Syndication or General Partnering?

15 Replies

While I look at large multifamily to invest, I wonder if it is worth starting a fund and syndicate the property with passive investors or find partners who will invest in the property but will be very active in the process. Have you done both and which is less of a headache? 

P.S. I love having control over the business aspect of my rentals!

Adanna

You can do both, especially if you find an active investor who brings something to the table that you lack. Let's say you find someone that has experience as a contractor. That is a huge resource if you are looking at projects that need work done. 

Gaspare, 

You are right, I guess I have ran into prospective investors who are more interested in the day to day processes rather than 'just' contribute what I lack in the partnership.

The structure does not depend on what YOU want to do, it depends on what the investors are expecting as far as returns. Are they going to be active? JV might work. Are they expecting to be a "silent partner"? Syndication might be your only option.

In a general sense, if I could get a deal done as a legitimate General Partnership, I would go that route. Fewer people in the deal and significantly lower legal costs. However, if you're going to bring on passive investors, then syndication is the answer.

I see you're not far from me here in Richmond, is your deal in the Williamsburg area?

Originally posted by @Adanna Davis :

While I look at large multifamily to invest, I wonder if it is worth starting a fund and syndicate the property with passive investors or find partners who will invest in the property but will be very active in the process. Have you done both and which is less of a headache? 

P.S. I love having control over the business aspect of my rentals!

Adanna

 I would figure out what your goals are first. If its to grow a small portfolio not quickly then do the GP route. If its to grow a large portfolio as soon as possible then I would syndicate or create a fund. 

Taylor, 

Hard to find deals in Williamsburg...I look for deals in Norfolk, Portsmouth, Suffolk, Chesapeake and Newport News area.

@Adanna Davis

If the plan is to play by the book, I suggest you speak with security attorneys to fully understand what is the right structure for each investment. This will give you the foundation necessary to make a decision down the road as to which structure makes sense and when. There are several attorneys on BP, folks like @Amy Wan , @Mauricio Rauld , or many others. 

Originally posted by @Adanna Davis :

While I look at large multifamily to invest, I wonder if it is worth starting a fund and syndicate the property with passive investors or find partners who will invest in the property but will be very active in the process. Have you done both and which is less of a headache? 

P.S. I love having control over the business aspect of my rentals!

Adanna

 Adanna,

Either way, if you structure it right, you will have control. If I were you in your shoes, I will go the JV route first. Here's why:

1. It sounds like you have no experience with MF yet. If so, you have no right to risk other people's money yet. It's better to lose your money on your first deal than risk other people's money. In a syndication, the private investors are not in control - you are. If the one steering the ship has no experience - that's not good for you and for them. Some single family home investors think that simply because they're successful with flipping houses or renting a few houses that MF investing should be easy. Not necessarily.

2. With the right JV partners whom you vet, like and trust, they can bring more than money to the deal. They can bring their expertise, their credit, their experience, and their network. All these will help make your first MF deal successful vs. you doing it on your own.

@Adanna Davis Either way its a security.  My experience is that it is much harder to raise money in a blind fund since investors are betting on your versus the property.  They cant do their own underwriting on the property.  So tough to do if this is your first syndication.  Investors would  be looking for experience.  Thanks @Alina Trigub for the shout out.

Danny, 

I have both.  All, I do is network, my co-workers are always eager to invest with me, I call up investors all of the time and connect with them either from mutual friends or forums like this.