First deal and syndication

25 Replies

I’m looking to step into my first investment property. Is syndication the right way? Does anyone have experience with with this in California?

Originally posted by @Jared Lomker :

I’m looking to step into my first investment property. Is syndication the right way? Does anyone have experience with with this in California?

This all depends on your knowledge, experience, resources and type of investment property you are interested in. 

 

@Jared Lomker I just had this same convo with an investor yesterday, happy to expand more if you like...but here are the basics:

1. Know your goals for your lifestyle: 
•Are you looking to be an active investor, a semi-active investor, or a passive investor?

Active= you find and buy the property, self manage, call all the shots, do all the hiring, firing, finding of residents, etc.
Semi-active=you buy a property, hire a property mgr who takes care of MOST of the work, and you simply thumbs up or thumbs down to work orders over X $ amount, or incoming resident applications, etc.
Passive = you simply write a check, go back to your life, and you receive distribution/profit sharing checks from the property.

2. That answer will help you to clarify your next steps...

If you're just starting out, and want to be Active or Semi-Active, then I suggest you stick to a single-family house or duplex for your first purchase.  This allows you to get involved, without too much financial risk (houses can be bought for $10-$20k in reasonable areas), and can learn the basics of self-managing.

If you're just starting out, and want to be Passive, then consider investing in an apartment syndication with an experienced team/sponsor.  

Syndications offer you the ability to be involved in a figurative giant machine with the economies of scale that come with it. A 200 unit apartment complex runs more efficiently than a single-family house and is set up to withstand vacancy, maintenance, etc without it affecting your returns (since those items are all built into the business plan to start).

So, what is it you want? A passive investment in a larger apartment deal, running effeciently like a large machine? Or a more active investment in a smaller property where you have more control, with the potential for some more dynamic ups and downs.  

Both can have great returns on your investment, so to me, that's not the best deciding factor, it is more about what you want to do with your time and your future.

I have done all of these options, and now syndicate mid to large apartments, helping investors create passive income. My friends and investors like the life it affords them. That being said, I certainly applaud anyone doing any kind of investing. There's no 'right or wrong' in my opinion.

Hope that helps!

@Chris Collins

Thank you very much for this explanation. This was helpful. I'm currently working a full time firefighter career and now with a family growing I want to have the ability to grow my net worth while continuing my career. The bonus of the fire service is we have several days off a week which gives me time to be a semi passive investor. My net worry is not very high and so finding partners to learn from and invest with is my goal. Eventually giving me the ability to have retire early by replacing my income. I am very good with rehab with a construction background of 20 years. I have been educating myself through people I've met and books I've come by. It's the details I'm trying to fill in. Thank you again for your input.

@Jared Lomker I am a syndicator. My first 2 deals weren't syndications. I syndicated starting from the 3rd deal. It's not as complicated as some tell you. Go for it! Consult an attorney and fully understand the process and structure. It's not rocket science.

@Jared Lomker . Check this book out by Joe Fairless. He was a guest on the BP Podcast. 



https://www.amazon.com/Best-Ever-Apartment-Syndication-Book/dp/0997454326

I started it earlier in the week, and I am having trouble putting it down! Great read and will open your eyes to the syndication world. 

Hey @Jared Lomker , I found myself in your position not so long ago. I’ll compile what I’ve learned over the past three years to answer your question.

To add to @Chris Collins ’ response, which was excellent, you’ll need to start by educating yourself on real estate investing. The more you know and understand difference niches of real estate investing the easier it will be for you to define your goals and vision. If your goals are still to get into multifamily and possibly syndication you’ll need experience to get started. You can gain experience several different ways.

1. Passively invest in an experienced sponsors deal. Keep in mind most experienced sponsors minimum investment requirements can be anywhere from $50k - $100k. The lowest I have seen was $25k. Furthermore, you may be required to be an accredited investor. If you aren’t sure what that means check out this article: https://www.investopedia.com/a...

If you don’t have $50k sitting around that’s okay, there are other ways to gain experience.

2. Start small. BRRR a single family or small multifamily (2-4 units) property. Manage all the steps from start to finish. While dealing with larger multifamily assets will be much different, there is a lot of valuable experience that comes with starting small. Then you could leverage your experience and move into a 6-12 unit apartment then a 20-40 unit apartment and so on.

Options #2 will also help set you up better for option #3.

3. Align with experienced sponsors. You will need bring something to the table that is valuable. Maybe that means you’ve found a deal and have systems in place to keep the deal pipeline flowing. Or, perhaps, you have developed a healthy pool of investors ready to commit to an opportunity. There are a lot of ways to be of value to an experienced operator but I chose those two examples because there are two things every syndicator is always looking for, deals and money. 

Hope this helps. If there’s anything else I can do to help reach out anytime. 




Hi @Jared Lomker,

Many that are expert apartment investors today, started out with passive investing. This gave them an introduction to the real world of investing and enabled them to build on their education in the world of multifamily investing before taking on active investing.

As a passive investor, you can legitimately ask questions of the sponsor. Depending on the amount of money you invest, the sponsor will be willing to spend some time educating you about the deal.

You can ask to see the deed, the market research, the underwriting, the appraisals, inspections, and property financials, and ask questions about each aspect of the deal.

Ideally, you will be furthering your education and getting a good return on your investment at the same time.

Wishing you all the very best!



I would look at either Joint Venturing (e.g. partnering up with someone) or being an investor and as ask the Sponsor can I have some responsibilities to learn. 

@Loren Jacobs

Thank you Loren. That was very helpful. I am taking steps every day to educate myself and continue to grow. I am developing my deam and establishing our goals.

This depends on what you want your roll to be. It's a great idea if you want to be a limited partner (someone who earns money from throwing in some cash and gets monthly progress reports on the apartment from the syndicators).

It's not a good idea if you want to be a general partner (someone who has a team of experts pulling this whole thing together for the first time- good luck with financing)

Neither is impossible but I recommend you start out as a limited partner to learn the ropes.

Originally posted by @Jared Lomker :

@Amy Heitner

Thank you for the direction. How would you find a sponsor to begin a passive income position.

BiggerPockets, in-person events, and podcasts. Reach out and set appointments to get to know sponsors. Simultaneously with that, start building your due diligence criteria and questions for sponsors. You'll need to build a system to qualify them. There have been many BiggerPockets posts on that topic, so searching here should teach you much of what you'll need to know on qualifying sponsors. Collect a variety of opinions and select those which you find the best.

@Jared Lomker

Hi Jared, assuming that you want to be the main manager of the syndication, I would say like everyone else to educate yourself first and then to start small such as a duplex. I also have goals to syndicate as a manager in the future but I know that the realistic thing to do is to start with small multifamilies first to develop credible experiences and educating myself as much as possible all at the same time. I just finished the Michael Blank course, and I’m no where near an expert or even credible because of it, but I’ve definitely learned that although you don’t need to be a genius to conduct a syndication, you do need to work your tail off and be knowledgeable.

A big part of syndicating is finding investors, and to put it simply, not many investors are going to give money to people who don’t have any experiences under their belt. Speaking from my current position, the you educate and hustle, the clearer the path will become. Hope this helps in any way...

@Jared Lomker Good info already presented here but really syndication is simply a joining of forces to accomplish something more difficult to do alone. If you throw words like "apartment" in front of the word, the numbers and properties just get bigger but a syndication could be done on any size property. 

With this being said and speaking from experience, if you are interested in getting into the sponsor or manager role of a "syndication", start with something you feel attainable with which allows you to build those "syndication" skills and grow upon.

This simply means, rather than jump into a large syndication, perhaps run lead or sponsor on a sfh, duplex, triplex or quad acquisition. Anyone can run a syndication of this size by managing and organizing the acquisition, ownership and exit of a property. Here are the steps:

1) Educate in what is needed to take down a sfh, duplex, triplex or quad as a partnership (JV Agreement recommended)

2) Identify the roles needed and who will fill them. Specifically, who in the partnership will have: A) Capital B) Experience C) Time (Note: You will probably be the Experience or Time)

3) Now Organize and Manage the acquisition and deal from start to finish.

4) Repeat and Scale

Before long, an apartment syndication is the next logical step. In every instance, a syndication is the same fundamentals just with bigger numbers and more units as you grow.

Also, a firefighter schedule is perfect! I was firefighter/emt for 4 years. Not only do you have the days off to get an advantage over the other W-2 9-5ers looking for deals,  but the firefighter shift is great time to analyze deals and grow your knowledge during those lulls waiting for that jolt from the fire tones. Not to mention, you have access to a close knit brotherhood of guys you spend more time with then family to involve in your new syndication opportunities. 

@Jared Lomker Other than asking this on BP, who is your coach or mentor to teach you all the ins and outs of syndication? You don’t just decide to do it. There are companies that train for this. I’m not trying to promote anyone so won’t say who I went to.

It was worth the money to be trained right. I’ve syndicated many apartments.

@Jared Lomker I agree with @Tim Ryan ... GET. A. MENTOR. 

Your reputation is everything in syndication - with investors, brokers, industry professionals, etc. You want to come out of the gate with credibility and an experienced "name" (mentor) backing you. My Dad and I hired a mentor last year and closed on 173 units in November - and we're about to go under contract on another property. My advice when I talk to anyone asking about syndication is to know what you're getting into... it sounds like you've got what it takes from your drive and goals perspective, you just need a mentor and a team to help accelerate your progress. If you are going to hire a mentor, make sure it comes with a mastermind group of people with resources to help you (for earnest money if needed, capital-raising, key principal, etc). We invested in 2 mentors before we found the right one... happy to discuss our journey if it'll help you make decisions about yours...feel free to reach out anytime! Wishing you the best of success!

@Jared Lomker whichever route you decide to take, do your research prior. Partner up with a syndication mentor and  have them walk you through your first couple of deals. There are great resources out there that will guide you and educate you tremendously. 

Originally posted by @Jared Lomker :

@Spencer Gray

How do I learn to eventually make it an option for myself? Any recommendations?

I am interested in doing this as I eventually want to bring investors in on deals with me.

 

Originally posted by @Caleb Heimsoth :

@Jared Lomker you should clarify. Are you wanting to be a passive investor in a syndication or do you want to set up your own syndication?

 My goal is to set up my own real estate syndication. How do you suggest that I start and eventually get to this point?