First Syndication Deal

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First Syndication Deal

Brandon Craig
Member since 2022 · 51 posts · 23 votes

Hi All,

I found a friend in my martial arts class that has been in real estate for 10 years. They are raising capital for a 506b (family and friends unaccredited) hybrid deal (in another state) that includes an apartment, selling some SFHs, building a few Multi families for air bnb etc.


I wanted to pass by you folks to make sure it's a decent deal for me. I am investing about 50k which is 3.3% stake out of 1.58mm capital being raised for the deal. 

The projected annual return is 43.86% with a 3.01 equity multiple.


They are sending me the operating agreement now. Anything else I need to be considering? Get a lawyer to look over the docs?


Thanks,
Brandon

4Reply
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Taylor L.
Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
4y

Don't focus as much on the projected returns. Focus on the team, their experience, and the business plan first and foremost. 

Are passive investors put first in the deal, earning a return before the sponsors? What are the risks and how are they being mitigated?

Although I will say, those projected returns are very high. Concerningly so. Anyone projecting returns that high had better have some strong reasoning behind it and a track record with this specific strategy. Even then, I always lean toward more conservative projections with the potential to outperform. You only need base hits repeated over time in order to become wealthy. Swinging for the fences every time is a recipe for losing money. 

Hiring an attorney to look at the documents is a good idea but doesn't come cheap.

I would recommend googling things along the lines of "Evaluating passive real estate syndications." The first couple of pages of Google actually turn up some decent advice that can get you started.

7Reply
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  • Taylor L.
    Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
    4y

    Don't focus as much on the projected returns. Focus on the team, their experience, and the business plan first and foremost. 

    Are passive investors put first in the deal, earning a return before the sponsors? What are the risks and how are they being mitigated?

    Although I will say, those projected returns are very high. Concerningly so. Anyone projecting returns that high had better have some strong reasoning behind it and a track record with this specific strategy. Even then, I always lean toward more conservative projections with the potential to outperform. You only need base hits repeated over time in order to become wealthy. Swinging for the fences every time is a recipe for losing money. 

    Hiring an attorney to look at the documents is a good idea but doesn't come cheap.

    I would recommend googling things along the lines of "Evaluating passive real estate syndications." The first couple of pages of Google actually turn up some decent advice that can get you started.

    7Reply
  • Brandon Craig
    OP
    Member since 2022 · 51 posts · 23 votes
    4y
    Quote from @Taylor L.:

    Don't focus as much on the projected returns. Focus on the team, their experience, and the business plan first and foremost. 

    Are passive investors put first in the deal, earning a return before the sponsors? What are the risks and how are they being mitigated?

    Although I will say, those projected returns are very high. Concerningly so. Anyone projecting returns that high had better have some strong reasoning behind it and a track record with this specific strategy. Even then, I always lean toward more conservative projections with the potential to outperform. You only need base hits repeated over time in order to become wealthy. Swinging for the fences every time is a recipe for losing money. 

    Hiring an attorney to look at the documents is a good idea but doesn't come cheap.

    I would recommend googling things along the lines of "Evaluating passive real estate syndications." The first couple of pages of Google actually turn up some decent advice that can get you started.


     Great advice. They sent a very professional slide pitch deck that showed all of their justifications around that specific market, e.g. employment market, housing shortage data, the new developments in the area, the air bnb data, etc. etc.


    They also stated the numbers were conservative (7 year to reach the target returns) and that likely it will be year 4-5. They states investors come first and will receive their money back at the least regardless. I will check out the operator agreement thoroughly. 

    Quarterly distribution, 100% capital return by 2024 Q2 with first distribution in Year 2 Q1.

    0Reply
  • Taylor L.
    Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
    4y
    Quote from @Brandon Craig:
    Quote from @Taylor L.:

    Great advice. They sent a very professional slide pitch deck that showed all of their justifications around that specific market, e.g. employment market, housing shortage data, the new developments in the area, the air bnb data, etc. etc.


    They also stated the numbers were conservative (7 year to reach the target returns) and that likely it will be year 4-5. They states investors come first and will receive their money back at the least regardless. I will check out the operator agreement thoroughly. 

    Quarterly distribution, 100% capital return by 2024 Q2 with first distribution in Year 2 Q1.

     Everybody says their projections are conservative :) It's up to you to determine if you agree.

    5Reply
  • Jim Pellerin
    Real Estate Consultant · USA · Member since 2014 · 1k+ posts · 751 votes
    4y
    Quote from @Brandon Craig:

    Hi All,

    I found a friend in my martial arts class that has been in real estate for 10 years. They are raising capital for a 506b (family and friends unaccredited) hybrid deal (in another state) that includes an apartment, selling some SFHs, building a few Multi families for air bnb etc.


    I wanted to pass by you folks to make sure it's a decent deal for me. I am investing about 50k which is 3.3% stake out of 1.58mm capital being raised for the deal. 

    The projected annual return is 43.86% with a 3.01 equity multiple.


    They are sending me the operating agreement now. Anything else I need to be considering? Get a lawyer to look over the docs?


    Thanks,
    Brandon

    The only way I would trust those projected returns is if they have a previous performance record to back it up. I hav seen many private equity deals where the IRR is between 20% and 30%.

    I also don't like the way they are mixing all the different strategies.
    4Reply
  • Account Closed
    Investor · Atlanta, GA · Member since 2017 · 174 posts · 104 votes
    4y

    43.86% annual return but 3.01x EM. Would love to see the math behind this.  

    5Reply
  • Ryan Tuttle
    Lender · Santa Monica, CA · Member since 2017 · 31 posts · 10 votes
    4y

    That IRR seems somewhat unreal, in all honesty. We structure equity with IRRs in the 15%-20% range.

    Would love to see the deck and model

    2Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    4y

    @Brandon Craig

    If they have a 40% annual return in their PPM and offering info run for the hills. If that was the case and they delivered that return they could raise $1 trillion as who wouldn’t want a 40% return….

    Also find out how much of their own $ they have invested in the deal. What is the flow of funds - who gets paid first and what are the management fees

    What are the lock up period

    We put together a 20 question questionnaire to ask your syndicator. Let me know if you want a question

    7e investments53 Reviews
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    4Reply
  • Brandon Craig
    OP
    Member since 2022 · 51 posts · 23 votes
    4y
    Quote from @Chris Seveney:

    @Brandon Craig

    If they have a 40% annual return in their PPM and offering info run for the hills. If that was the case and they delivered that return they could raise $1 trillion as who wouldn’t want a 40% return….

    Also find out how much of their own $ they have invested in the deal. What is the flow of funds - who gets paid first and what are the management fees

    What are the lock up period

    We put together a 20 question questionnaire to ask your syndicator. Let me know if you want a question

    They have 0 in the deal it’s all investors 50/50 GM/LP

    investors first. 
    2% acquisition fee
    10% asset management fee
    1% capital transaction fee
    10% preferred return to LPs

    Year 2 refi+NOI shows 121% COC and year 7 155% on sale. In between years are 5-8%


    0Reply
  • John Teachout
    Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
    4y

    We've invested in multiple syndications and while I'm no expert on them, I will say that this sounds like one of those "too good to be true" situations. It appears to be pretty unrealistic.

    3Reply
  • Brandon Craig
    OP
    Member since 2022 · 51 posts · 23 votes
    4y
    Quote from @Chris Seveney:

    @Brandon Craig

    If they have a 40% annual return in their PPM and offering info run for the hills. If that was the case and they delivered that return they could raise $1 trillion as who wouldn’t want a 40% return….

    Also find out how much of their own $ they have invested in the deal. What is the flow of funds - who gets paid first and what are the management fees

    What are the lock up period

    We put together a 20 question questionnaire to ask your syndicator. Let me know if you want a question

    Can you send me those questions? I have a call with them tmrw. 

    thanks.
    0Reply
  • Damian Smith
    Developer · Marlton, NJ · Member since 2019 · 44 posts · 8 votes
    4y

    @Chris Seveney

    Hey Chris could you send that questionnaire to me that is something i could use.

    0Reply
  • Taylor L.
    Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
    4y
    Quote from @Brandon Craig:
    Quote from @Chris Seveney:

    @Brandon Craig

    If they have a 40% annual return in their PPM and offering info run for the hills. If that was the case and they delivered that return they could raise $1 trillion as who wouldn’t want a 40% return….

    Also find out how much of their own $ they have invested in the deal. What is the flow of funds - who gets paid first and what are the management fees

    What are the lock up period

    We put together a 20 question questionnaire to ask your syndicator. Let me know if you want a question

    They have 0 in the deal it’s all investors 50/50 GM/LP

    investors first. 
    2% acquisition fee
    10% asset management fee
    1% capital transaction fee
    10% preferred return to LPs

    Year 2 refi+NOI shows 121% COC and year 7 155% on sale. In between years are 5-8%

     

    That is a terrible deal for the investors. You bear all the risk and the sponsor gets a big cut, while make preposterous fees all along the way. Fees are a key part of making syndications work, so they are a necessary part of the business. However, fees should mainly 'keep the lights on' for the sponsor. A 10% Asset Management fee is completely absurd, unless that's a typo. Even then, the sponsor must have skin in the game. Passive investors should eat first and sponsors should bear risk first.

    1Reply
  • Brandon Craig
    OP
    Member since 2022 · 51 posts · 23 votes
    4y
    Quote from @Taylor L.:
    Quote from @Brandon Craig:
    Quote from @Chris Seveney:

    @Brandon Craig

    If they have a 40% annual return in their PPM and offering info run for the hills. If that was the case and they delivered that return they could raise $1 trillion as who wouldn’t want a 40% return….

    Also find out how much of their own $ they have invested in the deal. What is the flow of funds - who gets paid first and what are the management fees

    What are the lock up period

    We put together a 20 question questionnaire to ask your syndicator. Let me know if you want a question

    They have 0 in the deal it’s all investors 50/50 GM/LP

    investors first. 
    2% acquisition fee
    10% asset management fee
    1% capital transaction fee
    10% preferred return to LPs

    Year 2 refi+NOI shows 121% COC and year 7 155% on sale. In between years are 5-8%

     

    That is a terrible deal for the investors. You bear all the risk and the sponsor gets a big cut, while make preposterous fees all along the way. Fees are a key part of making syndications work, so they are a necessary part of the business. However, fees should mainly 'keep the lights on' for the sponsor. A 10% Asset Management fee is completely absurd, unless that's a typo. Even then, the sponsor must have skin in the game. Passive investors should eat first and sponsors should bear risk first.

    Thanks for the info. Well if you know of any syndications let me know.. I’m on the hunt over here in Dallas. 
    0Reply
  • Brock Mogensen
    Real Estate Syndicator · Milwaukee, WI · Member since 2018 · 1k+ posts · 907 votes
    4y

    Returns sound solid.  I would also dig into the assumptions they are making in the numbers.  Want to ensure there are not super aggressive rent growth, operating expense, exit cap figures.

    Having an attorney look over the docs is never a bad idea.  But don't expect to make any changes to the docs, because the GP's will not be able to accommodate Invidia requests on the legal doc language.

    0Reply
  • Brandon Craig
    OP
    Member since 2022 · 51 posts · 23 votes
    4y
    Quote from @Brock Mogensen:

    Returns sound solid.  I would also dig into the assumptions they are making in the numbers.  Want to ensure there are not super aggressive rent growth, operating expense, exit cap figures.

    Having an attorney look over the docs is never a bad idea.  But don't expect to make any changes to the docs, because the GP's will not be able to accommodate Invidia requests on the legal doc language.

    Well others have a stated 43% return is not legit and 10% asset management is also bad
    0Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    4y
    Quote from @Brandon Craig:
    Quote from @Chris Seveney:

    @Brandon Craig

    If they have a 40% annual return in their PPM and offering info run for the hills. If that was the case and they delivered that return they could raise $1 trillion as who wouldn’t want a 40% return….

    Also find out how much of their own $ they have invested in the deal. What is the flow of funds - who gets paid first and what are the management fees

    What are the lock up period

    We put together a 20 question questionnaire to ask your syndicator. Let me know if you want a question

    They have 0 in the deal it’s all investors 50/50 GM/LP

    investors first. 
    2% acquisition fee
    10% asset management fee
    1% capital transaction fee
    10% preferred return to LPs

    Year 2 refi+NOI shows 121% COC and year 7 155% on sale. In between years are 5-8%
     

    I was very skeptical when reading your initial post and a few follow ups. After reading this last post, I now know my skepticism was highly warranted. 10% management fee? I would love to get that high of a fee. 50%/50% split? I would love to get that much as a sponsor! NO skin in the game for the sponsor? Not a good answer. The truth is, those numbers and terms are just not going to work. Proceed with extreme caution on this one or better yet, run. While it may work out, it sounds like a real long shot especially with the splits and fees as they are!
    Podcast Guest on Show #130
    0Reply
  • Brandon Craig
    OP
    Member since 2022 · 51 posts · 23 votes
    4y
    Quote from @Will Barnard:
    Quote from @Brandon Craig:
    Quote from @Chris Seveney:

    @Brandon Craig

    If they have a 40% annual return in their PPM and offering info run for the hills. If that was the case and they delivered that return they could raise $1 trillion as who wouldn’t want a 40% return….

    Also find out how much of their own $ they have invested in the deal. What is the flow of funds - who gets paid first and what are the management fees

    What are the lock up period

    We put together a 20 question questionnaire to ask your syndicator. Let me know if you want a question

    They have 0 in the deal it’s all investors 50/50 GM/LP

    investors first. 
    2% acquisition fee
    10% asset management fee
    1% capital transaction fee
    10% preferred return to LPs

    Year 2 refi+NOI shows 121% COC and year 7 155% on sale. In between years are 5-8%
     

    I was very skeptical when reading your initial post and a few follow ups. After reading this last post, I now know my skepticism was highly warranted. 10% management fee? I would love to get that high of a fee. 50%/50% split? I would love to get that much as a sponsor! NO skin in the game for the sponsor? Not a good answer. The truth is, those numbers and terms are just not going to work. Proceed with extreme caution on this one or better yet, run. While it may work out, it sounds like a real long shot especially with the splits and fees as they are!
    Sponsors fall under General partner with the management folks that find and manage the deal and asset right? 

    then the investors like myself are limited partner?

    so The investors and I are splitting the 50% based on how much we contribute 
    0Reply
  • Brandon Craig
    OP
    Member since 2022 · 51 posts · 23 votes
    4y
    Quote from @Will Barnard:
    Quote from @Brandon Craig:
    Quote from @Chris Seveney:

    @Brandon Craig

    If they have a 40% annual return in their PPM and offering info run for the hills. If that was the case and they delivered that return they could raise $1 trillion as who wouldn’t want a 40% return….

    Also find out how much of their own $ they have invested in the deal. What is the flow of funds - who gets paid first and what are the management fees

    What are the lock up period

    We put together a 20 question questionnaire to ask your syndicator. Let me know if you want a question

    They have 0 in the deal it’s all investors 50/50 GM/LP

    investors first. 
    2% acquisition fee
    10% asset management fee
    1% capital transaction fee
    10% preferred return to LPs

    Year 2 refi+NOI shows 121% COC and year 7 155% on sale. In between years are 5-8%
     

    I was very skeptical when reading your initial post and a few follow ups. After reading this last post, I now know my skepticism was highly warranted. 10% management fee? I would love to get that high of a fee. 50%/50% split? I would love to get that much as a sponsor! NO skin in the game for the sponsor? Not a good answer. The truth is, those numbers and terms are just not going to work. Proceed with extreme caution on this one or better yet, run. While it may work out, it sounds like a real long shot especially with the splits and fees as they are!

     And isn’t 10% normal for someone to manage a property?

    0Reply
  • Colton Hahn
    Specialist · Member since 2021 · 322 posts · 273 votes
    4y
    Quote from @Brandon Craig:
    Quote from @Will Barnard:
    Quote from @Brandon Craig:
    Quote from @Chris Seveney:

    @Brandon Craig

    If they have a 40% annual return in their PPM and offering info run for the hills. If that was the case and they delivered that return they could raise $1 trillion as who wouldn’t want a 40% return….

    Also find out how much of their own $ they have invested in the deal. What is the flow of funds - who gets paid first and what are the management fees

    What are the lock up period

    We put together a 20 question questionnaire to ask your syndicator. Let me know if you want a question

    They have 0 in the deal it’s all investors 50/50 GM/LP

    investors first. 
    2% acquisition fee
    10% asset management fee
    1% capital transaction fee
    10% preferred return to LPs

    Year 2 refi+NOI shows 121% COC and year 7 155% on sale. In between years are 5-8%
     

    I was very skeptical when reading your initial post and a few follow ups. After reading this last post, I now know my skepticism was highly warranted. 10% management fee? I would love to get that high of a fee. 50%/50% split? I would love to get that much as a sponsor! NO skin in the game for the sponsor? Not a good answer. The truth is, those numbers and terms are just not going to work. Proceed with extreme caution on this one or better yet, run. While it may work out, it sounds like a real long shot especially with the splits and fees as they are!

     And isn’t 10% normal for someone to manage a property?

     From our research industry average is around 1%. We charge maximum of 1% depending on the deal.

    10% is INSANE. 

    1Reply
  • Brandon Craig
    OP
    Member since 2022 · 51 posts · 23 votes
    4y
    Quote from @Colton Hahn:
    Quote from @Brandon Craig:
    Quote from @Will Barnard:
    Quote from @Brandon Craig:
    Quote from @Chris Seveney:

    @Brandon Craig

    If they have a 40% annual return in their PPM and offering info run for the hills. If that was the case and they delivered that return they could raise $1 trillion as who wouldn’t want a 40% return….

    Also find out how much of their own $ they have invested in the deal. What is the flow of funds - who gets paid first and what are the management fees

    What are the lock up period

    We put together a 20 question questionnaire to ask your syndicator. Let me know if you want a question

    They have 0 in the deal it’s all investors 50/50 GM/LP

    investors first. 
    2% acquisition fee
    10% asset management fee
    1% capital transaction fee
    10% preferred return to LPs

    Year 2 refi+NOI shows 121% COC and year 7 155% on sale. In between years are 5-8%
     

    I was very skeptical when reading your initial post and a few follow ups. After reading this last post, I now know my skepticism was highly warranted. 10% management fee? I would love to get that high of a fee. 50%/50% split? I would love to get that much as a sponsor! NO skin in the game for the sponsor? Not a good answer. The truth is, those numbers and terms are just not going to work. Proceed with extreme caution on this one or better yet, run. While it may work out, it sounds like a real long shot especially with the splits and fees as they are!

     And isn’t 10% normal for someone to manage a property?

     From our research industry average is around 1%. We charge maximum of 1% depending on the deal.

    10% is INSANE. 

    There are 6 air bnbs (3 duplex) they are building using the money from selling 12 SFH in the deal. 

    the deal includes this and a 16 plex. 

    They said that is why the fee is 10%.  
    that is also why the IRR and return is so high, 6 air bnbs bumps it up. 

    does that change things in the sketchiness?
    0Reply
  • Brandon Craig
    OP
    Member since 2022 · 51 posts · 23 votes
    4y
    Quote from @Brandon Craig:
    Quote from @Colton Hahn:
    Quote from @Brandon Craig:
    Quote from @Will Barnard:
    Quote from @Brandon Craig:
    Quote from @Chris Seveney:

    @Brandon Craig

    If they have a 40% annual return in their PPM and offering info run for the hills. If that was the case and they delivered that return they could raise $1 trillion as who wouldn’t want a 40% return….

    Also find out how much of their own $ they have invested in the deal. What is the flow of funds - who gets paid first and what are the management fees

    What are the lock up period

    We put together a 20 question questionnaire to ask your syndicator. Let me know if you want a question

    They have 0 in the deal it’s all investors 50/50 GM/LP

    investors first. 
    2% acquisition fee
    10% asset management fee
    1% capital transaction fee
    10% preferred return to LPs

    Year 2 refi+NOI shows 121% COC and year 7 155% on sale. In between years are 5-8%
     

    I was very skeptical when reading your initial post and a few follow ups. After reading this last post, I now know my skepticism was highly warranted. 10% management fee? I would love to get that high of a fee. 50%/50% split? I would love to get that much as a sponsor! NO skin in the game for the sponsor? Not a good answer. The truth is, those numbers and terms are just not going to work. Proceed with extreme caution on this one or better yet, run. While it may work out, it sounds like a real long shot especially with the splits and fees as they are!

     And isn’t 10% normal for someone to manage a property?

     From our research industry average is around 1%. We charge maximum of 1% depending on the deal.

    10% is INSANE. 

    There are 6 air bnbs (3 duplex) they are building using the money from selling 12 SFH in the deal. 

    the deal includes this and a 16 plex. 

    They said that is why the fee is 10%.  
    that is also why the IRR and return is so high, 6 air bnbs bumps it up. 

    does that change things in the sketchiness?
    Also they confirmed they have skin in the game. They paid the close on first phase of the deal, 16 SFH, earnest and legal fees 
    0Reply
  • John Teachout
    Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
    4y
    Quote from @Brandon Craig:
    Quote from @Will Barnard:
    Quote from @Brandon Craig:
    Quote from @Chris Seveney:

    @Brandon Craig

    If they have a 40% annual return in their PPM and offering info run for the hills. If that was the case and they delivered that return they could raise $1 trillion as who wouldn’t want a 40% return….

    Also find out how much of their own $ they have invested in the deal. What is the flow of funds - who gets paid first and what are the management fees

    What are the lock up period

    We put together a 20 question questionnaire to ask your syndicator. Let me know if you want a question

    They have 0 in the deal it’s all investors 50/50 GM/LP

    investors first. 
    2% acquisition fee
    10% asset management fee
    1% capital transaction fee
    10% preferred return to LPs

    Year 2 refi+NOI shows 121% COC and year 7 155% on sale. In between years are 5-8%
     

    I was very skeptical when reading your initial post and a few follow ups. After reading this last post, I now know my skepticism was highly warranted. 10% management fee? I would love to get that high of a fee. 50%/50% split? I would love to get that much as a sponsor! NO skin in the game for the sponsor? Not a good answer. The truth is, those numbers and terms are just not going to work. Proceed with extreme caution on this one or better yet, run. While it may work out, it sounds like a real long shot especially with the splits and fees as they are!

     And isn’t 10% normal for someone to manage a property?


    10 percent to manage a property is typical but not to manage a fund or syndication. Most syndications have a management company in place but that is not related to their asset management fees...
    0Reply
  • Brandon Craig
    OP
    Member since 2022 · 51 posts · 23 votes
    4y
    Quote from @John Teachout:
    Quote from @Brandon Craig:
    Quote from @Will Barnard:
    Quote from @Brandon Craig:
    Quote from @Chris Seveney:

    @Brandon Craig

    If they have a 40% annual return in their PPM and offering info run for the hills. If that was the case and they delivered that return they could raise $1 trillion as who wouldn’t want a 40% return….

    Also find out how much of their own $ they have invested in the deal. What is the flow of funds - who gets paid first and what are the management fees

    What are the lock up period

    We put together a 20 question questionnaire to ask your syndicator. Let me know if you want a question

    They have 0 in the deal it’s all investors 50/50 GM/LP

    investors first. 
    2% acquisition fee
    10% asset management fee
    1% capital transaction fee
    10% preferred return to LPs

    Year 2 refi+NOI shows 121% COC and year 7 155% on sale. In between years are 5-8%
     

    I was very skeptical when reading your initial post and a few follow ups. After reading this last post, I now know my skepticism was highly warranted. 10% management fee? I would love to get that high of a fee. 50%/50% split? I would love to get that much as a sponsor! NO skin in the game for the sponsor? Not a good answer. The truth is, those numbers and terms are just not going to work. Proceed with extreme caution on this one or better yet, run. While it may work out, it sounds like a real long shot especially with the splits and fees as they are!

     And isn’t 10% normal for someone to manage a property?


    10 percent to manage a property is typical but not to manage a fund or syndication. Most syndications have a management company in place but that is not related to their asset management fees...
    They said property management is wrapped in the 10% asset management fee. 

    Because 6 air bnbs are in included in the deal with a 16 unit apartment, the fee is higher than normal.
    0Reply
  • John Teachout
    Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
    4y

    So unless the property management is going to be done by the deal sponsors, they're not delineating what amount is going to which... The more details that come out about the structure of this syndication the hokier it sounds to me. You seem to be committed to moving forward with it so all I can suggest is to bring this thread back to life in a few years and let everyone know what happened.

    0Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    4y
    Quote from @John Teachout:

    So unless the property management is going to be done by the deal sponsors, they're not delineating what amount is going to which... The more details that come out about the structure of this syndication the hokier it sounds to me. You seem to be committed to moving forward with it so all I can suggest is to bring this thread back to life in a few years and let everyone know what happened.


    I agree with this. 10% fee, even considering PM fees in it appears to be high and neither is specified as to how much goes to each. If they are doing a 2% and 8%, then the sponsor management fee is double the norm. There have been quite a number of red flags and warnings in this thread and many of your responses tend to be, "but what about this and this is why that is" leading me to believe you have already made up your mind that moving forward is a good idea so I wont try and change your mind but again, warn you that some things in this syndication are outside the norm and the promised rates of return (STR's in the package included) are abnormally high leading me to believe that the investors will have a much higher chance of disappointment than satisfaction. A syndication should be well focused and this particular offering is all over the board. If you like the idea of investing in a syndication with STR's, then find one that focuses on that and has a good track record. If you like the apartment syndication process, then go with that. Combining so many strategies into one syndication offering is rarely a great idea.

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