What are the best sources for syndicated deals?

Question

I'm looking to diversify into real estate but need to remain fairly passive given my day job. I've started off by putting a turnkey duplex under contract that will close this week, but the more I look at it the more I think turnkey won't give me the scale or upside I eventually would like.

This brings me to syndicated deals. I've looked at a few crowdsourced websites like Crowdstreet and Cadre, but I suspect the best deals are not found through those public forums. Any advice on how to get started in this area?

Brian Burke · Answer

@Christopher Nemlich I think you are right. There are a lot of very qualified syndication sponsors out there—but unfortunately there is no centralized repository to locate them. But that doesn’t mean that you can’t find them with some good old-fashioned shoe leather.

By far the best way to find great syndicators to invest with is to get recommendations from friends and colleagues who are already investing. This is easy for some people that have lots of friends investing in passive real estate opportunities. But it can be impossible for others who just don’t have those resources. Fortunately, there are many ways to find great syndicators, it just takes a bit of time and effort. This list isn’t exhaustive but includes most of the best ways to find quality firms to partner with.

Conferences. Experienced syndication sponsors are considered experts in the real estate field and are often invited to various investment conferences to speak in keynote presentations and on expert panels. This is a great way to hear their thoughts on markets and strategy and a host of other topics. Sometimes their speakers have trade show booths where you can speak directly with them or they are available before or after their speaking session. You don’t even have to attend some conferences, some will publish a list of their speakers and/or attendees and you could simply reach out directly after researching their firms online.

Brokers. Often, brokers of large multifamily properties put out lists of their recent transactions. Scan those lists in the markets that interest you and look to see who the buyers and sellers are. Often, those buyers and sellers are syndicators. Search them online and check out their websites.

Meetups. Similar to conferences but typically on a much smaller scale. Meetups are typically organized by other investors and have invited guests to speak to their group. Syndicators are often sought out to be those speakers. Search online for “real estate meetups” and check their websites for their upcoming speakers.

Networking events. This can range from local real estate clubs all the way up to multifamily specific events such as the National Multi Housing Council’s annual meeting. The most experienced syndicators would be more likely found at the larger events, with newer smaller syndicators found at local clubs.

Real estate websites. Sites such as biggerpockets.com have many syndicators that participate in the forums. Read what they are posting to sort out who is experienced and who is not.

Podcasts. There are dozens of real estate podcasts out there. Go to your favorite podcast app and search for real estate, multifamily, or syndication and you will find many podcasts that talk about those subjects. Many of the podcast hosts are syndicators themselves, and many of the guests on the shows are syndicators. Listen to those podcasts and you can learn a ton about the various players.

Blogs. Syndicators write blogs for their own websites and also for other websites such as BP, Entrepreneur, Forbes, etc. Reading what they have to say in those articles gives you a window to the mind of the syndicator. After a while you’ll develop a knack for figuring out who really knows what they are talking about and who is just full of it.

Company Websites. Nearly all experienced syndication sponsors have a website. Searching online for terms such as “real estate investment firms”, “real estate syndicators”, “real estate private equity” and most likely about a dozen or more other search terms should reveal the websites of many syndication sponsors.

News Articles. Active syndicators are frequently quoted in news articles or have entire articles written about them in trade and mainstream publications. Many will issue press releases when they close on acquisitions, which result in articles in publications like Multi Housing News, GlobeSt, and Multifamily Biz. Watch for the company names or the spokesperson’s names and search those names online to find out more about the firm.

Crowdfunding. No discussion of finding real estate sponsors would be complete without talking about crowdfunding. Crowdfunding portals don’t typically invest directly in real estate. Instead, they invest in syndications, or act as a placement agent for their investors to invest in syndications directly. So yes, crowdfunding platforms are really just middlemen between investors and syndicators. While this is certainly a way to find syndications, it comes at a cost because the crowdfunding portal is a business and has to receive revenue in order to survive.

This revenue can come from the investor or the syndicator, or both. But ultimately, any cost to the syndicator is ultimately a cost to the deal, which means that at the end of the day it costs the investor.

Investors that can find quality sponsors, and do proper due diligence on them, can save an entire layer of cost by investing directly with those carefully selected sponsors versus investing through crowdfunding portals.

Good luck!

John Casmon · Answer

Hey @Christopher Nemlich, you got great feedback from @Brian Burke. I would suggest making a list of a handful of syndicators and learning more about them and their principles. As @Ian Ippolito stated, most will seem redundant, so try to get referrals and learn more about how each group operates.

I will point out that the "screening process" for vetting syndications goes both ways. Great operators with long track records usually will not accept sophisticated investors and have higher minimums. As others stated, they have investors waiting for their next deal so there's no need to do much networking/promotion. They also prefer experienced passive investors who make their job easy and don't ask questions all the time. If you want to be a hands-on learner, you need to find an operator who will provide that opportunity.

Ian Ippolito · Answer

Chris,I have a significant amount of my net worth invested in private syndications/crowdfunding deals. And I'm going to disagree with a lot of what has been said above. This is coming from my personal point of view of a conservative investor. Someone who's more aggressive or coming from a different financial situation will disagree with me and feel very differently.1) In my opinion, podcasts, Facebook ads, brokers etc. are not good places to find high-quality sponsors. Personally I believe we are late in the cycle, and if we have a severe downturn I don't want a less experienced sponsor learning expensive mistakes with my money. So at this stage I'm only investing in sponsors with at least full real-estate cycle experience and little to no investor money lost. These types of sponsors have built up very enthusiastic investor bases over decades, and their deals usually oversubscribe quickly (often within a day or two and with no effort on their part). They don't have any need to run podcasts, pay for Facebook ads, try fishing for investors at meet ups, use brokers etc. What I have seen is that the less experienced sponsors are generally the ones that are forced to use those methods because they don't yet have the enthusiastic investor bases of the more experienced ones. These aren't a match for me personally. At the same time, a more aggressive investor or someone coming from a different financial situation might be fine with these. So it depends on what you are looking for.2) Marketing to unsophisticated investors: Also, many times I've seen that syndicators who get their investors primarily via podcast etc. are marketing to unsophisticated investors. When an offering targets unsophisticated investors, there's almost always going to be one or more things about it that I just can't stomach. So this to me is an immediate yellow to a red flag. On the other hand there are some people who get most or all of their syndications through these methods.3) Brokers: these generally don't do their work for free. What I find as many times is that deals that require going through a broker have huge and uncompetitive fees that can be avoided by going through other sources. So personally I don't like this method either.At the same time there are people who like getting their deals through brokers because it is easy and convenient. In my opinion, it would be wise to realize that the broker is not going to do your due diligence for you and you still need to do it yourself.

4) Websites: These can be useful for looking for red flags on a sponsor after I've identified them. But, in my opinion they are not helpful for sourcing new high-quality sponsors. That's because every single sponsor (whether high or low quality) has a website and most of them look almost exactly the same as everyone else (i.e. we are wonderful, our people are the most experienced, our due diligence is fantastic, our track record is the best etc.).

Additionally, many of the most experienced sponsors were around before crowdfunding was introduced, and so they are operating under older sections of the law that do not allow them to publicly solicit. So they are not going to be putting a ton of information on the Internet, in blogs, etc.. because they are not legally allowed to.

Personally I source my deals in these ways:

1) Crowdfunding sites. It's true that 95% of these deals don't have the type of experienced sponsors I'm looking for, but occasionally I get lucky. Unlike the typical syndicator who gets most of their investors from podcasts, the vast majority of these aren't marketed to unsophisticated investors. And if you are more aggressive investor, you can find lots and lots of deal flow. But even here, I feel you cannot trust the crowdfunding sites do adequate due diligence on your behalf and you still need to do it yourself.

2) Networking. This is where I've gotten the vast majority of the most experienced sponsors and deals in my portfolio. Every investor I run into I ask them "what are you investing in and who's done well for you?" If you don't have a network and don't have the time or inclination to develop one then the alternative is to join a good investor club.

If you happen to be interested in some of the sponsors I personally like, PM me and I can give you more info.

Hope this helps and good luck.

Bryan Hancock · Answer

Experienced syndicators often are more deal constrained than capital constrained and thus their cost of capital will be lower. A lot depends on your risk tolerance and how hard you need your money to work to meet your defined goals for that portion of your assets you're allocating to investing passively in real estate projects. If you're only getting 12%ish I see no reason why you'd allocate your assets to this asset class rather than something broader and safer. To seek additional yield you have to take additional risk. There is no free lunch in life.

Further, there are tons of very sophisticated sponsors growing their deal base faster than their investor base and thus they're not automatically less sophisticated because they "have to advertise."

A lot depends on what you'e seeking, your goals, and how much time you have to actively scrub sponsors on your own. The latter is a tall order for all but the most sophisticated investors anyway and certainly does not make this type of investing passive. If you want to be that active maybe you should just do active projects instead and capture the additional yield.

Chris Salerno · Answer

Brain burke did a great job explaining.

I would be careful with crowdfunding websites. Before just picking a syndicator I would pick the markets you want to invest in. Once you feel comfortable with the markets then find a great syndicator. This will help you better analyze the deals when you get them.

Let me know if you have any more questions. Good luck!!

Greg Dickerson · Answer

I would add be careful of newer crowdfunding sites as several are going bust and a couple have been closed down as they were straight up Ponzi schemes. You can google this to learn about recent SEC filings and closing down of funds. Caveat Emptor!

Taylor L. · Answer

I think the two go hand-in-hand. Identify a market you like and look for sponsors doing deals in that market. Find great sponsors you like and look at the markets they do deals in. It's a big country with many solid real estate markets. You may not identify all of them on your own.

Brian Burke · Answer

I’m not sure that there is a “typical” minimum, but $50K to $100K is pretty common.

Dylan McCabe · Answer

@Christopher Nemlich

Aside from all the great feedback, I agree that you need to sift through your options with some sort of system.

I would connect with local sponsors, as mention by @Brian Burke.

Then, I would connect with local brokers to ask for feedback on the buyers. No need to mention the buyer by name, but you can take a broker to lunch, mention there returns you’ve been offered, and ask the broker if that’s realistic in your market.

In Texas, a lot of out of state buyers are over paying for deals, so they are going to have a very hard time executing the business plan and securing investor returns. You can ask a broker about things like that.

Brokers work with buyers all day long, so they are a great resource.

We typically require 50k minimum but look for investors who can invest at least 100k.

We are launching a Multifamily podcast soon, and I plan on doing a show on “questions you should ask your syndicator”. Our goal is to give investors a truer behind the scenes look at Multifamily investing.

What are the best sources for syndicated deals?

What are the best sources for syndicated deals?

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