Resources for non-accredited investors looking for passive deals?

Question

Hey, I'm an active investor but looking for passive investor resources for my mom.  She's doing well with her retirement but I need to increase her passive income as we might have some long term care costs coming down the pike and investing in the stock market isn't going to do the trick!

Although I invest in SFH's out of state, the idea of managing something like that on any level to her in terms of dealing with fixing things is not attractive.  She likes the idea of investing in multi-family syndications but she's not accredited and not sophisticated. And I'm not a fan of crowd funding platforms, I got burnt bad by one.

So... how do you find out when big, trusted, multi-family syndicators are actually offering something for non-accredited investors?  Is there any resources or tips to track them or is it just reach out to each of them and see what's going on?  Just thought I'd see if anyone has been in a similar spot and had any advice?!?

And no... not interested in having her loan me money for my own investing or anything like that.  Thanks for your time!

Jack Martin · Answer

@Adam Sankowski a great point here by @Alina Trigub.  The bigger the syndicator, the higher the likelihood they are not accepting non-accredited investors.  The primary challenge you will face is to find a good syndicator, knowing that we as 506(b) syndicators are not allowed to publicly solicit.

However, educating people is appropriate and you will find some of the best syndicators sharing advice, perspective, and real estate knowledge on forums like this one.  If you take the time to read through threads, it is pretty easy to weed through the sales pitches and find those who are truly sharing advice.  Those could be a good syndicator for you to connect with, OR would likely know a quality syndicator for you to connect with.  Remember, a good experience investing in a syndication starts with a quality syndicator.

Additionally, as you search you'll find syndicators specializing in a wide variety of asset classes, each with a strategy that may or may not be a fit for your investment goals.  A few points for you to consider:

• Is your goal to create cash flow, equity growth, or both? The asset class and investment strategies that will help you accomplish those goals differ. Some investments are capable of distributing cash flow along the way and some will require you wait till the asset is sold before you get your share. Some investments are capable of creating more cash flow than others, and some are capable of creating equity at a faster rate than others. 
• How much risk are you willing to take?  Each asset class inherently has a spot on the risk spectrum, and the yield expectation typically correlates with the risk. 
• Are you concerned about the investment's ability to weather a recession? If you are investing with a long term mindset, there are asset classes that historically bridge recessions better than others.

As an example, on the higher end of the risk spectrum (but also with the chance of higher returns) you could invest in a development project, knowing if the market corrects you could lose your investment.  On the other end of the spectrum, if you prefer long term, lower risk, cash flow investments that will weather a recession, you may want to consider mobile home parks, knowing if the market corrects your investment will likely continue to perform. (a shameless plug, as that is my favorite asset class). The point is to get clear on what your goals are and that should help you choose the asset class and strategy that will suit you best.

My advice to you is to connect with syndicators that resonate with you and take the time to develop a relationship with them. Prior relationship is a requirement of 506(b), so take the time to get to know them and understand their strategy.

Making sense of their deal, their business philosophy, and their track record will be important to understand, but I believe you should develop a foundation of trust before you invest. IMHO, the character of the sponsor is the most important consideration, regardless of how good a deal might look.  Trust is paramount to sleeping at night, and I can't stress that enough. It does no good to place capital with someone who has a great project with an attractive pro forma, to find out later they can't be trusted.

Consider talking to other investors who have had an experience with the syndicator already. You can simply ask the syndicator if they would be open to connecting you to a handful of investors who have known and invested with them for a long time. In a 15 minute phone call, you will learn more about the sponsor than you ever could elsewhere.

Some other items to consider that are ofter overlooked:

• How accessible is the syndicator? If you have a concern, are you able to talk to them? Do they return calls?
• Do they have a communication plan? Are they transparent? Even when they run into a problem?
• Is there a schedule for reporting, distributions, tax documents, etc.?

Your overall experience investing in a syndication involves much more than the deal, or the yield you could achieve. If you take the time to do develop a good foundation of relationship, you should have a pretty good handle on what your experience will be like before you invest.

All the best,

Jack

Will Barnard · Answer

Attend as many real estate meet ups and start asking around. Hit up your inner circle and ask for referrals. That all said, you need to be careful who you invest with as the person or persons making the investment offering are just as crucial as the numbers of the deal itself. Check previous history of performance, check criminal backgrounds and any previous BK's. Look into them deep before giving anyone any money.

Alina Trigub · Answer

@Adam Sankowski

1) "Big doesn't always equate to good, just like small doesn't always equate to bad.  So when looking for syndicators, I'd advise you to be open all as long as you can verify their trusted and have the track record, and so forth. In fact, based on my experience, the bigger the company the slimmer the chances they will have an offer for non-accredited investors. Mind you, they may still use 506b ruling but only accept accredited investors.

2) Before you or your mom go around the nation to catch some syndicators at the conferences, it is absolutely critical to educate yourself. I"d start with the books, such as "it's a whole new business" and "best ever syndication book". I'd also listen to podcasts, such as Syndication Show by @Whitney Sewell. In addition, what the aforementioned conferences and even local REI events are good for is networking. Ideally, you'd want to connect with like-minded investors to hear about their experiences.

Here're a couple of posts to give you additional guidance on the topic:

https://www.biggerpockets.com/member-blogs/10850/84504-step-by-step-process-on-how-to-invest-in-a-real-estate-syndication

https://www.biggerpockets.com/member-blogs/10850/85836-should-i-buy-a-turn-key-property-or-invest-in-a-syndication

Charles Carillo · Answer

@Adam Sankowski

I agree with @Will Barnard; to invest in multifamily syndications as an non-accredited investor you need to have a relationship with the syndicator and be sophisticated. Sophistication can be acquired by attending a couple real estate conferences, prior real estate experience, listening to syndication focused podcasts etc. Start networking with your mother at local real estate meetups and conferences. Build relationships with syndicators.

Trevor Ewen · Answer

@Adam Sankowski

Build relationships with syndicators and investors on Bigger Pockets. That's how I got my start with passive, larger scale projects. Old podcasts are a goldmine to hear firsthand from some syndicators that are doing great work. Obviously, you should verify they are what they say, but you'll be pleasantly surprised in many cases.

I have a similar situation with my own father. You may want to assess her risk tolerance. In his case, I don't want him to join as an equity partner because the risk is a bit high for him. I have brought him into private loans. The turnaround and comparative certainty of that approach works well.

Resources for non-accredited investors looking for passive deals?

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