10% of a $4 million deal or 100% of a $400,000 deal?

6 Replies

@Brandon Turner always says that 50% of a great deal is better than 100% of no deal, but what about a small percentage of a large deal vs 100% of a smaller deal?

It seems like there is a lot of love for syndication and partners on BP. The advantages I see with that are that you can bring in expertise that you lack, along with being able to take advantage of some economies of scale.

On the other hand having 100% of control of a deal and not having to answer to anyone else sounds divine.

Curious what BP thinks about this.

I've been thinking a lot about this same question recently. I think ultimately it depends on deals and figures. Interest rates are reasonable today (though the market in many places is saturated), which means that instead of owning a finance-free REI property for $400k may not be as favorable as financing 4 deals for $400k, down paying $100k each (25%), hopefully cash-flowing, and building equity. If that makes sense.


Essentially, is still boils down to: how GREAT is the "deal"? [And, who ultimately gets to decide?]...

I like the idea of syndication at 10% over owning 100% of a $400k deal. That's because with syndication you are leveraging knowledge, systems, money, and taking advantage of economies or scale. Plus you would have more credibility/track record with a syndicated $4million dollar than simply owning something outright. 

Just my opinion...everyones goals are different and every deal is different. I can see doing the $400k deal if there was huge upside and it was a homerun. 

@Eric M. It likely depends on your personality. If you want "control" then you're not going to want to be part of a syndication. You have other people have had influence over your capital. Even at the end when the property is sold even if you'd rather hold. But it's passive so it's a completely different investment mindset. If I wanted something completely passive I'd probably skip syndication and move right into a publicly-traded REIT. At least then I still have control over pulling my capital out if I don't like the performance.

I think the question to ask is what happens when things don't go right.. when you own something out right you have a little more flexibility on what to do.

when your part of a large group.. your dependent on others for your outcome... Sponsor in these deals in my mind is far more important than the deal.. there are deals everywhere that's not hard to do.. finding qualified ( VERY EXPERIENCED) sponsors who have been through many economic cycles is hard to do.

Control freaks go for owning the asset and don't like to be part of the crowd or the group.. those that want to hand everything off and let someone else run it.. those are the types  and ( personality types) that like the group approach.

its all rosy until it isn't  :)

Also consider who you are partnering with. Very important!

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here