@Todd Goedeke it was actually the other way around for me. I spent months digging into buying other investment properties, vs investing in a syndication, and spoke with cpas, lawyers, other investors (of single families, apartments, multi families, and syndications), capital raisers, and syndicators (small and large), and got a lot of perspectives and advice from all of them. Met some lovely people along the way. Once I understood the ins and outs of it, and having been a landlord for 25 years now, I invested. So my 'bias' started with my own money. Not only did I invest, but I wanted to work in the space, as I, as well as a LOT of investors out there, find it a very attractive alternative to the time and energy and expense involved with sourcing, renovating, managing these deals.
I invested a lot of time and money to become SEC registered, specializing in private placement of capital. The exam process was tough. I wouldn't have gone through this, in my early 50's, if I wasn't so passionate about it. I'm not alone in this. Institutional investors are paying a premium to buy up these portfolios, as it's a stable way for them to buy cash flows. Plenty of buyers for the smaller deals, too. Who doesn't like a well-managed cash flowing property?
Re mentioning one deal, I said it was an outlier, and the other range was accurate. I cannot mention specific deals for a few reasons - one, I'm an SEC rep, as I said. That means I have to follow stringent guidelines with respect to advertising/marketing. Two, Bigger Pockets has very stringent guidelines, and I've had comments taken down in the past when I was more specific. Happy to chat off the forum, if you'd like.
You mention commissions. Any private equity raise has an acquisition fee, whether you work directly or indirectly with a sponsor of the deal. This is industry standard, so many brokers/advisors simply work as part of investor relations, so fees aren't increased by working via a broker. And returns to investors are net of all fees, so if someone invests $100k into a private equity deal, they get $100k worth of capital in the deal, plus distributions and returns derived from a capital event.
Yes, accredited investors could go out and find their own deals. But that is active investing. I have friends who do syndications, and I admire them for it. It's a LOT more work, and often they get hit some obstacles on their first few deals, without the benefit of experience, which has an impact on either their returns or their exit strategy, or both. Some get lucky and knock it out of the park on their first deal or two. Thankfully there is a good network of people out there helping each other out as they progress along the learning curve.
It's really a matter of what you want to do, isn't it? Some people LOVE buying a bunch of rentals. Some love flipping. Some form syndications with friends and family money, and go on to be very successful. But a growing number of investors are happy to find the right sponsors, who have a lot of experience on their team, who have exited many deals, who have already cut their teeth on painful lessons. Having spoken with friends who are syndicators (ie active), their returns on their first few deals aren't usually superior to returns that investors get with established syndicators. Personally, I would happily have a team who knows their market, has contractors and property managers and banking relationships well-established, do the work for me, because I'm able to earn returns passively (with a lot less volatility than the stock market). I mentioned one deal, but there have been several with that operator with similar returns, and the range in other markets has been what I mentioned in my previous comment, with multiple operators, over multiple exits. I'm just mindful of my wording in this forum. Plenty of other capital raisers here on BP who've delivered similar results for their investor base too.
I will also add that investors are nearly always repeat investors. Once investors find good partners/syndicators, they tend to stick around for years, especially when deals have been exiting within a few years, and they can roll proceeds over into the next deal. And I'm not speaking just about myself. I know a good few people in this business, and their investor base is loyal.
I have a lot of respect for and am constantly impressed by the clever real estate investors/entrepreneurs out there. There are many ways to skin a cat. For accredited investors (though not all deals are limited to accredited investors), it's nice to plant those investment 'seeds' across multiple markets, in multiple sectors, getting the upside of appreciation/depreciation/tax advantages/distributions that real estate offers, and passively doing it via syndications is a model that works for many. I just sold a house, worked with my cpa on tax planning, and invested straight into 5 deals. 3 were with syndicators I raise for, 2 were not, as there are a lot of interesting opportunities out there in commercial real estate, and I'm always open to new opportunities for myself and clients, some of which are outside of the niche I work in. If I had more money I would have liked to invest in a farmland deal I found, as I really am a fan of diversifying across location and asset type.
As a footnote, my husband is Australian, and we have, after a lot of digging around, found a few syndicators/funds in Australia, that we plan to invest in, via his retirement account, as well, which are not multifamily. So yes, it would be fair to say that I'm a big fan of this approach :)
Horses for courses, as they say. If what you're doing works and you enjoy it, stick with it. But please respect this approach, too. A lot of work goes into vetting deals/syndicators, to mitigate risk as much as possible for investors, which is why good private equity raisers have a base that sticks with them for many years.
Happy holidays & I wish you continued success :)
