He is new to Syndication though...

Multi-Family and Apartment Investing
6yFollow

He is new to Syndication though...

Account Closed
Real Estate Investor · Waldorf, MD · Member since 2014 · 592 posts · 320 votes

Would you invest with a Sponsor with no track record BUT has a mentor with over 28 successful syndicated deals?  Extremely trustworthy and sharp with over 5 years of experience in wholesaling and flipping but new to syndication.  I trust him but what would you do?  Would you entertain a listen or pass based on a lack of experience?  

Let me know BP. 

0Reply
64 views

Most Popular Reply

Brian BurkePro Member
Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
6y

I'd probably pass.  Why take the risk when there are better options?

Being a sponsor isn't just about skill--it's also about financial strength.  The mentor can help the sponsor fill the knowledge gap, but will they step in and write a check when things aren't going well?  Probably not...

Podcast Guest on Show The Truth About Real Estate Investing in 2024 (What Investors NEED to Know)
6Reply
See this reply in the discussion

14 Replies

Jump to latestLatest
  • Brian BurkePro Member
    Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
    6y

    I'd probably pass.  Why take the risk when there are better options?

    Being a sponsor isn't just about skill--it's also about financial strength.  The mentor can help the sponsor fill the knowledge gap, but will they step in and write a check when things aren't going well?  Probably not...

    Podcast Guest on Show The Truth About Real Estate Investing in 2024 (What Investors NEED to Know)
    6Reply
  • Hadar OrkibiPro Member
    Rental Property Investor · USA / NZ · Member since 2016 · 1k+ posts · 812 votes
    6y

    @Account Closed , there is a simple answer. dont get in t any syndication / deal unless you know its a good deal. learn to underwrite and make sure you done your Due Diligence on the Deal and the sponsor. 

    0Reply
  • Evan Polaski
    Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
    6y

    @Account Closed, there are a lot of options out there with experienced syndicators, so the deal had better have a clear path to outperforming other options.

    In general, there is a reason a lot of syndicators start with the close family friend with a lot of money.

    1Reply
  • Greg Dickerson
    Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
    6y
    Originally posted by @Account Closed:

    Would you invest with a Sponsor with no track record BUT has a mentor with over 28 successful syndicated deals?  Extremely trustworthy and sharp with over 5 years of experience in wholesaling and flipping but new to syndication.  I trust him but what would you do?  Would you entertain a listen or pass based on a lack of experience?  

    Let me know BP. 

    It depends on the individual, their reputation, professionalism and verifiable track record of success in the business they are currently in. I would also take a good look into the deal and the market it’s in. If it’s a good deal and the individual checks out I might do a partnership with them as long as I had a controlling interest but that’s just me as  I have never been a passive investor. 

    1Reply
  • Scott Mac
    Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
    6y

    Hi Lamont,

    I agree with what the others have said, but I remember you saying in another post you were having trouble finding investors.

    So possibly, as a co-GP in the deal (like a joint venture kind of situation) it might make sense, if it allows you to attract Investor cash to the closing table, or the person is bringing investor cash onboard, but you will still need a deal Sponsor to step up to the plate as Key principal for the loan. Someone with the lender required experience and net worth. 

    I point this out because not all Key Principals can bring the investor money to the table when needed.

    Without the LP's the deal is just dust in the wind.

    But keep in mind there is only so much of the GP side of the deal to go around money wise, but a smaller bite of pie to a hungry man might be better than no bite of pie at all. (and man do I like pie!)

    You also have to consider earnest money, and due diligence costs and who is going to put those forward, as well as who will do what needed actual work before close and after close.

    Just another angle to think about.

    Good Luck!

    0Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    6y

    @Lamont Marable. I’m with @Brian Burke. I’d pass. That type of syndicator is extremely likely to overpay and mismanage projects

    0Reply
  • Mark Allen Kenny
    Investor · New York City, NY · Member since 2016 · 155 posts · 105 votes
    6y

    @Account Closed An inexperienced syndicator should be building a team around them. Regardless of their education and intention, there are always going to be blindspots if this is their first deal. So in addition to mentorship, they should be bringing experienced operators onto the GP team to eliminate those blindspots.

    1Reply
  • Alina Trigub
    Rental Property Investor · Glen Rock, NJ · Member since 2015 · 3k+ posts · 2k+ votes
    6y

    @Account Closed

    If you have a specific skill set that may benefit sponsors, offer to volunteer for them. This may take you further than you think.

    1Reply
  • Victor S.
    WorldWide · Member since 2016 · 1k+ posts · 1k+ votes
    6y

    what kind of wholesaling and flipping? if he was doing sfh-type stuff but is now shifting into multi space, i'd question how those skills transfer over into that space. i'd want to have somebody who survived prior economic downturns vs somebody who was successful flipping in a hot market. i'd still give him a listen, tho. maybe he is one of the few that will pull thru.

    1Reply
  • Joseph CacciapagliaBusiness Member
    Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes
    6y

    Did the Sponsor use OPM for any of the flips? Some people are great with their own money, but then lose their minds once they're using OPM. Being a good steward of other peoples' money is an important skill for a syndicator.

    Does the Sponsor have any experience with the deal type that is being proposed? Flipping houses and doing a value add multifamily deal are very different transactions that require different skill sets.

    Does the Mentor have any skin in the game for this deal? If the experienced syndicator is willing to put some money in the deal, that shows a little trust. Otherwise, how committed is the mentor? I could say anyone more successful than me in this business that I know is my "mentor", but what does that really mean? Did the Sponsor just cut this Mentor a check for some education? If that's the case, it would be a hard pass for me.

    [email protected]979-218-2286
    Joseph Cacciapaglia powered by Morty
    WebsiteView Page
    2Reply
  • Evan Loader
    Rental Property Investor · Ann Arbor, MI · Member since 2019 · 71 posts · 67 votes
    6y
    Originally posted by @Account Closed:

    My advice would be to avoid syndications at all costs.  

    Ask a syndicator who they recommend for their parents 401K?   

    Ask an insurance man how many  variable annuities or wholesale insurance policy he invests in?

     That is a bit of a blanket statement. Do you have any specific reasons as to why we should avoid syndications? The comparison to insurance salespeople that hock whole life & annuities is at best, lacking any substantive comparison and at worst....intellectually lazy. 

    1Reply
  • John FortesPro Member
    Multi-Family Syndicator · Abington, MA · Member since 2017 · 603 posts · 347 votes
    6y

    If the sponsor is lead on the deal with no previous experience? You have to ask yourself if you are comfortable with that.

    If the sponsor has a team behind him (not a board committee) but has truly partnered with an experienced investor, that's a different discussion. Answer will vary by night and day on which side of this scenario this situation fits. 

    Happy investing!

    1Reply
  • Todd Dexheimer
    Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
    6y

    I would pass, unless the mentor was the lead on the deal or someone else with a lot of experience. 

    For your first deal, you will need to find friends and family connections. I suggest that you start with smaller deals using your own money or a smaller group of friends and family or partner with experienced sponsors. 

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free