would someone go through the effort of raising millions in capital just to take a smaller piece of a giant pie when they could instead work from only their resources but have their own small pie. It feels as though an investor can make the same return (percentage wise) by doing either path. Other than the pride of partial ownership and the moderate-sized piece of pie, what is there to be gained from syndication? I hope I can learn something valuable about the concept of syndication because I'm almost sure there's something I'm missing about the strategy. Thanks in advance!

Best,

Callaway

[Jim Pfeifer]

To me, this comes down to whether you want to invest actively or passively.  I have done both.  I had 38 units a few years back and I thought I was a passive investor - but I found I was spending most of my time managing the property manager and I was very involved in the day to day operations of the real estate.  I was not very good at this - I made money only because the market just continued to go up, but I was not cash flowing I was banking on appreciation.  I was speculating.  I did not want to fully commit to being an active investor which is a full time job.  I don't think you can go part way and beat the returns of a syndicator.  To be active, you need to really know the market you are investing in so you can get advantages over the pros.  I didn't have that and didn't want to try.

I have sold all of my active properties and am a full time passive investor.  When I invest in a syndication, I am effectively hiring an asset manager.  I do a lot of due diligence on the sponsor and the deal, but once I send the wire I am completely passive.  I have no control - I just sit back and wait for cash flow and reports.  I trust my professional asset manager to take care of the entire investment.  In my experience, the cash flow is much better than when I owned my own properties (lone wolf) and the appreciation has been about the same.  The result is that I make a lot more money and spend a lot less time doing it.