All Forum Posts by: Jacob Rosenkranz

Personally I don't think they are comparable....very very different investments.

Very few syndicators offer the opportunity to invest in 100 or 1000 units for example in different locations, where you can do that with an ETF...broad market ETF might have 100 stocks or more in 100 different companies.  Same investment in multi-family might get you 1 deal in one location.  Hurricane hits and your investment could be wiped out.

Some stocks this week had exchange rate risk...I don't ever hear about that in syndications....I guess there could be, but much less likely.

Stocks...including ETF you see a lot of volatility these days....20% swings in good companies in a single day...so lots of things out of your control.  For the most part I would not think most real estate assets ever see that swing in a single day, unless there is that hurricane or some other unique event....fire, flood, plant shut down in a one employer town, things like that.

Also lots of small operators in the syndication space....plenty have just a handful of deals under their belts in a specific geographic area....They may have hit 3 home runs with little effort on the results.....where if you look at a large syndicator with lots of deals spread around the USA...overall returns might be lower, but risk likely lower too as they're more experienced, and returns average out over poor, good, and great locations.

I think the big telling factor will be in about 2-3-4 years when the bridge debt comes due...If we get a big recession and either lending dries up or lender underwriter standards change, there will be some syndicators in big trouble....will have a tough time selling, won't be able to refinance, will be going back to investor for capital calls.   I don't remember the year now, but maybe around 2009 seems like there was this big wipeout of jobs in middle management....that potentially could happen again...depending how the recession goes.   If you get a big wipeout of tech jobs for example, where people can replace their great pay, we could have some real issues....

Many of the deals I'm getting pitched today are very very different from even just a year ago...and not in a good way.

Good luck out there...there are great operatorsyou just have to find them, and then look very carefully at each deal they pitch...and then keep your fingers crossed.

Unfortunately I doubt anyone is going to be able to answer this question, and even if they tried, their answer wouldn't be all that helpful.

The difficulty in answering arises from a lack of data.  Unlike publicly-traded mutual funds where you can look up past performance easily from a number of sources, there is no central repository for syndication performance data.  Nor are there research firms that have taken on this task--and even if there were, they would have to rely on data supplied from sponsors or investors, which could be over or understated or misunderstood.

Even if there were such data, it wouldn't be all that helpful because this is the classic case of past performance isn't indicative of future results.  We've been in a "rising tide lifts all boats" scenario for the last 12+ years, so even the most inept sponsor could come out looking like a genius in the right circumstances.  That may soon change.

Over the long haul, well-located real estate in the hands of a capable operator will perform quite well if it's conservatively financed.  Bad locations, bad operators, and over-leveraging can be a death sentence when the market isn't there to bail these deals out.  That day is coming.  When, is the million dollar question.

It's also difficult to put all syndications in the same bucket.  Even good sponsors have a bad deal once in a while--if they haven't, they just haven't been active enough or for long enough.  Different strategies have widely mixed results, too--for example, ground-up development can be hit-or-miss.  Older properties can either soar or tank.  Some geographical markets are boom and bust...

Your best defense is to diversify--eliminate single points of failure by investing with multiple experienced sponsors, in multiple markets.  And make syndication investments only a part of your investment strategy.

Your looking to go in as a investor? 

Hi @Jacob Rosenkranz if you find a great forum where there is a lot of discussion about operators, you should be able to get feedback about this particular operator. If you are not finding that, perhaps it is not a red flag but maybe they are a new side. I would absolutely not trust an underwrite that assumes a further compressed cap rate. While that could happen, that is a HUGE red flag in my opinion.

I would recommend you check out the private investor club at the Real Estate Club Crowd Funding Review to help you vet passive income opportunities. You can also check out Jim Pfeifer’s Left Field Investors.Third I would buy @Brian Burke's wonderful book The Hands-Off Investor. This BP book is a gem in helping people like you vet passive income opportunities. I think that these resources will give you a lot of insight and help you with learning about the operator selection process.

Happy investing!