Originally posted by @Wade G.:
My biggest concern is investing money with a group of people that I don't really know and especially with a lead investor that I will have just recently met. Even if the lead has a proven track record I still have no way of evaluating that persons historical moral code. People sometimes tend to make odd decisions when large sums of money are involved. Personally I can't imagine being a lead because of the huge responsibility of managing other peoples money. If I lost their money I don't know how I would handle it. This topic is very timely for me because I have just recently given myself about six months to decide whether I want to buy more SFH or place the funds into a syndication.
Wade,
I'm sure those are concerns that many passives share. Giving your hard earned money to basically a stranger and trusting them to take care of it.
So the question is, how do you make them not a stranger? This is why i recommend investing passively in your own market if that is a concern for you. That way you can physically meet your syndicator. You can physically see and touch the property you are investing in (regularity). Also, track record is huge in this industry. Ask to see there last few deals. Did they do what they told investors they would do in the beginning. If not, why. As syndicators, we tend to paint a picture of how a property is and operates based on the data we are provided but until we physically take over, we really don't know. Its like when you go in for surgery and they take all of your vitals, but until they cut you open, they really don't know.
Also, ask to speak to some of their passives. Better yet, request a copy of their "Schedule A" (a roster of the investors on a deal) and you pick the investors you want to speak with. Some may not live in the country, like in my case, but at least you are choosing at random and not being fed their best investors. Every syndicator has them. Me included. On the same deal, I have some who sing my praises and others that would rate me as average. Its in my best interest to refer you to the ones who sing my praises than any who may speak negative of me. You can't make everyone happy as they say.
Yes it is a huge responsibility as a sponsor., which when not handled well ends up in court. As a passive, you want somebody dedicating 100% of their time to safeguarding your investment. If they have a day job, just realize that will mean less time focused on your investment, however minute, and be comfortable with that decision.