Looking for Cash Flow... Syndication?

23 Replies

My main goal in Real Estate is to generate cash flow. From listening to the podcast, it seems like getting in with a successful syndicator can be a good way to make good money. How do I find these syndicators? How do I know who is good? I imagine there are many syndicators on bigger pockets. I love the idea of owning a piece of an apartment building. I'm interested in the Atlanta region but honestly if it makes me money, I don't really care?  I asked a lot of questions but I'm just trying to learn more about these big syndication deals. The guy on the podcast said if your dream is get into commercial multifamily then dont bother starting small, just jump right into commercial multifamily... welll uhhh i don't know how to do that. I don't have that much money and I have ZERO experience. 

@Brian Lewis , yes many syndicators are on BP.  Look beside their name, most will have the title syndicator beside their name.

I would start getting into contact with the syndicators that you like by following them by direct messaging them, most are great people and are willing to have a conversation and entertain questions.  Once you find a few you really click with see if they have anything they are currently working on and see if you can join.

@Brian Lewis you are right to say that it doesn’t matter if the real estate is in your particular market.  Far more important is that the real estate is in a top-performing market and selecting a quality firm to invest with.  Here is a recent thread on selecting investment sponsors:  https://www.biggerpockets.com/forums/432/topics/503289-how-to-vet-syndicators

First of all, @Bruce Petersen and @Brian Burke I'd like to just appreciate all the BR action while I'm trying to learn how to BRRRR. Thank you for replying but I have further questions. I can learn from you two right now! Both of your user names say Syndicator next to it, so it seems you are the type of people I need to speak to. How do I get involved with people like you If i have money to invest? What different levels are there? In what ways can you make money in syndication?

@Brian Lewis , make sure you look into the legal aspects of syndication. From what I understand, you need to either have a prior relationship with the syndicator or be an accredited investor with the SEC.

If I'm remembering this podcast episode correctly, the guest started straight into multifamily because he already had a lot of capital he could throw down. Without significant capital or experience, I think syndication could be a tough place to start.

That being said, if you don't have capital to offer, maybe you can earn some sweat equity by putting in your time/effort to help someone. I think you'll be more likely to find a way to help someone if you're looking locally (somewhere within reasonable driving distance), unless you have a particular unique skill set which could be applied at a distance.

While it's great to have big goals of multifamily and syndication, but for someone who's constraints are experience and capital, I think this may be a tough place to start. In my opinion, when you're starting out, any experience is good experience. For me personally, I'm working towards doing my first deal right now. Long term, I'd like to get into multifamily, but because my biggest constraints are capital and experience, I'm looking at a few flips for my first deals because this is a way to gain more capital and real estate experience (so that in the future I'll have more money and some street cred to be part of bigger things when those opportunities present themselves). In my opinion, you should keep syndication and multifamily on your radar, but also think about what else you could do RIGHT NOW to mitigate your personal constraints, even if means doing a smaller SFH deal to start.

The first step is to learn how to ask the right questions to see if the group you are talking to is a good fit.  The thread I linked to above is a good start to learn the questions to ask.  From there the process is different with every sponsor. Some will send you offering documents as soon as they get your email address. That’s a sign of either desperation, inexperience, or downright carelessness.  Not to mention likely ignorance of the law. Avoid any group that does that. 

Other companies will set up a phone call to learn more about your goals and objectives.   The objective is for you to learn more about the company and it’s offerings, but just as important, for the company to learn more about you. As much as you want to learn about the company you are seeking to invest with, the company wants and needs to know if you are an accredited investor (as determined by net worth or income minimums), and if their offerings are a fit with your goals and objectives. Good syndicators know that having the right investors, not just any investors, makes the investment (and their company) more successful.

As to your question of how you make money, the answer is no different than with any real estate investment—cash flow, appreciation, loan amortization and tax benefits. Investors typically receive the majority of the income (and offsetting depreciation), all refinance proceeds and a share of the upside.

Brian, I'm invested in syndications (both old-school, and crowdfunding).

Yes, there are many syndicators on bigger pockets, and you have just thrown chum into the water my friend. LOL.

The answer to your  question depends a lot on your personal financial situation how much risk is appropriate for your portfolio. That's because evaluating a conservative sponsor is very different than evaluating an aggressive one.

But to take a step back: In my opinion, if you don't understand anything about commercial real estate, you're simply not going to be qualified to judge whether a syndicator is good or not.

So if you were my brother or relative, I would say that if you're serious about investing in commercial real estate and are going to be putting in significant money, the first step is to educate yourself. There are plenty of places on the Internet. You can join a local investment group. You can reach out to people in your personal network that you trust to give you a referral to an investor or someone else you can ask advice.

Probably the very worst way to get unbiased advice on picking a syndicator, is to listen to what a syndicator tells you. Make sure that your source of advice doesn't have a conflict of interest.

Having said that, if you share your personal financial situation and risk tolerance, I can tell you my opinion on the best way to choose a syndicator. If that information is too private to share publicly, feel free to PM me.

I have 50k to invest and my risk tolerance is high! I am a math teacher in NY so job security isnt an issue. Im looking for opportunities to create more cash flow so I can replace my salary.(like everybody else).

Syndications are a good way to get cash flow that is truly passive. Good thoughts and advice offered above. Start interviewing syndicators and ask them about their business models. I think you’ll find they’re eager to talk with you. Their deals can be very attractive but they also need investors and a pre existing relationship so the onus is on the investor to reach out. I know of one investing guru group that charges $20,000 for their people in their club to be qualified to invest in their syndications. But there is really no need to do that. Just reach out and start talking to people. The thread Burke mentioned above is a great one.

Originally posted by @Brian Lewis :

My main goal in Real Estate is to generate cash flow. From listening to the podcast, it seems like getting in with a successful syndicator can be a good way to make good money. How do I find these syndicators? How do I know who is good? I imagine there are many syndicators on bigger pockets. I love the idea of owning a piece of an apartment building. I'm interested in the Atlanta region but honestly if it makes me money, I don't really care?  I asked a lot of questions but I'm just trying to learn more about these big syndication deals. The guy on the podcast said if your dream is get into commercial multifamily then dont bother starting small, just jump right into commercial multifamily... welll uhhh i don't know how to do that. I don't have that much money and I have ZERO experience. 

 Hi Brian-

Great question.

Im sure many syndicators on BP. Are you an accredited investor? How much capital are you seeking to commit, what term/duration, what IRR are you seeking to achieve? Do you have a preferred asset class that you feel more comfortable than others?

Steven Gesis, Developer
440-374-8403
Originally posted by @Steven Gesis :
Originally posted by @Brian Lewis:

My main goal in Real Estate is to generate cash flow. From listening to the podcast, it seems like getting in with a successful syndicator can be a good way to make good money. How do I find these syndicators? How do I know who is good? I imagine there are many syndicators on bigger pockets. I love the idea of owning a piece of an apartment building. I'm interested in the Atlanta region but honestly if it makes me money, I don't really care?  I asked a lot of questions but I'm just trying to learn more about these big syndication deals. The guy on the podcast said if your dream is get into commercial multifamily then dont bother starting small, just jump right into commercial multifamily... welll uhhh i don't know how to do that. I don't have that much money and I have ZERO experience. 

 Hi Brian-

Great question.

Im sure many syndicators on BP. Are you an accredited investor? How much capital are you seeking to commit, what term/duration, what IRR are you seeking to achieve? Do you have a preferred asset class that you feel more comfortable than others?

No, I am not an accredited investor. I can commit up to 50k. I don't really know how to answer the term/duration, or the IRR question. What is IRR? Well actually, I know it's Internal Rate of Return but why did you ask that specific question? No preferred asset class. Not really sure how to answer that either.

Thanks for all the replies everybody. Anybody who just got here please add to the discussion. I know that I can do a lot of self education but the more you guys say the more I know what I should even be looking for. Educating yourself is really tough as a novice.

Originally posted by @Lane Kawaoka :

Brian Lewis respectively you need money to invest. If not you have a money problem and you either need to find deals, work at your day job, or a eat a lot of ramen noodles.

I would suggest starting small wholeselling or buy and hold sfhs.

 How much money are we talking? I have some. Is 50k good to start? Or you think I need to get more. I know some people who have money also.

@Brian Lewis If you only have $50k, you may not want to put it all in a syndication as these are more for wealth creation and protection than pure cash flow. Many large syndications have $50k as the minimum investment, but some start lower. Take some time to use the "search" function on the site and check out the threads and articles on syndications to learn more. 

As far as markets. Texas, Georgia, Arizona, and Florida are common markets for syndication, but there are great prospects in the Midwest as well, especially if you value cashflow over appreciation. 

Here is my two cents. If I were in your position. Which I was and am not really far from it. I would keep listening, reading, etc until you have a real understanding of the acronyms and such that go with investment real estate. Get comfortable with them so you can talk about them in conversation with confidence. 

If you have 50k why not look to buy your own building? I'm not sure what properties go for in your market, but 50k in my market will get you real close to a 20-30% down payment requirement for a multi-family with 4 plus unit building. I would go for a 5+ commercial. Maybe you could partner with someone on a deal? It would work similar to a syndication. You get your cash flow you're looking for and you can really get your hands in the cookie jar and learn the workings. Roll that into a bigger deal and repeat.

Short story on my first deal. 

I found the BP podcast through a financial security podcast. Joined bigger pockets. Found Grant Cardone, Michael Blank, J Scott and some others that are flippers. 

My background is construction both commercial and residential. Always employed. Have always wanted self employment. Flipping always caught my eye and still  does. I started reading. And reading. And reading. And listening. And reading. 

The most valuable tool everyone has is CONVERSATION. Start talking to people. Tell them what you are doing or are starting to do. I did all of this while I dug in deep to my 9-5. All it takes is finding the right person. You'll have people tell you your crazy. Not interested. Too risky yada yada keep going! When 50 people tell you they're all set that 51 could be that person that says let's do it.

I'm closing my first deal on an 11 unit with a partner with the only money out of pocket is personal lawyer fees for LLC and operating agreement paperwork and the building inspection. I spoke to the right person. But I studied to the near point of analysis paralysis. I'll be securing a property that generates enough cash flow to pay my investor and replace nearly half my spouses income in the first year. Just a beginning to my ultimate goal of true self employment.

Keep listening to podcast, reading blog post, and stashing the cash. Start looking at buildings and analyzing them on your away from work time. Get comfortable with crunching numbers all while working your day job. Eventually it will all click. You'll be confident in talking the lingo and before you know it you'll have that first deal. I'm sure there are plenty of others on here who have the same story or close to it as my wife and I.

And keep posting in here if you have questions you can't find answers to!

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The beautiful thing about participating in syndication is that it doesn't matter where you live, you can put dollars to work in the best market and people for you. Keep in mind that most of these deals require you to leave your money put for several years. This is truly a "set and forget" type of play. Of course you'll get regular updates from the syndicator and you'll never be left in the dark, but you have nothing to do with the daily management of the property. That being said, it sounds like you're looking for an opportunity to learn. So find a syndicator who is willing to spend time with you, walk you through a couple of past executive summaries and explain what the numbers mean. 

@Brian Lewis I agree with what a few others have said. The key points being read, learn and diversify.

1. Read. There is a TON of info on BP. Read this http://www.biggerpockets.com/forums/311/topics/527804-friend-netted-3m-looking-to-deploy-newfound-wealth-into-re, the posts and all of the links. Go to www.crowdstreet.com and download their whitepaper. Go to www.jakeandgino.com, read/watch/listen.  Go to www.themichaelblank.com, read/watch/listen. Go to www.praxcap.com, www.venturedproperties.com and others...see how they operate their businesses and if that is in alignment with your investing strategy.

2. Learn. Similar to above, but now that you have a baseline with all of this new information, start asking SPECIFIC, well thought out questions.

3. Diversify. I'm not a financial planner, however, I thinking diversification is pretty general advice. $50K is a lot of money but I think everybody here would agree, including the syndicators who would accept your 50K if you were an accredited investor, you probably shouldn't park all of your $ in one investment. At a minimum, you should probably have it spread across a few syndication deals. You might also consider different locations, different commercial investments, different RE investments or different asset classes all together. If you haven't already, do yourself a favor and speak with a fee based financial planner (i.e. they don't make commissions off of their recommendations). Build a financial plan first and then start picking your investments.

Good Luck.

Thank you everybody for your advice and replies. I have to catch up and read everything you've sent but it seems from the responses that syndication isn't for me just yet. I'll keep looking for a SFH and MFH

@Brian Lewis . Regardless of what you decide, remember that you must always take some type of action to move things forward. Listening to podcasts and reading are all nice. But make sure to give yourself a time table on when you want to jump into the game. You can start small and work your way up, as you gain more and more experience and understanding. Real Estate investing is a journey ... Enjoy !!!

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