First time syndication experiences
Hello,
I am exploring a deal that would require me to become a first time syndicator which is exciting and nerve racking. Every syndicator started with their first deal and I'm asking the more experienced syndicators; how that first deal went and what advice do you give to first time syndicators. What background/experience is preferred for the first timer? thanks, Brian
It's like drinking from a fire hose.
Most important is having good advisors. You will need them to walk you through all the maze of requirements and bumps in the road, because there is no straight line path. Get the best you can of each of these:
- SEC attorney
- Local attorney
- Mortgage Broker
- Insurance Broker
- Property Management Company (if used)
- Contractors for due diligence
Hey Brian,
First off - congrats! That is an awesome and exciting step towards your syndication goals!
Our first deal was also scary. There’s so much uncertainty, and even though we’d spent months educating ourselves on multifamily, and had single family investing experience, we didn’t really feel ready or qualified to do a deal. For context, our first multifamily deal as lead sponsors was a 100+ unit apartment complex.
For our first deal, the raise took us longer than anticipated (due to the uncertainty in the market and real time changes happening with debt/interest rates/investor sentiment). But we managed to get it done with some tips we got from more experienced syndicators in our network. I’ll share some of those tips below.
- 1. Make sure your partnership team is well rounded. You’ll want someone who’s an asset manager and has property management connections, has access to capital, construction experience, and has a good SEC attorney, insurance broker, a key principal, etc.. Vetting your sponsorship team is key too, because if you’re bringing on your investors, then you are putting their money at risk! Having a partner who has a lot of experience and has even been through an economic downturn would make it more likely for the deal to go well during the hold period. The experience of the sponsorship team makes it easier to raise capital as well.
- 2. If you're raising capital, start reaching out to qualified investors (as in, you have a substantive relationship with them) ASAP! This way you aren’t coming off as desperate and you give them time to educate themselves and feel comfortable with the deal. Investors can sense desperation! Also, right now raising capital is becoming more challenging since many investors are scared, so giving yourself as much time as possible is key.
- 3. Don’t be afraid to ask for help. We reached out to many experienced investors in our network who had gone through similar experiences with deals they were working on. To be honest, no amount of books or podcasts will prepare you for the unpredictable curve balls you’ll face during a deal. But this is why having a strong network is KEY! You can build a strong network in this space by reaching out and connecting with people on platforms like BP. You can also attend conferences to meet syndicators who are currently doing deals in this environment (a good one is the Deal Analysis Workshop happening in April https://thinkmultifamily.com/deal-analysis-workshop-2023/ )
- ****This is not an affiliate link, but we've been to this event 2 times and loved it!****
Like I mentioned above, the experience on the sponsorship team should include:
- -Property management and/or asset management experience (arguably the most important part, since the real work happens during the business plan and this can make or break the deal)
- -Financial and/or underwriting experience
- -Multifamily experience
- -Construction Management
- -Capital Raising experience with connections to capital
- -An SEC attorney with experience doing syndications
- -An insurance broker with relevant experience
- -A mortgage broker with relevant experience
Might be forgetting something, but that should cover it.
I hope that helps! Let me know if you have any more questions, or just hit me up.
Good luck! These are interesting times, and my brothers and I are by no means experts who “know it all.” But that’s why we surround ourselves and work with smarter people who we can reach out to, leverage, and learn from.
You got this!
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@Brian Plajer
How many deals have you done previously ?
@Chris Seveney we have several rental properties and are under contract for a new build townhome rental however, the deal we are looking at would be our first multifamily deal that requires syndication. Trying to get my ducks in a row
#1 All Forums Contributor
- Investor
- Virginia
Quote from @Brian Plajer:
@Chris Seveney we have several rental properties and are under contract for a new build townhome rental however, the deal we are looking at would be our first multifamily deal that requires syndication. Trying to get my ducks in a row
We are on our 8th fund, happy to share any experiences offline
Understanding the underwriting and deal structure side in syndications is key.
Congrats! This is HUGE! I think the most important part is the partnership running the deal. I wouldn't be cheap with the equity to bring on someone experienced as an advisor or possibly having a larger role with the caveat that they will guide you and teach you along the way.
In my first deal, I didn't make nearly as much return as I could have if I took it down myself, but I also could have made some terrible decisions without my advisors, and I made sure I paid them well in equity to keep their interest high. Overall, your first deal won't make you a millionaire but the knowledge you get from it will set up all the future deals you do.