Pittsburgh, PA · Member since 2010 · 123 posts · 48 votes
Based on my research as well as conversations with experienced syndicators, property management is one of the most important aspects of a successful syndication. As someone new to syndication, it would seem to make sense to start with a smaller asset, say 25 units or less. Basically build your track record and move up to larger buildings. However, from what I can tell it's tough to get true professional management for assets of this size. I feel like buying a property of this size may actually set me up for failure or a mediocre syndication at best. Does it make sense to focus on something larger (50 or 75 units) and try to partner with someone experienced?
Am I totally off base with my assumptions or is this there something to this line of thinking?
Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
10y
@Account Closed, property management is not one of the most important aspects of a successful syndication. It is one of the most important aspects of ANY real estate investment.
Just like any other profession, there are good property managers and bad ones. The level of sophistication typically increases as you move up in property size. Larger properties are easier from a management perspective because you can hire a very sophisticated and experienced manager (the trick is finding and vetting them). And you can hire more experienced on-site staff (managers start at small properties and work their way up to larger ones just like owners should).
That said, if your objective is to acquire property with investor's money, a large property with a sophisticated management company isn't going to be your golden ticket. For investors to trust YOU with their money (they aren't investing with the management company) you have to have a track record. A large property with a good management company can still fail under a bad owner.
This means that you'll most likely have to cut your teeth on smaller properties, which will challenge you and educate you as you interface with management companies of lesser sophistication. This will prepare you for larger deals.
I say "most likely" because you might get lucky and find a big investor willing to let you obtain your education at the risk of their dime. But that's the exception, not the rule. Unless, of course, you are at a guru seminar, in which case you'd be led to believe that kind of thing happens all the time.
Rental Property Investor · Los Angeles, CA · Member since 2014 · 120 posts · 88 votes
10y
There all all levels of property managers. There's one set that manages smaller buildings that don't necessarily require a live-in manager. . I have one area where I have four-plexes 8-plexus and a 24 plex and my smaller property manager who doesn't have an on site presence is fine. However it's true those aren't syndicates - maybe one or two partners. For larger properties over 60 units you can get the bigger more professional property management and those actually can support an on-site presence with an office and everything. . So it's not necessarily true that you can't get a property manager to manage a 25 unit place. I actually feel that you should start with something modest in order to get a track record before you can successfully syndicate. I started with a 24 unit one and showed that we did a good job on that with just a couple of partners and next went up into a 60 unit. The 60 unit was part of a syndication we did. 600 units later with syndicates I can definitely say that you need to build that track record to show investors that you're worth putting their money with. There's no way someone will put any kind of appreciable money with you unless you've shown them through experience that you actually know what you're doing. Good luck.
Pittsburgh, PA · Member since 2010 · 123 posts · 48 votes
10y
Mark Mosch thank you for the reply and honest feedback. I would likely try to partner with someone experienced before asking anyone to solely invest in me.
Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
10y
@Account Closed
Anyone putting money into the deal will want to know that the property is competently {professionally} managed but more so that the syndicator is experienced enough to make it happen.
Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
10y
@Account Closed, property management is not one of the most important aspects of a successful syndication. It is one of the most important aspects of ANY real estate investment.
Just like any other profession, there are good property managers and bad ones. The level of sophistication typically increases as you move up in property size. Larger properties are easier from a management perspective because you can hire a very sophisticated and experienced manager (the trick is finding and vetting them). And you can hire more experienced on-site staff (managers start at small properties and work their way up to larger ones just like owners should).
That said, if your objective is to acquire property with investor's money, a large property with a sophisticated management company isn't going to be your golden ticket. For investors to trust YOU with their money (they aren't investing with the management company) you have to have a track record. A large property with a good management company can still fail under a bad owner.
This means that you'll most likely have to cut your teeth on smaller properties, which will challenge you and educate you as you interface with management companies of lesser sophistication. This will prepare you for larger deals.
I say "most likely" because you might get lucky and find a big investor willing to let you obtain your education at the risk of their dime. But that's the exception, not the rule. Unless, of course, you are at a guru seminar, in which case you'd be led to believe that kind of thing happens all the time.
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
10y
There are many small (100-250 total units) but professional PMs in my area that manage 10-50 unit complexes. I'm using one and I find her primary challenge is her contractors. I had to help her find a MF painter, MF flooring company and affordable general maintenance.
The sales broker for this complex is a new syndicator (has two investors right now) and he has two properties, 26 units and uses a manager that has 105 units and he said she's excellent.
I would think you could find professional PM without much trouble.
Pittsburgh, PA · Member since 2010 · 123 posts · 48 votes
10y
Roy N. Brian Burke Mike Dymski
Thank you for your detailed responses. I thought having more sophisticated management would help mitigate some of the risk but it sounds like my track record and experience are the most important qualities to potential investors. I appreciate the time you all took to answer my question.
Investor · Austin, TX · Member since 2013 · 933 posts · 1k+ votes
10y
I wrote a top 10 lessons learned in raising $1m in two weeks in this forum about week ago. No. 1 lesson is credibility. That credibility comes w teaming up w an experienced partner. IMO you have two paths. Start small and build on your own or go big faster by teaming w experts. Find something u can do for them like raise capital leveraging their credibility and choice selection of a top market and great deal.