New Investor Seeking Insights on JVs & Syndications (50+ Units)

[Stone Safaie]

Hey BP community,

I’m fairly new to real estate and interested in investing in 50+ unit properties. I’d like to come in as a limited partner. A couple of questions:

1. Are these forums a good place to connect with managing partners for JVs or syndications?

2. What’s the best way for a new LP to vet potential managing partners?

3. Any red flags to watch for when structuring these deals?

Looking forward to your insights!

[Evan Polaski]

@Stone Safaie, like Chris notes:

1. No.  There are some groups, like Chris, that are on these forums, but generally I would say the sentiment towards syndication on these forums has soured, and therefore the syndicators themselves have stayed away.  Passive Pockets, Meta (FB/IG) ads, local meetups are good places to find groups.

2. Brian Burke's Hands Off Investor is a pretty good starting resource.  Remember syndicators are marketers first and operators (sometimes) a distant second.  Best way to vet would be talk to a lot of them before you commit capital.  And also, know everything about operating real estate, if you really want to know the risks: business plan, financing structures, ability to execute, market research to vet their underwriting assumptions, how fees can influence investment decisions...

3. Yes.  As Stuart noted, I would call these less red flags and more things to understand.  Just on these forums, we have heard of groups having a convertible note structure in their syndications.  You have groups that overtly hide performance of past deals.  One group is now offering a pref equity investment to rescue their deals, while they still actively market how they have never had a capital call (technically, accurate, but in spirit very deceptive).  Many groups buy cash flow negative deals and overraise to pay distributions right away.  You will likely run into a lot of late-20's/early 30s guys doing this, who have a lot of confidence but not a lot of experience.

Overall, I think the biggest thing is finding a group that generally has the same outlook as you.  If you want to swing for the fences, that 3 yr, value-add deal with floating rate debt may be the right fit.  If you just want consistent distributions over the long-haul, you may want a more stable deal with a longer horizon, even though that may mean giving up the 20% return possibility.