All Forum Posts by: David Thompson

Hi Philip

Lots of good resources out there.  Are you an accredited investor?  That would be a primary hurdle for most syndications.  Here's a blog on 25 FAQs I get from the thousands of investors I have worked with.

Hi Ashley,

I'm not sure on your background w/syndications so excuse me if you are experienced.  That said, these blogs on vetting a sponsor and 25 Syndication FAQs maybe useful to your approach.  Many of the folks responding in these forums w/experience would likely point you to some operators as part of your review.   

Tom,

Outside of being an issuer (finding your own deals, managing them to disposition) which enables you a lot of exemptions from being licensed, the only two options left are starting your own Fund (Special Purpose Vehicle - SPV) or getting licensed and having your company affiliate with a licensed broker dealer.  I have experienced all of these options.  

If you are going to solely focus on a capital raising business, then I believe the broker dealer route allows you the most flexibility and aligns best with your investors.  Your investors simply would be getting the same deal as the operator is showing.  The issuer can pay the BD directly. The biggest con, you can only educate and market deals with operators that have been vetted and pre-approved to be on the BD platform.  So if you go this route, you want to make sure the BD has a lot of quality deal flow in niches you have interest.

The downfalls w/SPVs are simply, you cannot receive compensation from the issuer for raising capital.  You will have cost to launch your fund (legal, admin backoffice), you have to run or hire a backoffice for directly managing your investor base and all costs / fees must be between you and your investors.  You, ultimately are adding cost to your investors on deals they could go direct to the operator and get better returns.  So, the issuer wins, you can't collect anything in compensation from the issuer for bringing them your investors / capital.  You probably need a min of $3M raise to make a SPV viable.  The biggest pro is you have the most flexibility to do any deal you like.

Hi Natalie,

Borrowing money to invest, you should be thinking of more conservative ways to get a spread that makes sense.  Growth strategies may not materialize and so you could be hit w/a double whammy, paying the 3 1/2% interest and losing money.  Read this blog I recently wrote that may be of interest, since you are now accredited (via net worth I hope as income thresholds must be met for the past two years to qualify).  

Based on many MF syndication deals and looking at Class A units specifically which I invest in, I believe you can attain a 10% return on your capital w/very minimal risk based on historical data, how deals are structured for class A units (income only, paid first, no upside); vs class B units (income / growth, paid second, upside), etc.  A $100,000 investment would generate a $833.33 monthly income.  

Hi Joe,

My hometown of Phoenix, great pic, one of the top growth markets in the country.  Yes, syndication is a very different animal, expensive, complex for small acquisitions like this.  I would definitely bone up on a lot of study around syndication as something to strive towards.  Smaller projects like this really doesn't make sense to syndicate in my opinion.  Probably looking at $1M raise or more as a starting point. I work with a lot of sponsors and investors in this space. Click on my top 10 lessons for vetting a sponsor, so as you think about that in your future, you can understand what investors may want to see in a sponsor.

Hi Shannon,

I believe partnering with experts is the way to go.  I work with several operators in the syndication space.  Your brand and reputation is everything in this business.  It takes a while to learn the ropes to do anything well.  If you can find a role to work alongside experts, you minimize your risks and accelerate your learning curve.  Then leverage that relationship, build a track record and reputation by doing good for your investors until you are ready to go on your own.  Read this blog for more insight on this #1 lesson I learned when I started in the syndication business and how that propelled future success.

Hi Aaron,

A lot to consider.  First, are you a DIY investor, wanting to manage your real estate investments or do you want to be more of a passive investor, preferring to invest alongside experts in say syndication deals?  You could of course be a hybrid investor, say, splitting up your funds and invest in some DIY opportunities in areas you know well or like to learn more, while leaving other areas that you research and are promising, but don't have the capital, time or expertise, nor care to develop the operational understanding of owning something more actively.  Read my BP blog on active vs passive investing.

I personally do both, have SFR rentals in a town I live and know best, Austin, TX. I have total control and can decide to sell on my terms. That said, I don't want too many of them as it turns more and more into a job. I also invest in more recession resistant real estate syndication deals all across the country in markets I don't have the local expertise but the operator does. I'm invested in MF apartments, self storage and mobile home parks as a core passive investing strategy because I like hands off nature of it, get regular income, great tax benefits and upside appreciation potential. Read this BP Blog on these 3 niches.

Can you move to a lower cost city ?  You can then decide to buy, take advantage of low interest rates.  Invest the difference in whatever strategies you like.  DIY strategies sounds like its working for you.  If that gets old or you want to do some of that but not FT and develop some passive holdings, diversify in other solid recession resistant niches like apartments, self storage, etc. that can build current income and offer appreciation over time you could also look at syndication deals in markets you like / should be looking at but don't have the time or energy to self manage or purchase on your own due to larger upfront investments.  

Out of state investing is more challenging for DIY investors.  Can be done, but takes more time.  I am a hybrid investor, preferring to manage local properties in my city and diversifying into syndication deals that give me geographic and other niche diversification.  So, flipping houses or buy n hold SFRs might be a good local pursuit while leaving the experts in other markets and niches (like self storage, apartments) for my out of state investing.

Depending on size, a typical good mix I like to see is a bit more 2x2s and less 1x1.  60/40 ratio.  Owners should experience less turns (cost) with families than single units.  If near a university or urban core, you likely would not have that much concern w/more one bedrooms.