I continue to see more and more posts suggesting real estate investors should go from buying 2-4 unit buildings to buying larger apartment complexes. I believe these posts are influenced by the pay for education syndication model. Here’s how it works: You’re told you can accelerate your growth and get into larger syndications. These syndication educators teach you underwriting, give you lists of brokers, recommend you increase your social media visibility and are provided techniques and tools to raise capital. You’re also given permission to list your educators as "Partners" or “Strategic Advisors” to boost your credibility given you have no track record.

You take all of these steps and then set out on the mission of raising capital. Easy right? Not so fast. You realize it’s not easy to raise capital for larger syndications in small amounts. Your friends and family know you on a personal level and question your capabilities. They’re out. You then realize raising capital from individuals you don’t know is equally as challenging because you don’t have a track record. They're out as well. Where do you go from here after spending all of this money on education and time setting up your syndication business? You take the lists of brokers you were given, the underwriting skills and capital raising techniques you were taught and you begin raising capital and finding deals for the the syndication educator who started you down this path in the first place.

Now you may ask why you would do this? They offer you Co-GP status of course! Yep, raise some money for them, find them a deal, lend them money to fund a deposit or conduct their diligence…you contributed to the deal and in return they will give you a CO-GP title. Now you are instructed you can put "GP" or "Owner" of 50, 100, 500 etc. units in your social media or your website and just like that you have yourself a track record. Let's just ignore the fact you are knowingly misleading those you want to stumble across your your more polished syndication resume, but who cares? Next time you try your hand at raising capital you may fool some of the people who first balked at your credentials.

To recap, you pay to learn the necessary skills to source deals and capital for your educators and you are actually taught to deceive investors by embellishing your track record and credentials by dangling your GP status in ways not representative of your true role. I believe most who sign up for these programs are too naive to know what's happening but if you are someone who does and still believe this is the best path forward I question whether you possess the moral compass or responsibility to care for someone else's hard earned money. That's the roadmap and its spreading like wildfire. Anyone else noticing?

Stuart Udis

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7 Votes