Specialist · San Antonio, TX · Member since 2018 · 77 posts · 18 votes
I just came back from the R2R event hosted by Brad Sumrok - The event was great and I got to meet tons of successful people who are doing syndications.
My question is should you invest in a passive deal first or jump straight in to being a deal sponsor?
Specialist · Denver, CO · Member since 2017 · 60 posts · 137 votes
7y
@Kevin Ferguson I think both routes are good options, depending on largely on your personal network and willingness to dedicate lots of time to daily action. As several folks have already attested, starting as an LP is a great way to start; I went straight to syndication and was able to recently close on a $7.5 million property in Colorado.
My syndication was a 506(b) offering and I had enough people in my network that both had money, and trusted me with it, to raise a bit over $2.1 million. I spent 9 months learning as much as I could through books, podcasts, and free meetups, then applying that knowledge to find and close a deal.
Both routes are possible, it just takes looking in the mirror and deciding which way you want go!
Rental Property Investor · DFW TX · Member since 2018 · 179 posts · 260 votes
7y
@Kevin Ferguson - I am along time (since 2010) Sumrok student. I have invested passively in several deals over time. You don't say if you joined or mention your experience, but making some assumptions... I assume you are talking about your action, not your selection of Brad's Personal Mentoring vs. Foundations programs.
Say you attempt to be a sponsor, is your resume likely to attract me to your deal? Can you swing an agency loan? If you have 'creds' go for it, but if not, do a passive first, consider being a KP, and work up to sponsor if that is you goal.
Rental Property Investor · Huntington, NY · Member since 2016 · 102 posts · 74 votes
7y
Hey @Kevin Ferguson. I don't know if there is a right answer here. I too would like to get in on the GP side of a syndication and have taken the approach of investing as a LP first. I invested in two syndications this year as a LP. I don't think that alone will lead me to the GP side of a deal but figured it was at least a way to earn a good return with the added benefit of learning a thing or two along the way. Good luck.
I plan to join the foundations program next year. I realized how much goes into apartment deal syndicating and I'm still learning.
You're right, my resume wouldn't be enough for you to be attracted to any deal I would possibly have; I heard that word a lot during the conference is that a Key Player or Key Principle?
My goal is to invest in a passive deal by the end of this year. Then build up a track record and become the deal sponsor.
I was about to ask, do you want a new job or are you just looking to invest some money and earn a good return without doing much work?
But it sounds like you answered your own question. That's a typical path, and I've seen many achieve those goals even in the few years I've been in the MF game.
Developer · Houston, TX · Member since 2015 · 1k+ posts · 1k+ votes
7y
Neither, it means Key Principal ;) Some lenders don't use that terminology, they just call it non-managing guarantor.
I was there too but I don't think we got a chance this weekend. My opinion is that being a passive is a good start. A lot of people (including myself) started that way.
Specialist · Denver, CO · Member since 2017 · 60 posts · 137 votes
7y
@Kevin Ferguson I think both routes are good options, depending on largely on your personal network and willingness to dedicate lots of time to daily action. As several folks have already attested, starting as an LP is a great way to start; I went straight to syndication and was able to recently close on a $7.5 million property in Colorado.
My syndication was a 506(b) offering and I had enough people in my network that both had money, and trusted me with it, to raise a bit over $2.1 million. I spent 9 months learning as much as I could through books, podcasts, and free meetups, then applying that knowledge to find and close a deal.
Both routes are possible, it just takes looking in the mirror and deciding which way you want go!
It looks like you've got your answer here already as to how to start out. I also took a similar route by investing as an equity partner first in a few deals. As to when is the time to become active is really up to you: when you will be ready to implement the knowledge you acquire through learning about syndications.
So read books on the topics of syndication and multifamily investing (if you need recommendations, PM me), listen to podcasts and network with like-minded investors to keep the momentum going for yourself!
I have a full-time job right now but I know through passive investing and syndications, I'll be able to leave my job and pursue REI full-time (Allowing me to Travel!)
Key Principal! I went back and forth with the spelling ;)
Unless you have the network and people willing to trust you with your first syndication; Being a passive sounds a lot better. The goal is to be the deal sponsor though!
Great advice! How long did it take you to become a passive in your first syndication? I bet you looked through a lot of deal analyzers from the deal sponsors.
Cincinnati, OH · Member since 2013 · 1k+ posts · 1k+ votes
7y
@Kevin Ferguson Congrats on being inspired to take action! Being a passive investor is a great way to start and learn more about syndication before taking on your own projects. I'm not sure of your background, but really embrace the education process. I would suggest listening to multiple podcasts as well as reading books on the subject.
My goal is to invest in a passive deal by the end of this year. Then build up a track record and become the deal sponsor.
I think that's a good way to approach it. This is what I've done starting from about a year ago. I've found some deal sponsors that I've learned a lot from. They're very responsive and have the heart of a teacher.
Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
7y
@Kevin Ferguson there’s definitely advantages to possibly investing in syndications, however I would try to work with sponsors that are going to allow you to be a little more active. Make sure that you’re truly looking at this deal as a learning experience.
This is not the only way to get experience, however. You can invest in smaller multi families on your own, invest actively with several partners that have some experience or volunteer/work For active investors.
If you’re going to go the passive route, just make sure you understand who are you are doing business with. It’s very important to find sponsors that you can trust and that have a good track record of honesty and integrity. Also make sure that they can fully explain their underwriting to you and that it appears to be conservative in nature. Just recently Rent growth through most major markets either stalled out or was negative. The sponsors that are underwriting at 5% growth are going to end up in a heap of trouble eventually.
Rental Property Investor · Tampa, FL · Member since 2015 · 1k+ posts · 969 votes
7y
In order to become an apartment syndicator, you need to have a track record in real estate (doesn't need to be apartments) and/or business (i.e., held a high level position, started your own company, etc.) AND have a strong educational foundation. In other words, you need a background that allows potential investors to trust you with their money.
If you don't have those requirements covered, I would passively invest first and work on your education and real estate experience (passive investing in a deal will help with your credibility, but you really want to have some experience successfully managing a deal).
Awesome advice Theo, I definitely have a track record in SF but not the MF level yet.
I have some sophisticated investors that would want to invest into an apartment deal but I want to keep educating myself and invest passively into a deal first. That way I can have the track record you're describing.
Cincinnati, OH · Member since 2013 · 1k+ posts · 1k+ votes
7y
@Kevin Ferguson One place to start is by @Theo Hicks and @Joe Fairless the Best Ever Syndication Book. I would also check out the recent BP book by @Matt Faircloth, Raising Private Capital. Multifamily Millions by David Lindahl is another good one, less about raising money and more about multifamily.
For podcasts, there are a lot and I know many of the podcasters so I don't want to slight anyone. I can DM you my favorites.