Professionalism difference: Syndicators vs. Turnkey/PMs

17 Replies

There seems to be a difference between the level of professionalism (communication, promptness, clarity, responsiveness, etc.) between the sponsor of a syndication project versus a Turnkey provider or their PMs.

I suspect there are many easy to see (and some hard to see) reasons for this, but I want to open the discussion. First off, the syndication sponsors I have worked with seem to be more prompt and personable individuals. Emails are typically replied to within 24-48 hours, and they get stuff done. Without me having to ask them the same thing for weeks at a time. There are exceptions as some Turnkey outfits are not bad, but there is a difference for sure.

I have two out of state "Turnkey-type" investments (one an individually owned property, same for the other except in a self-directed IRA). It seems like the folks are nice enough, but it takes a longer time to clear up what is going on. It usually takes multiple phone calls. However, with the 3 private placement sponsors I have invested with in many deals (soon to be 5), there is an air of professionalism that is palpable.

What is your experience? What has your experience been with Turnkey providers? Managing the property manager? Sponsors of equity investments? Would love to hear your thoughts.

As a syndication sponsor I can speak to part of this question from this side of the fence.  Running a successful syndication company completely depends on our investor base.  And because we cannot advertise (we don't do 506(c)) the growth of our investor base is entirely dependent on word of mouth and referrals.  Screw that up and you are done.  

I suppose one could say the same about the TK business but I haven't been on that side of the fence so I shouldn't speculate.

Speaking only for myself, our investors and our track record are our highest priorities, and these two things go hand in hand.  As a result, we place a lot of focus on customer service (investor relations), communication and reporting.  Our competitors aren't other syndicators, its other investment providers such as banks, brokerage firms, etc.  Those folks run a sophisticated operation, and if we don't keep up with their level of sophistication (and exceed their customer service) we would lose business to other investment classes that treat their investors better.

Perhaps it could be said that the competitor to TK firms is buying homes directly, and that competition lacks sophistication--thus the hurdle is just above that level and anything above that is good enough.  That said, I'm sure there are plenty of TK folks that are totally professional so I'm not picking on them--just speculating on the source of the OP's experience as described in the post.

This is an interesting observation. The easy, but unfair, commentary would be to say that the barrier to entry is simply much higher with syndications, and you simply get better people. I am not sure, however, that this is either fair or true. I think, that while you may be right in your observation, there are more rational explanations...

The reason, I would suspect, for the fundamental difference you are sensing goes back to the fundamental difference in the investment vehicle itself. Taken by itself, SFR is not easily systematize-able. There is just not enough income coming in to afford the type of systems which would allow the sponsor flexibility to focus on you - the investor. The provider does the job of 4 people often enough, from GC to PM and everything in between. 

The answer becomes more SFRs, but this can instead of solving the issue, exacerbate it, leading to so-so communication.

Thus, I think that most TK guys and gals are good people who try, but there are structural deficiencies that are almost impossible to overcome within the model itself.

As you know, when we buy apartments, property management, contractor budgets, and pay roll are all included into the model. Systematize-able... 

Originally posted by @Andrey Y. :

There seems to be a difference between the level of professionalism (communication, promptness, clarity, responsiveness, etc.) between the sponsor of a syndication project versus a Turnkey provider or their PMs.

I suspect there are many easy to see (and some hard to see) reasons for this, but I want to open the discussion. First off, the syndication sponsors I have worked with seem to be more prompt and personable individuals. Emails are typically replied to within 24-48 hours, and they get stuff done. Without me having to ask them the same thing for weeks at a time. There are exceptions as some Turnkey outfits are not bad, but there is a difference for sure.

I have two out of state "Turnkey-type" investments (one an individually owned property, same for the other except in a self-directed IRA). It seems like the folks are nice enough, but it takes a longer time to clear up what is going on. It usually takes multiple phone calls. However, with the 3 private placement sponsors I have invested with in many deals (soon to be 5), there is an air of professionalism that is palpable.

What is your experience? What has your experience been with Turnkey providers? Managing the property manager? Sponsors of equity investments? Would love to hear your thoughts.

I come from both sides of this and I would say it really just depends on the company. For example, being apart of a Turnkey Provider I know it is important to respond to someone in 24 hours or less. It's your investment and I can understand what it is like to have questions and not have them answered as soon as possible. It really just depends on the company you deal with and their level of professionalism. Maybe the TK companies you worked with were just some bad apples.

Good luck to you! 

I own both SFR and commercial real estate and the commercial side is significantly more efficient. It's easier to systematize investor relations with commercial real estate where much of the communication is a similar message to hundreds or thousands of investors...than it is for a 3rd party PM to communicate disparate information with the same number of individual investors. It scales better.

There are crappy syndication and unprofessional offerings and communication out there as well.  They are just disguised in shiny offering materials and silver tongues.

Originally posted by @Brian Burke :

As a syndication sponsor I can speak to part of this question from this side of the fence.  Running a successful syndication company completely depends on our investor base.  And because we cannot advertise (we don't do 506(c)) the growth of our investor base is entirely dependent on word of mouth and referrals.  Screw that up and you are done.  

I suppose one could say the same about the TK business but I haven't been on that side of the fence so I shouldn't speculate.

Speaking only for myself, our investors and our track record are our highest priorities, and these two things go hand in hand.  As a result, we place a lot of focus on customer service (investor relations), communication and reporting.  Our competitors aren't other syndicators, its other investment providers such as banks, brokerage firms, etc.  Those folks run a sophisticated operation, and if we don't keep up with their level of sophistication (and exceed their customer service) we would lose business to other investment classes that treat their investors better.

Perhaps it could be said that the competitor to TK firms is buying homes directly, and that competition lacks sophistication--thus the hurdle is just above that level and anything above that is good enough.  That said, I'm sure there are plenty of TK folks that are totally professional so I'm not picking on them--just speculating on the source of the OP's experience as described in the post.

 Well said.

Originally posted by @Ben Leybovich :

This is an interesting observation. The easy, but unfair, commentary would be to say that the barrier to entry is simply much higher with syndications, and you simply get better people. I am not sure, however, that this is either fair or true. I think, that while you may be right in your observation, there are more rational explanations...

The reason, I would suspect, for the fundamental difference you are sensing goes back to the fundamental difference in the investment vehicle itself. Taken by itself, SFR is not easily systematize-able. There is just not enough income coming in to afford the type of systems which would allow the sponsor flexibility to focus on you - the investor. The provider does the job of 4 people often enough, from GC to PM and everything in between. 

The answer becomes more SFRs, but this can instead of solving the issue, exacerbate it, leading to so-so communication.

Thus, I think that most TK guys and gals are good people who try, but there are structural deficiencies that are almost impossible to overcome within the model itself.

As you know, when we buy apartments, property management, contractor budgets, and pay roll are all included into the model. Systematize-able... 

I observed a similar thing in my own experience. SFH that I acquired and managed myself did really well. This started to take too much time. It was not scalable for someone that works full time. And I haven't found that paying for a PM is profitable or scalable unless you can acquire 100s of SFHs or condos. Maybe Grant Cardone was right all along!

@Andrey Y. I’m not accredited yet so haven’t done any private placement or syndication. However I own out of state and have two different PMs. I would say 95 percent of the time for both of them I get s response in under 24 hours (assuming during business week) Sometimes it’s under an hour, probably half the time. So I would just say your individual investment PMs are lacking in that regard.

I haven't had much experience with syndication, but I know the PMs I work with, I always get their cell phone number and for the most part just text. If it's something formal, I'll emailed. But if it's something quick like, hey how is the rehab coming, or where do we stand with signing a new tenant, I just text. Usually get a response within half an hour. 

Originally posted by @Andrey Y. :
Originally posted by @Ben Leybovich:

This is an interesting observation. The easy, but unfair, commentary would be to say that the barrier to entry is simply much higher with syndications, and you simply get better people. I am not sure, however, that this is either fair or true. I think, that while you may be right in your observation, there are more rational explanations...

The reason, I would suspect, for the fundamental difference you are sensing goes back to the fundamental difference in the investment vehicle itself. Taken by itself, SFR is not easily systematize-able. There is just not enough income coming in to afford the type of systems which would allow the sponsor flexibility to focus on you - the investor. The provider does the job of 4 people often enough, from GC to PM and everything in between. 

The answer becomes more SFRs, but this can instead of solving the issue, exacerbate it, leading to so-so communication.

Thus, I think that most TK guys and gals are good people who try, but there are structural deficiencies that are almost impossible to overcome within the model itself.

As you know, when we buy apartments, property management, contractor budgets, and pay roll are all included into the model. Systematize-able... 

I observed a similar thing in my own experience. SFH that I acquired and managed myself did really well. This started to take too much time. It was not scalable for someone that works full time. And I haven't found that paying for a PM is profitable or scalable unless you can acquire 100s of SFHs or condos. Maybe Grant Cardone was right all along!

There is no "may be" as to whether Grant Cardone was right in this respect. He is also right on "no cranes" and $800 - $1,200 rents. Yet again, non of this is magic or beyond the realm of logical thought, so it's not exactly that Cardone has the magic dust :)

Logic is key...

@Brian Burke   I think one main difference is the syndicator can send out a blast email to all investors at once on a specific property. 

turn key or PM has 1000 different properties for 700 different people and 600 different messages much much tougher..

But generally speaking syndication is a higher level organization for sure..  turn key is pretty rudimentary at its base.

owner/investor  one house one owner one tenant.. … 

and your not doing tax returns for them or other accounting and such and your not on their loans with them etc.

but I can see how @Andrey Y.   would get that impression...  

@Jay Hinrichs . And @Andrey Y. I also find those with dedicated client management staff do better than those who don’t have this. Makes it easier to keep all the messages straight and makes it more likely you get a response when there is more then 1 person who can respond

My goal by end of 2019 is to be entirely out of single family, have 1 or 2 NNN properties valued at $5MM, and to have $1M in equity deployed into passive syndications.

Having a payed off asset 30 years from now is not as enticing as the prospect of not having to deal with tenants ;)

Originally posted by @Tom Ott :
Originally posted by @Andrey Y.:

There seems to be a difference between the level of professionalism (communication, promptness, clarity, responsiveness, etc.) between the sponsor of a syndication project versus a Turnkey provider or their PMs.

I suspect there are many easy to see (and some hard to see) reasons for this, but I want to open the discussion. First off, the syndication sponsors I have worked with seem to be more prompt and personable individuals. Emails are typically replied to within 24-48 hours, and they get stuff done. Without me having to ask them the same thing for weeks at a time. There are exceptions as some Turnkey outfits are not bad, but there is a difference for sure.

I have two out of state "Turnkey-type" investments (one an individually owned property, same for the other except in a self-directed IRA). It seems like the folks are nice enough, but it takes a longer time to clear up what is going on. It usually takes multiple phone calls. However, with the 3 private placement sponsors I have invested with in many deals (soon to be 5), there is an air of professionalism that is palpable.

What is your experience? What has your experience been with Turnkey providers? Managing the property manager? Sponsors of equity investments? Would love to hear your thoughts.

I come from both sides of this and I would say it really just depends on the company. For example, being apart of a Turnkey Provider I know it is important to respond to someone in 24 hours or less. It's your investment and I can understand what it is like to have questions and not have them answered as soon as possible. It really just depends on the company you deal with and their level of professionalism. Maybe the TK companies you worked with were just some bad apples.

Good luck to you! 

I think the two TK providers I used are actually fine. It just seems like a losing battle "managing the property manager" for $150/mo. after CapEx, and a 2-3% annual appreciation (most Turnkey markets). I'm sure others will disagree with me.

@Brian Burke makes a great point.  I only have experience on the syndication side of things but the reputation of a operator is what allows us to scale.

Websites like BP bring a level of transparency to the real estate investing marketplace that will only improve in the coming years.  Crowdsourcing of due diligence with groups like @Ian Ippolito forces operators to deliver or their reputation will keep groups/investors from reinvesting.

I don't think its syndication vs turnkey, I think its the quality of the business/people you are dealing with.  If I am willing to send you my money and I can't get a response in a timely manner BEFORE I invest in a project what do you think will happen if something goes wrong in the project?  

As a passive investor your success is completely tied to the quality of the operator no matter turnkey investing or syndication.  If your gut is telling you something about the person you are dealing with you are probably right......

Kris

Originally posted by @Account Closed :
Originally posted by @Andrey Y.:
Originally posted by @Tom Ott:
Originally posted by @Andrey Y.:

There seems to be a difference between the level of professionalism (communication, promptness, clarity, responsiveness, etc.) between the sponsor of a syndication project versus a Turnkey provider or their PMs.

I suspect there are many easy to see (and some hard to see) reasons for this, but I want to open the discussion. First off, the syndication sponsors I have worked with seem to be more prompt and personable individuals. Emails are typically replied to within 24-48 hours, and they get stuff done. Without me having to ask them the same thing for weeks at a time. There are exceptions as some Turnkey outfits are not bad, but there is a difference for sure.

I have two out of state "Turnkey-type" investments (one an individually owned property, same for the other except in a self-directed IRA). It seems like the folks are nice enough, but it takes a longer time to clear up what is going on. It usually takes multiple phone calls. However, with the 3 private placement sponsors I have invested with in many deals (soon to be 5), there is an air of professionalism that is palpable.

What is your experience? What has your experience been with Turnkey providers? Managing the property manager? Sponsors of equity investments? Would love to hear your thoughts.

I come from both sides of this and I would say it really just depends on the company. For example, being apart of a Turnkey Provider I know it is important to respond to someone in 24 hours or less. It's your investment and I can understand what it is like to have questions and not have them answered as soon as possible. It really just depends on the company you deal with and their level of professionalism. Maybe the TK companies you worked with were just some bad apples.

Good luck to you! 

I think the two TK providers I used are actually fine. It just seems like a losing battle "managing the property manager" for $150/mo. after CapEx, and a 2-3% annual appreciation (most Turnkey markets). I'm sure others will disagree with me.

Not me.   TURNKEY is great for the provider not the investor.  Its a scam incognito. 

What puzzles me is why you even want to do  syndications.   Seems you do well on your own.    Lets face it syndicators have one interest above all-  Themselves.    Collect money fee, acquisition fee, ongoing management fee,   watch contractor do upgrade fee, hire contractors fee,  disposition fee,   fee for doing refinance,  fee for doing financial statements,   20% fee if sell property at profit.

If investor happy with their 5% preferred return great..  

Say a syndication is obliged to sell in 6 years.  What if property values have fallen.   Can they change their mind as its a great property just bad timing.

When i buy RE i want control.

 I'm not sure it's accurate to say that investors in a syndication USUALLY get hosed. Do we have any hard data on this? What is your definition of getting "hosed"?

@Andrey Y. I couldn't agree more with @Brian Burke and @Kris Benson I have no experience with TK operators so can only speak about what I know.  I think it comes down to, treat other just like you want to be treated. More details on my personal approach from syndicatio standpoint is in my article: https://www.biggerpockets.com/blogs/10850/75569-care-for-your-investors-like-mom-cares-for-you