Accountant · St. Louis, MO · Member since 2019 · 17 posts · 4 votes
I have dipped my toe in some crowdfunding (Fundrise, Diversy Fund and Groundfloor) this year and I am looking for additional passive investing opportunities going forward. My question is how do I find syndications and funds that accept unaccredited investors when they are unable to market their products because of the limitations of 506(b)?
I would say a lot of times you will find syndicators commenting on these type of posts in the forums. I would just look into the members you see that are active here.
Look at who is creating multifamily investing content, posting about their previous deals, etc but who is not outright advertising their current offerings.
I know it is tough, but that's a start. Good luck!
I would say a lot of times you will find syndicators commenting on these type of posts in the forums. I would just look into the members you see that are active here.
@Eric J Platter These are good suggestions. You will see over time fewer and fewer 506b offerings because so many investors want to be able to advertise.
And conservative securities attorneys won't recommend 506b anymore to clients because websites and social media could be considered "chumming the water" and proving a substantial relationship is difficult as well.
506c eliminates so many concerns for the syndiator.
Listen to podcasts and look at the forums. You'll be able to see who is posting on the topics and get to understand who is doing syndications. Then reach out to them. 50% will not accept non-accredited and 50% will.
@Eric J Platter you can also reach out to 506(c) operators and just ask them if they know of any 506(b) sponsors.
Beyond that I agree with all the other posts, looking at signature blocks on Bigger Pockets, podcast guests, real estate advice books, blogs, etc are your typical routes to seek these offerings out.
@Stephen J Davis St Louis has a couple REI investor clubs but the put on @Megan Greathouse and STL REI Happy Hour is the best organized and most attended. I will broadcast my intentions and see what comes of it!
@Spencer Gray that is a great idea! I can think of at least one who is pumping out content but not actively advertising deals. Most of largest and popular are almost exclusively 506(c). I have reached out to Goodegg Investing, Aysm Capital, the DeRosa Group (@Matt Faircloth is the best!) and 37th Parallel.
@Jonathan Barr I have reached out to everyone here to expand my network and maybe I will find that pearl of great price [506(b)].
@Kent Leach I think you are correct that some (maybe most) securities attorneys are actively counseling their clients to stay away from 506(b) because the potential trap of advertising and triggering enforcement action by the SEC.
@Todd Dexheimer I have been listening them non-stop for the last year and is how I have found my first batch of companies and people to follow. I must keep digging and don't give him before I find a home for my passive investment dollars!
@Evan Polaski as part of one of the biggest operators do you have any recommendations? I know Ashcroft Capital would right up my alley by they are exclusively 506(c).
@Eric J Platter I have found LInkedIn to be a great source to expand my professional network. My group only takes accredited investors and we try to add value to those people by providing good content, leading networking events, etc. I see a lot of people on LinkedIn with "Multifamily Syndicator" or something similar on their profiles so they are easy to find but most have little real estate experience, so screen them well. I know a few people I trust that take sophisticated investors if you want to dm me. Either way, give LinkedIn a try.
@Paul Chapey I have certainly considered it but I do not have my CPA or CMA certifications. Currently what I reviewed is that the certifications are more geared towards stock brokers with their SEC series exams. I will need to be more patient until that happens or I find the elusive 506(b) syndication.
@Eric J Platter you've received some good ideas in this thread already, evidence of what a great platform BP is. As you explore those paths and find some 506b sponsors, make sure to take the time vet the sponsor and their opportunity and get validation from neutral parties and existing investors if you can.
Keep in mind that the most critical variable in your experience as an investor will be the PEOPLE you are investing in, not just the DEAL you are investing in. Trusting the sponsor will be paramount to you sleeping at night, and I can't stress that enough. It does no good to place capital with a sponsor who has a project with an attractive pro forma to find out later they can't be trusted. Making sense of the deal and understanding their track record is important, of course, but I believe you should develop TRUST before you invest. Developing that trust with someone you don't know may seem like a challenge, but if you approach it correctly, you should be able to achieve a pretty solid foundation of trust.
One of the best ways is to talk to others who have had an experience investing with the sponsor already. Simply ask the sponsor if they would be open to connecting you to a handful of investors who have known and invested with them for a long time. There is nothing that replaces a live conversation with someone who has already built that trust with the sponsor over time. Some items to consider as you talk to them:
How has the overall experience been? How accessible is the sponsor? If you have a concern, are you able to talk to them? Do they return your calls? Are they transparent? Even when they run into a problem?
Also, one of the most often overlooked components of a syndication is the reporting. When you find a sponsor you like, do yourself a favor and get clear on what your experience will be like AFTER you have invested.
Does the sponsor have a communication plan? How often will you receive progress reports? How are they delivered? What will the reports cover? How often will you see financials? When will you receive tax documents? How often will you receive distributions? In the sponsor's history, have the reporting and distributions been on time?
Another way to gain clarity on a sponsor is to talk to neutral parties who are exposed to their track record, history, and character. Best case, that would be a professional administrator who oversees your investment, but if the sponsor doesn't take their offerings to that level, you might ask to speak with other professionals they work with that have oversight and can share the truth about the sponsor.
Your overall experience investing in a syndication involves much more than the yield you could achieve. If you take the time to share some phone calls with a handful of prior investors, you should get a pretty good handle on what your experience is going to be like.
The purpose of investing in a syndication is to leverage the sponsor's time, expertise, and ability to source great deals, but if the experience is going to cause you to lose sleep at night, any return you might make simply will not be worth it.
I'll likely always offer some 506(b) and 506(c) deals. I think that it reaches two different segments of investors and our whole goal is to make this more accessible anyway.
I will echo what many have said here. The 506(b) space is tricky to navigate which is one of the reasons I have been advised to go with only 506(c) offerings. I'm not 100% convinced that is the right direction and am still open to non-accredited investors. One of the difficulties is that most of the sponsors want the investor to reach out and make the first documented contact as an inquiry and then schedule an introductory call. I still hear some people saying to find a deal and then find the money but if you are doing a 506(b) offering it's too late to get to meet investors.
I think you are in a similar situation, you need to know these sponsors before they have a deal or you will need to wait for the next one. I'd cruse the BP forums and find syndicators and check out their websites. Many will have a webform on their site where you can enter your info so you can either enter their investor funnel or even schedule an introductory call.
@Eric J Platter great question. There are many groups out there, especially during this time where zoom calls are becoming more common. 506(b)allows for accredited and “sophisticated investors” who do not meet the accreditation requirement. There are limitations for how many sophisticated investors a syndication can have. It is also important to note that for 506(b) there must be a “pre-existing and substantive relationship.” In summary, in order to passively invest in syndications, you do not have to be accredited, but must first find and develop a relationship with a sponsor.
1) Bigger Pockets - I have found this section of the forum is helpful for discovering syndicators and to begin to follow their content.
2) Linkedin - I am actively involved on LinkedIn and in 3 months have been able to 10x my network of other apartment investors and active syndicators
3) Podcasts/Blog Content - Once you learn of a few syndicators, they may have a podcast; if they do, check it out and subscribe. This will allow you to understand follow them and become a part of their network.
4) Meetups - as I stated above, these Zoom meetups are popping up all over. I have found a meetup for nearly every day of the week!
If you have not already, explore these avenues and after having immersed yourself in the network, as well as developed solid relationships, you can find opportunities to invest as a sophisticated investor.
I hope this helps! Please let me know if this helps or if you have any additional questions.
I agree with what everyone else has said. Start sending PMs to people and asking them for direct references, see if anyone knows who or what you are looking for. Bigger pockets does not allow self promotion in the forums so you really have to connect with them in private. Best of luck in your search!