Help! Investing in Large Apartment Syndications and can't stop!

65 Replies

The last property I bought has been about 18 months ago. Due to getting into a bunch of new hobbies/interests which take up a good chunk of my free time, I have been putting my dollars bound for investments into large apartment syndications primarily (and maybe only 20% of investable capital into index funds).

Is there a problem with this? It seems like IF I am able to earn a 14-18% IRR completely passively, with tax benefits translated to me, what is the point of buying leveraged rentals to earn 15-25% but spend valuable time managing them?

Is there a point where you wouldn't put so much capital into apartment syndications and go another way? Like private lending or note investing perhaps. I am not too familiar with either. Outside of purchasing my own 32+ unit building, I am just not seeing a huge benefit in the active investing of rentals vs. passive syndications. Appreciate your thoughts on this guys!

I am on the verge of starting down a similar path of going heavy into syndication. I’m very curious for outside feedback from the community before I get started, any replies are appreciated in advance!

No problem going all in on syndications. You can actually diversify very well. I would invest in different asset classes, with many different sponsors, in different parts of the country. 

I think active investing of SFH is more likely to bring higher returns than syndication. That's if you look at just the returns on investment. When you take into account the return on time then that's where the balance starts the shift. When I was still doing SFH investing I was spending a lot of time on direct mailers, talking to potential sellers (who are generally never happy to hear from you), and all the subsequent issues once you buy the property. It might take you months to find a property and months more to fix it up and sell it. 30% ROI sounds awesome but that might only actually be $20k. If you have more money to deploy than you have ability to find good 30% ROI-type properties then you need to find a way to scale up better. Syndications could be that vehicle.

Originally posted by @Jerry Limber :

I am on the verge of starting down a similar path of going heavy into syndication. I’m very curious for outside feedback from the community before I get started, any replies are appreciated in advance!

 I hear you. So long as I am able to earn a decent income in my W-2 job, perhaps I should be focused on continuing to master my craft. I am starting to value my free time more these days, and have noticed I am lazy to pursue individual properties myself. Cap rates are squeezed (in MF especially). Maybe leaving it to the experts and collecting a decent return, 100% passively is the way to go.

Let me know what you find out and decide!

Originally posted by @Sam Grooms :

No problem going all in on syndications. You can actually diversify very well. I would invest in different asset classes, with many different sponsors, in different parts of the country. 

 What are the other "asset classes" that you are referring to? So far, the syndicators I've come across have been investing in large (100+ unit) apartment complexes, most with a value-add approach. Could you shed light on these other assets and sponsors? Here or PM is fine. Appreciate it!

Originally posted by @Michael Le :

I think active investing of SFH is more likely to bring higher returns than syndication. That's if you look at just the returns on investment. When you take into account the return on time then that's where the balance starts the shift. When I was still doing SFH investing I was spending a lot of time on direct mailers, talking to potential sellers (who are generally never happy to hear from you), and all the subsequent issues once you buy the property. It might take you months to find a property and months more to fix it up and sell it. 30% ROI sounds awesome but that might only actually be $20k. If you have more money to deploy than you have ability to find good 30% ROI-type properties then you need to find a way to scale up better. Syndications could be that vehicle.

 We have talked before. I appreciate the thoughts as always.

Yes, I have bought some properties which have seen a very decent rental income growth and appreciation. Unfortunately now, I cannot find properties which "cash flow" on Day 1, IN APPRECIATING markets. Of course, in cities like Birmingham, Memphis, Little Rock, even Texas cities this is possible, but not the classical appreciating markets. I don't think Dallas/Houston/San Antonio etc. will continue to see 6-7% year over year appreciation indefinitely.

@Jay Hinrichs and I have discussed issues with high property tax and foundation issues in Texas. I hate to say it, but I am not excited about the promised 8% returns on cash, which are closer to 4-5% long term when you factor in CapEx. The only usefulness of SFHs that I see (in these midwest/south markets) is a good tax treatment and principal paydown if you want to hold for decades. There are no outsizes returns anymore in most markets.

Originally posted by @Andrey Y. :
Yes, I have bought some properties which have seen a very decent rental income growth and appreciation. Unfortunately now, I cannot find properties which "cash flow" on Day 1, IN APPRECIATING markets. Of course, in cities like Birmingham, Memphis, Little Rock, even Texas cities this is possible, but not the classical appreciating markets. I don't think Dallas/Houston/San Antonio etc. will continue to see 6-7% year over year appreciation indefinitely.

@Jay Hinrichs and I have discussed issues with high property tax and foundation issues in Texas. I hate to say it, but I am not excited about the promised 8% returns on cash, which are closer to 4-5% long term when you factor in CapEx. The only usefulness of SFHs that I see (in these midwest/south markets) is a good tax treatment and principal paydown if you want to hold for decades. There are no outsizes returns anymore in most markets.

Hahah. I'm well aware of Jay's views on Texas. Foundation issues are way overblown. I have houses and apartments across Texas and it's not an issue. But I'm sure glad it's scaring away some folks on the coast :) 

Taxes are truly crazy though. 

@Andrey Y. , I agree with @Sam Grooms - if you like syndication and have found performing Sponsors that you know and trust, no problem at all! I also agree that looking into other asset classes, but staying within the syndication realm, can be a great way to diversify if you're worried about deploying too much capital into one niche.

Originally posted by @Michael Bishop :

@Andrey Y., I agree with @Sam Grooms - if you like syndication and have found performing Sponsors that you know and trust, no problem at all! I also agree that looking into other asset classes, but staying within the syndication realm, can be a great way to diversify if you're worried about deploying too much capital into one niche.

 I have.. although too early to tell. Lets see how the next 1-2 years pans out ;)

Originally posted by @Andrey Y. :
Originally posted by @Sam Grooms:

No problem going all in on syndications. You can actually diversify very well. I would invest in different asset classes, with many different sponsors, in different parts of the country. 

 What are the other "asset classes" that you are referring to? So far, the syndicators I've come across have been investing in large (100+ unit) apartment complexes, most with a value-add approach. Could you shed light on these other assets and sponsors? Here or PM is fine. Appreciate it!

aloha Andrey

other potential asset classes are NNN commercial, mobile homes, self-storage, strip malls, and more

my strategy is to ladder anticipated closing dates, and diversify across asset classes and areas of the country

this also allows me to have different syndication teams, so I am not relying on a few key players

aloha

steve

ps- I've heard syndications referred to as (tongue in cheek, but it applies to you and me) "REI for doctors and dentists"

I also only invest passively now. My wife and I have a couple of rentals. Acquiring and managing them is a time sink and not worth it. 

I have invested in a few syndications in my home state, through people I know, but finding sponsors in other niches and geographies is a little more challenging. We're not yet accredited, so that limits us. I've considered investing in REIT's and funds (Rich Uncles, Fundrise, Realty Mogul).

Hey Andrey.  I invest both actively and passively.  You are spot with the delta in returns in active vs passive investing.  If investors are able to add value (or achieve predictable appreciation), they can get higher returns with active investing.  If not, active investing is not worth all the extra work.  That fact is magnified at this point in the cycle.  Deal flow is king in this market and we need hundreds of opportunities flowing through the pipeline or to invest with someone who has it.  Busy professionals like yourself need to make a decision if they are going to run an active marketing program (mail, cold calling, broker relationships, networking, etc.) or to investing with someone who has full time staff generating deal flow every day.  You have picked the latter (so have I the past two years).

I'd recommend investing in multiple asset classes.  I have invested in multifamily, self storage, mobile home parks, dollar stores, grocery stores, and government buildings.  Feel free to reach out if you want me to send you some examples.  I have no association with the sponsors (other than as an investor).

@Nate Reed feel free to reach out if you want me to send you some non-accredited offerings.  I see and vet a ton of offerings.

Originally posted by @Michael Le :
Originally posted by @Andrey Y.:
Yes, I have bought some properties which have seen a very decent rental income growth and appreciation. Unfortunately now, I cannot find properties which "cash flow" on Day 1, IN APPRECIATING markets. Of course, in cities like Birmingham, Memphis, Little Rock, even Texas cities this is possible, but not the classical appreciating markets. I don't think Dallas/Houston/San Antonio etc. will continue to see 6-7% year over year appreciation indefinitely.

@Jay Hinrichs and I have discussed issues with high property tax and foundation issues in Texas. I hate to say it, but I am not excited about the promised 8% returns on cash, which are closer to 4-5% long term when you factor in CapEx. The only usefulness of SFHs that I see (in these midwest/south markets) is a good tax treatment and principal paydown if you want to hold for decades. There are no outsizes returns anymore in most markets.

Hahah. I'm well aware of Jay's views on Texas. Foundation issues are way overblown. I have houses and apartments across Texas and it's not an issue. But I'm sure glad it's scaring away some folks on the coast :) 

Taxes are truly crazy though. 

well when the foundations happen to you then your opinion changes.. but its not only Texas other markets have foundation issues.. but those can be real problems if it happens to one of your assets it can wipe out a year or multiple years worth of cash flow no doubt.

the other passive investment for those with decent SIDRAs are notes  great performing notes.. when well chosen these are passive as well. And  a tad more control than be a limited partner.. At least if you have a project that needs some help..  

Originally posted by @Andrey Y. :
Originally posted by @Sam Grooms:

No problem going all in on syndications. You can actually diversify very well. I would invest in different asset classes, with many different sponsors, in different parts of the country. 

 What are the other "asset classes" that you are referring to? So far, the syndicators I've come across have been investing in large (100+ unit) apartment complexes, most with a value-add approach. Could you shed light on these other assets and sponsors? Here or PM is fine. Appreciate it!

Andrey, Steve listed some for you. Mobile Homes and Self Storage are fairly popular with syndicators right now. PM me and I could give you a couple names that are doing well. 

Nate, feel free to PM me, too. 

However, you're going to really want to expand your list of sponsors beyond the few that I give you. You need to put yourself where the sponsors are. There's plenty of conferences they attend. You can find a lot of those conferences in this forum. 

One of the good ones I went to this year was CrowdConverge in Vegas. It's put on by Trowbridge and Sidoti. Trowbridge wrote the book on syndicating money. You can meet people raising money for everything there, not just real estate (for things like food products, pharmaceuticals, etc). If you want to stick to real estate, there was even a guy there that buys vacant land in California, builds these giant warehouses, and rents them to marijuana growers, distributors, manufactures, etc. I simplified it, but he has it down to a science and his returns are some of the highest I've seen. I also know of someone doing a similar approach in Portland.

Another good conference I went to this year where syndicators were was in Denver, put on by Joe Fairless. Some of the largest sponsors for MHPs and Self Storage were there. 

These conferences are across the country, I just happen to go to the ones on the West Coast. Just make sure you're choosing ones that cover advanced topics/trainings in syndication, and aren't "how to syndicate" conferences for people hoping to become syndicators. 

@Andrey Y. Basic portfolio management: If you concentrate your portfolio too much into one area (especially, non-liquid assets) you will get burned. Of course, a lot of this is dependent on timing. 

You'd be sitting pretty if you started investing 5 years ago and went all-in on syndications. Today, not as much even if you diversified across all real estate types. The underlying basis is, mostly, the same - non-liquid, highly leveraged, long-term holds. 

On standard value-add deal, the project-LP IRR delta is anywhere between 300-500 bps (on average). If things go to plan, the sponsor and investor will both make money. But it's a big IF.

I do agree with your point about cherishing your free time. Can't get that back!

@Andrey Y. , I have a considerable part of my portfolio in both single-family rentals, and syndication/crowdfunding investments.

For people who are cash poor and have lots of time on their hands, an all single-family rental portfolio makes sense, because they can put in a lot of sweat equity. If you have more money or less time, then passive investing starts to make more and more sense. As a very conservative investor, there's one more advantage to me of directly owned real estate: I'm able to configure the deal to be much more conservative ways than is possible through 99% of the passive offerings out there (i.e. no debt). But most people are not that conservative and actually prefer the higher projected returns that come with a higher risk of higher leverage, so this isn't an advantage to everyone.

To answer your question of "is there a problem with this", though, I would say "yes". Try googling "the apartment recession of 1972" and you'll see what can happen if you put all of your eggs in one basket. They also did badly to the S&L crisis, but on the other hand held up better than single-family houses in the last recession. So the solution, in my opinion is diversifying.

Others have mentioned diversifying on this thread into other commercial real estate asset classes, and to me that is a first step, but not enough. I would go two steps further. I would recommend diversifying three ways:

1) capital stack location: debt versus equity.

2) commercial versus residential (you can invest in single-family homes through passive investments as well)

3) commercial real estate asset class types (mentioned by others such as medical, fast service restaurants, retail, etc.)

Each of the different choices has a different risk reward profile, so it's important to first understand what those are, then take a look at your own risk profile, and then come up with a game plan of how you want to structure your portfolio for diversification. If you don't, and just look at deals, the most likely you'll end up with a portfolio that is way out of whack on risk.

A lot of fantastic points being made in this thread.  As a investor who invested in syndications with my own money to supplement my income and now as the investment officer in a self-storage owner/operator who syndicates our projects I think I have a unique perspective of both sides of the coin.

@Andrey Y. as an investor I think you need to be thoughtful of your portfolio allocation as @Omar Khan says.  Apartments are "sexy" and have had a fantastic run.  There will be a correction in apartments I just think you need to align with operators who believe that and underwrite their opportunities accordingly.  I invested in a fair amount of commercial multifamily personally and I can tell some of the most sophisticated operators have had challenges finding value in multifamily right now.   

I 100% agree with your thoughts on how much time do you want to spend on becoming an expert in commercial real estate and invest direct.  If you believe in the 10,000 hour rule than you know you only have so many 10,000 hour blocks in your life.  Do you want to dedicate 10,000 hours to creating successful real estate investments?  If not than syndication is a reasonable option to partner with real estate experts who have put in the time and share in the benefits of these asset classes.

The critical part of this is the sponsor/operator of the deal.  In my experience investing in syndications my time was spent in vetting the sponsor.  Track Record, references, site visits, office visits, etc. to see if this was someone I would work for/with.  Sponsors are great when everything is going well with a project but when things turn sour you find out what type of person you have partnered with.  Is that sponsor going to do everything in their power to make it right when the poop hits the fan?  That's what I wanted to know.

The other part about this was the relationship.  When my money making years are done and I look back on my experience I want to have built relationships with people I really liked working with.  The money is nice but what will really matter is the time.  I can't get that back.  Can I build a long term relationship with someone I truly enjoyed partnering with?  That has steered me away from many investments that looked good in the pro forma.

Kris

Originally posted by @Ian Ippolito :

@Andrey Y. , I have a considerable part of my portfolio in both single-family rentals, and syndication/crowdfunding investments.

For people who are cash poor and have lots of time on their hands, an all single-family rental portfolio makes sense, because they can put in a lot of sweat equity. If you have more money or less time, then passive investing starts to make more and more sense. As a very conservative investor, there's one more advantage to me of directly owned real estate: I'm able to configure the deal to be much more conservative ways than is possible through 99% of the passive offerings out there (i.e. no debt). But most people are not that conservative and actually prefer the higher projected returns that come with a higher risk of higher leverage, so this isn't an advantage to everyone.

To answer your question of "is there a problem with this", though, I would say "yes". Try googling "the apartment recession of 1972" and you'll see what can happen if you put all of your eggs in one basket. They also did badly to the S&L crisis, but on the other hand held up better than single-family houses in the last recession. So the solution, in my opinion is diversifying.

Others have mentioned diversifying on this thread into other commercial real estate asset classes, and to me that is a first step, but not enough. I would go two steps further. I would recommend diversifying three ways:

1) capital stack location: debt versus equity.

2) commercial versus residential (you can invest in single-family homes through passive investments as well)

3) commercial real estate asset class types (mentioned by others such as medical, fast service restaurants, retail, etc.)

Each of the different choices has a different risk reward profile, so it's important to first understand what those are, then take a look at your own risk profile, and then come up with a game plan of how you want to structure your portfolio for diversification. If you don't, and just look at deals, the most likely you'll end up with a portfolio that is way out of whack on risk.

Want to give this response more than 1 up vote. Ian runs an exceptional blog (can't advertise the link here, but you should check it out) that goes into depth. 

Don't believe the hype. Apartments can and have gone into deep recessions before (S&L deeper recession than 2008). It could be for a multitude of reasons: economy, sponsor, leverage, strategy, mismanagement, etc. 

Diversifying within real estate doesn't solve the problem. You are still "stuck" with a non-liquid asset that is exposed to the gyrations of the real estate market. 

Originally posted by @Kris Benson :

A lot of fantastic points being made in this thread.  As a investor who invested in syndications with my own money to supplement my income and now as the investment officer in a self-storage owner/operator who syndicates our projects I think I have a unique perspective of both sides of the coin.

@Andrey Y. as an investor I think you need to be thoughtful of your portfolio allocation as @Omar Khan says.  Apartments are "sexy" and have had a fantastic run.  There will be a correction in apartments I just think you need to align with operators who believe that and underwrite their opportunities accordingly.  I invested in a fair amount of commercial multifamily personally and I can tell some of the most sophisticated operators have had challenges finding value in multifamily right now.   

I 100% agree with your thoughts on how much time do you want to spend on becoming an expert in commercial real estate and invest direct.  If you believe in the 10,000 hour rule than you know you only have so many 10,000 hour blocks in your life.  Do you want to dedicate 10,000 hours to creating successful real estate investments?  If not than syndication is a reasonable option to partner with real estate experts who have put in the time and share in the benefits of these asset classes.

The critical part of this is the sponsor/operator of the deal.  In my experience investing in syndications my time was spent in vetting the sponsor.  Track Record, references, site visits, office visits, etc. to see if this was someone I would work for/with.  Sponsors are great when everything is going well with a project but when things turn sour you find out what type of person you have partnered with.  Is that sponsor going to do everything in their power to make it right when the poop hits the fan?  That's what I wanted to know.

The other part about this was the relationship.  When my money making years are done and I look back on my experience I want to have built relationships with people I really liked working with.  The money is nice but what will really matter is the time.  I can't get that back.  Can I build a long term relationship with someone I truly enjoyed partnering with?  That has steered me away from many investments that looked good in the pro forma.

Kris

Nice post.. I have one client from Hawaii.. and he subscribes to the  He and she has to like them to do business with them. 

they took a liking to Portlandia  and to my Wife and I and that was about 12 years ago.. I was the broker they chose to find them an apartment in PDX for their 1031 out of Vegas which was epic timing .. Vegas crashed PDX stayed solid and they paid cash so no risk to market for them..  but they like to come and hang with us.. and they live In Honolulu so we go there two to three times a year to visit and hang with them.  and we have done many other deals together we have built home communities together etc etc..  So the I got to like the person really resonates with me as well.. And as I work with the very few clients I have its kind of the same thing its more family oriented .. one of the reasons I have never done the sponsor thing is there would not be enough time in a day to have those kind of relationships with a huge amount of smaller investors.. Not that they are smaller investors but they may only put say 100k into a deal you raised a few million with so now you have 20 folks into one deal instead of one or two.. which is how I have done it.. usually one.. makes for some pretty tight relationships that go on for decades..   Of course on our small balance debt side we have hundreds of clients but those are usually different mind sets and investment goals .. than those that invest with sponsors.. 

Originally posted by @Omar Khan :
Originally posted by @Ian Ippolito:

@Andrey Y. , I have a considerable part of my portfolio in both single-family rentals, and syndication/crowdfunding investments.

For people who are cash poor and have lots of time on their hands, an all single-family rental portfolio makes sense, because they can put in a lot of sweat equity. If you have more money or less time, then passive investing starts to make more and more sense. As a very conservative investor, there's one more advantage to me of directly owned real estate: I'm able to configure the deal to be much more conservative ways than is possible through 99% of the passive offerings out there (i.e. no debt). But most people are not that conservative and actually prefer the higher projected returns that come with a higher risk of higher leverage, so this isn't an advantage to everyone.

To answer your question of "is there a problem with this", though, I would say "yes". Try googling "the apartment recession of 1972" and you'll see what can happen if you put all of your eggs in one basket. They also did badly to the S&L crisis, but on the other hand held up better than single-family houses in the last recession. So the solution, in my opinion is diversifying.

Others have mentioned diversifying on this thread into other commercial real estate asset classes, and to me that is a first step, but not enough. I would go two steps further. I would recommend diversifying three ways:

1) capital stack location: debt versus equity.

2) commercial versus residential (you can invest in single-family homes through passive investments as well)

3) commercial real estate asset class types (mentioned by others such as medical, fast service restaurants, retail, etc.)

Each of the different choices has a different risk reward profile, so it's important to first understand what those are, then take a look at your own risk profile, and then come up with a game plan of how you want to structure your portfolio for diversification. If you don't, and just look at deals, the most likely you'll end up with a portfolio that is way out of whack on risk.

Want to give this response more than 1 up vote. Ian runs an exceptional blog (can't advertise the link here, but you should check it out) that goes into depth. 

Don't believe the hype. Apartments can and have gone into deep recessions before (S&L deeper recession than 2008). It could be for a multitude of reasons: economy, sponsor, leverage, strategy, mismanagement, etc. 

Diversifying within real estate doesn't solve the problem. You are still "stuck" with a non-liquid asset that is exposed to the gyrations of the real estate market. 

were I have seen Multi and commercial suffer is the long lag times to bring new product to the market then over building and economy or jobs swing..  late 80s to early 90s in Texas I personally saw two different BAy Area syndicators lose their butts on dallas apartment communities I mean they lost the whole projects to the banks.. its above my pay grade of course .. but I witnessed it first hand and it was going through that drama when I worked at those companies that I decided sponsor of syndication is not for me  :)  I know its soup de Jour now.. but boy your really moving up the responsibility ladder when you take on investor money in that manner and as an investor the sponsor is critical..  absolutely critical in my mind.   

Not an expert on Texas but my understanding especially with commercial is older type retail centers that are many decades  old used construction techniques and materials that can have foundation issues.

The newer properties are engineered in such a way to adjust to soil movement without having huge foundation issues like properties of the past.

Everyone needs to check on their own but this is just what I have seen with newer commercial builds in Texas from the purchases.

In regards to syndication there are instances where it makes sense. If you are a very busy professional making passive investments with experienced partners can make all the difference. You do not have time to WORK FOR YIELD whereas the sponsor is making real estate their everyday endeavor and specialty in life.

For preferred return you have to decide what is most important. There are some deals with higher cash flow but little no upside, some with a mix of cash flow and equity upside, and then those deals where little to no cash flow for awhile but then higher cash flow and equity growth on the back end.

The time horizon makes a big difference as well. If someone can double your equity in 2 to 3 years versus 10 years your money grows faster and you can access it sooner. Sure you can sell a partnership interest but unless the sponsor wants to buy it out at face value or another existing investor in the deal then you are selling to outside companies that want a discount to buy. Also per the offering agreement you might not be allowed to sell them if you could.

So there are many,many layers to this. Some newer sponsors will take very little for themselves but the reality is if they are any good as soon as they get going they will IMMEDIATELY look for other capital that is cheaper. You want aligned interests and if the syndicator is not making good money then motivation is lower to really work on the property. You want both parties rewarded handsomely for each deal otherwise you run into volume syndicators that like to take fees to make ends meet. The quality of the deals tends to be sub par which reflects in the exit values.       

If people believe the syndicators for returns on multifamily that are referencing recent exits where they bought at the bottom 4 years ago they are in for a rude awakening. I must see literally about 50 new guys a week on Facebook selling invest in multifamily crap,here is my story,blah,blah,blah.

They are hyping these new investors up, getting them to buy courses, and then taking their money as a sponsor and pushing returns from cycles past. Of course in small print they have the may lose money and all that jazz to CYA themselves. It's all a bunch of smoke and mirrors.

The good syndicators will have exit plans and be cautious on underwriting. Those sponsors that need  cash today with no other means to generate income be careful with as some will do almost anything to make a buck. 

Originally posted by @Kris Benson :

A lot of fantastic points being made in this thread.  As a investor who invested in syndications with my own money to supplement my income and now as the investment officer in a self-storage owner/operator who syndicates our projects I think I have a unique perspective of both sides of the coin.

@Andrey Y. as an investor I think you need to be thoughtful of your portfolio allocation as @Omar Khan says.  Apartments are "sexy" and have had a fantastic run.  There will be a correction in apartments I just think you need to align with operators who believe that and underwrite their opportunities accordingly.  I invested in a fair amount of commercial multifamily personally and I can tell some of the most sophisticated operators have had challenges finding value in multifamily right now.   

I 100% agree with your thoughts on how much time do you want to spend on becoming an expert in commercial real estate and invest direct.  If you believe in the 10,000 hour rule than you know you only have so many 10,000 hour blocks in your life.  Do you want to dedicate 10,000 hours to creating successful real estate investments?  If not than syndication is a reasonable option to partner with real estate experts who have put in the time and share in the benefits of these asset classes.

The critical part of this is the sponsor/operator of the deal.  In my experience investing in syndications my time was spent in vetting the sponsor.  Track Record, references, site visits, office visits, etc. to see if this was someone I would work for/with.  Sponsors are great when everything is going well with a project but when things turn sour you find out what type of person you have partnered with.  Is that sponsor going to do everything in their power to make it right when the poop hits the fan?  That's what I wanted to know.

The other part about this was the relationship.  When my money making years are done and I look back on my experience I want to have built relationships with people I really liked working with.  The money is nice but what will really matter is the time.  I can't get that back.  Can I build a long term relationship with someone I truly enjoyed partnering with?  That has steered me away from many investments that looked good in the pro forma.

Kris

 Thanks for the thoughtful reply. I have been thinking a lot about this. Is it enough to just speak with the sponsor/investor marketer over the phone, then talk with 1-2 prior investors (or none in some cases), get a good "gut" feeling, look at some numbers on prior deals, then boom. Read PPM and invest. Admittedly, this is what I have been doing.

I feel comfortable doing it this way because I am involved with larger, more "seasoned" firms in the apartment space. But I wonder, if meeting face to face, and touring their office etc. would be more prudent. It isn't so practical for me to travel too much, as I tend to save my travel time for vacation/leisure. Wondering if its worth the time to do a direct visit if you don't already have to be there.