why syndicators do this?

Question

Not sure if everyone feels the same way as I do…

Ever since the pandemic, I have not seen any of the syndicators that I previously invested with come up with solid deals. I don’t understand why would they make purchases or construct apartment buildings around 220k-270k per door (1-3bd apartments) while single family residence built in early 2000s in the area are for 270k-325k. These are the same syndicators that would buy 100k per door when single family prices were 200k+. And no they are not buy and hold forever, they are just construct to sell or buy hold and sell.

What am I missing out on? Why are they doing this?

David Lilley · Answer

We routinely buy well located multifamily properties in Dallas around 125k per door. Lots of factors at play in this question.

Account Closed · Answer

You haven't met any of the smart ones then because Inland, Passco, Inspired, JLLX, and many more, all make very consistent returns in their property types of expertise

Reed Rickenbach · Answer

Legit operators that were around before COVID have slowed down because CoC and IRR have been compressed with so much competition. If your syndicator slowed down instead of taking advantage of a frothy market, that's a very good thing.

Bruce Lynn · Answer

There are several office to residential conversions in downtown Dallas that will be 500K a door.   So 200K might be a bargain depending on what you are buying.  Multi vs single family entirely different, so not sure you should compare that.  Managing and maintenance on a 200 door multi would be way more cost efficient for example than 200 doors of single family.

Lots of investors on the sidelines right now, but there are still great syndicators producing great deals.   Of course there are others that are pushing out terrible deals, but they often tell a good story and their followers continue to follow them.   I often listen to pitches and live deals and think, no way would I ever give that operator money, but some have people lined out the door.

Also everyone has different goals.....some principal preservation....better perhaps than leaving it in the bank where you loose 10% a year due to inflation.  Maybe better than that stock market where probably average investor lost 20-30% in 2022 and most predicting average return of 0% in 2023.

Taylor L. · Answer

Could be a few things.

- Multifamily prices are up from a few years ago

- The sponsors you know may have shifted from C class to B or A class

- They may be investing in more expensive areas

Those kinds of deals are still happening, but not in major markets like DFW. We did one recently with a purchase price just over $100k/door in a region with sfr prices over $300k. It's just not something you're likely to find in the bigger, more bought-up markets these days.

Eliott Elias · Answer

Syndicators who were doing this were fake investors. They had FOMO and wanted in on the action. The investors were brain washed into thinking this market is going to go up forever. Most syndicators i've met are not real estate savy.

why syndicators do this?

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