As an Accredited Investor, Let Me Ask You..

11 Replies

As an accredited investor who participates in a syndication, do you typically invest with the same syndicator? 

What are some good qualities that you look for in a long-term partnership of an investment company? What would be some things that would turn you away from a syndicator besides not reaching returns.

Best Regards,

Syndicators that show poor character, behave outside the norm, or don't know their business don't work for me!

Personally - I seek to only invest with syndicators whose character is so good that I'd be comfortable if they had all of my money.  That would be a ridiculous and stupid thing to do, but there are a lot of sponsors out there. I only want the best of the best to have my money.

It might sound silly, but responsiveness by email goes very far with me.

@Taylor L. hit the nail on the head. You want to seek out experienced and sophisticated sponsors with a proven track track with multiple successful exits. 

Responsiveness goes without saying. If they can’t follow up with you in a timely manner chances are they are sloppy operators and are not on top of things.

The idea is to build a long term relationship with people you trust and can rely on to do the right thing in any circumstance. This can be one group or several. 

Alignment of interest is huge. You want a sponsor who is putting their own money in the deal and getting paid after the investors.

There are some really great operators out there and some very poor ones. Do you’re homework and due diligence and remember caveat emptor.

@Nick Love I invest in deals with experienced operators that use conservative financing and have good fundamentals. I don't care a ton about syndication experience but more on ability to execute. You have alot of deals with experienced syndicators raising money on deals for inexperienced operators for a cut and I would not do that. I also prefer deals that while they could get more aggressive financing do not necessarily use it. For example, I don't invest in deals that have 30 year amortization and 5 year interest only. While someone can secure this financing now there is no telling if they can get it again and if their existing strategy is predicated on market improving to exit a less than ideal rate environment could move cap rates up although not as much as you would think.

@Nick Love

I'm in complete agreement with @Taylor L. in this case. First and foremost, you invest in a person that is in charge of the investment. So you want to ensure you establish relationship with them, evaluate their track record and have a rapport with them. Their long term plans and strategy should resonate with you. If there's a disconnect, determine why. If it doesn't sit well with you, move on to another sponsor. 

In terms of whether to invest with the same sponsor, you can invest with the same and you can also look to invest with others. It's up to you what strategy to implement and how much to diversify your portfolio.

Here're some materials that will help you determine further who to work with and what values should a deal sponsor have,

@Nick Love

Presently, I have two investor relationships with different syndicators. Although one has been much more active, lately.

Management is key. I would rather a good management strategy in a tough environment than a good environment with a bad management strategy. Find people who will put conservative estimates around their costs and leave ample contingency in place.

Make sure they have experience in the asset class & style. There are a lot of 'flavor of the week' kind of strategies (mobile home, self storage, etc.). These are good strategies in general, but I would prefer a partner that has a track record in the specifics of it, and is not just jumping around from project to project because they did the analysis and found reasonable prices. 

Hi Nick. It is really up to you. I know passive investors who go all in with one syndicator and others who diversify across multiple syndicators.

In regard to good qualities, I think transparency is a huge. If something goes wrong, do they let you know, how quickly do they let you know, and are they already working on a solution? 

Another is their visibility. If a syndicator also has a large online and in-person presence (i.e., writes books, has a blog, podcast, youtube channel, hosts meet-ups and conferences, etc.), if they do something shady on a deal, not only will their syndication business be negatively impacted but their entire brand as well. On the other hand, if they are fairly unknown and you cannot find a lot of info about them or their business online, that is not  good sign.

Lots of good advice here and I'll piggy back on @Theo Hicks , communication is super important because I want clarity and transparency for anything I invest in. I would hope that would be the same for passive investors as well. Once that is compromised, the brand could be tarnished. 

@Nick Love if you’re able to find multiple syndicators that you trust, I’d argue that its preferred vs. just investing with one syndicator. Each has their own strategy, and diversifying good strategies never hurts. In addition, each will have better local knowledge about certain geographies. Adding diversification here never hurts as well.

That being said, investing with one good syndicator repeatedly is preferred to investing in one good syndicator plus several okay syndicators. Stick to the best ones.

@Nick Love I would never invest with just one Sponsor, unless I was only investing the minimum amount one time. Diversification is key, at least to me. Do I want any number of $50K investments tied up with one group, in one asset class and (likely) one market? Or would I rather split up those $50K investments in to multiple asset classes, in many different geographical locations, with two or more Sponsors? I take the ladder every day, spreads risk.

Of course, approach in reality varies greatly by investor/preference, as @Theo Hicks said.