Structuring a Syndication

[Noah Bussanich]

I currently own a few single-family rental properties that have yielded excellent returns based on my projections. Now, I’ve come across several off-market properties with strong potential, and I’m looking to scale by raising capital. However, I’m not entirely sure how to structure a syndication for these larger deals. Could you recommend any resources or provide advice on the best way to approach this?

Thank You

[Evan Polaski]

@Noah Bussanich:

On structure, something like the Best Ever Real Estate Syndication book by Joe Fairless will help outline some of the basics.

Kim Lisa Taylor on these forums owns a law firm that specializes in syndications, and offers a free book, a free consultation.

But the term "how to structure" can mean a lot of things.  Are you unclear whether to structure as a 506(b) or 506(c) or Reg A?  Are you a 3(c)1 or 3(c)5, etc?

Or are you unclear as to whether you structure as a debt offering or equity?  If equity, do you structure with a pref and carry, or straight split?  Do you charge fees or not, and if so, at what level?

Or do you really mean: what will get investor's attention?  Do I need to find deals that pencil to 20+%?  Do I focus on 8-12 units or 50+ units?  Do I focus on hotel conversions or core multifamily deals?

The technical options are easy to learn, some from books, some from talking with attorneys since they are basically rules you need to follow.  

The investor piece is a bit of chicken and the egg: you need to have an idea of what types of structures are out there (Kim and team, as well as other syndicators can give you some ideas).  You also need to know what your investors want.  Some LPs will only invest in deals with a pref.  Some are very fee conscious.  Others just want the highest marketed return they see on the internet.

And as for your investment focus: that really needs to be decided by you.  What do you have expertise in and can sell to your investors?  Where do you see market opportunities?  How much capital do you have available, since even if you successfully syndicate a deal, you are still out of pocket for earnest deposit, due diligence costs, formation costs, etc until you reimburse yourself from the raise.