All Forum Posts by: AJ Shepard

To add, the syndication fund raise is typically for the down payment of the property.  The remainder of the financing is usually from a bank, credit union or financing company.  This a basic concept of leverage that makes real estate so profitable.  Many times partnerships are formed because these banks and financial institutions will require someone with a sufficient net worth to write the loan.  So often you’ll see multiple people in the GP to perform all the necessary functions that the company is going to perform.

I don’t believe this to be true.  When you invest in a syndication as a LP or a GP you are investing in a company.  The company owns the real estate and reports a K-1.  Which is a lot more similar to reits than owning property.  The company is typically a pass through which is why there are depreciation losses as well as income.  It is possible to 1031 out of a syndication but typically the entire partnership needs to participate.  But the reason that this process is difficult is that the company is dissolving upon disposition.

As far as Units owned it’s a tough metric to measure in case of talk above.  If you’re really into how much a syndicator actually owns, request a copy of their real estate schedule owned that they have to provide to lenders to qualify for loans.  A lot of people really believe that tracking net worth is a lot more reasonable metric when comparing.   

@Benjamin Cohen I would look for experienced investors to minimize the risks associated with investing. For someone starting out, you may want to consider partnering up as LP, then learn the ropes from there. Set a clear goal, deals that you'd like to take part in, look at how they are executed, then you'll know what value you can bring to the table. You may also want to start a podcast to grow your network. Best of luck!

I’ve always found that it is a lot cheaper/more economic to have a lawyer review paperwork that you have come up with than it is to have them come up with anything.  I’m not a lawyer and can’t give legal advice.  But you might think of preparing all the paperwork yourself (maybe both scenarios) and asking for a quote from the lawyers on what it would take to clean it up for the deal?  I would also confirm before talking to the lawyers that the structure is supported and accepted by the bank that you are using for debt.  No sense in creating something that can’t get debt anyway…. Hope this helps.

Michael,

There are many ways to skin a cat and if it is a great deal finding partners will happen.  If you want to describe the deal here a little more in detail, you may get some suggestions on how to proceed.  Such as #units, purchase price, required debt and equity.  Do you have some partners already lined up to provide services. 

I think everyone’s perspective is a little different.  When you say “Big” money deals, what size are you referring to?  

I’ve been of the school of start somewhere and gain experience.  Either in your own projects or working and partnering with someone else to learn the ropes.  There’s a barrier in the business of getting bank loans, the investment qualifies itself, but the bank requires someone that has sufficient net worth in order to sign on the loan.  They want to know that there is someone with experience that is going to make sure the project works.  So ultimately if you are just starting out, most likely need to partner with people to accomplish “big” deals.  Next, I would be asking yourself, what value do you bring to the table, how can you contribute.  Focus on that, and develop those skills.  

I agree with @Taylor L. and we have investors who started with 50k or less. As a syndicator, you must establish a good relationship with them and once you built that trust, they would even jump on the next deal. So, most of the LPs investing for the first time tend to be conservative, unless they are someone from GP's network or they are repeat investors.

@Nathanael Greene

It depends on where you are currently. Have you invested before in syndication as LP? If your goal is to be the GP, I suggest that you start investing as LP first, learn the ropes on how they do it, and mock-up a deal as if you are presenting it to the investors. It's better to start with small multi-units first before going to a large scale. You have to walk before you run. Best of luck on your RE journey!

I agree with @Brian Adams that you have to set the expectation of investors of your goal in holding on to the property. Most of the time, LPs just want to have a clear exit strategy and are interested in how profitable their investment can be.

If you're planning the move to Portland anyway might as well invest in property that has great potential for appreciation and cash flow. You just need to find the best property management company to do the work for you. If you prefer to invest passively out-of-state, I suggest going for the syndication route as LP. Best of luck on your RE journey!