What do you look for in an Apartment Syndicator?
Investor · Houston TX · Member since 2020 · 27 posts · 16 votes
What do you look for when investing your money into an apartment deal?
What do you look for in your returns?
Do you diversify syndicators?
Do you like them to be owner operators as well?
Value or Yield?
Underwriting standards with assumptions that are supported in reality and verifiable
Transparency and communication: i.e. do they answer my call, emails. When I ask questions do they give me a straight answer or beat around it.
Returns are contingent on product, but "good" returns. I want solid singles and doubles, not homeruns
I look at many, across many asset types and risk profiles. I prefer groups that specialize in one specific product type vs diversified operators
I am indifferent to owner operators vs operating as investment manager. This is also a function of size, i.e. I don't trust a group that has 500 doors to be as efficient at property management as a group with 5,000 doors.
Biased to value and long term appreciation, as long as the plan to achieve it seems sound. I want cash flow today as a risk mitigation strategy more than a need for money in my bank account or creating a passive income stream.
As both an investor and operator, to me building the relationship, trust, and establishing credibility with the track record of the team are of utmost importance. Of course the potential returns (IRR, COC, EM) will initially draw the attention of an investor, but what's more important is how they plan to balance the risks/returns such as assumptions in underwriting, how they plan to execute the business plan, and the track record of the management team.
As far as location: Personally I'm investing in areas of high growth across several markets within the southeast for some diversity.
Underwriting standards with assumptions that are supported in reality and verifiable
Transparency and communication: i.e. do they answer my call, emails. When I ask questions do they give me a straight answer or beat around it.
Returns are contingent on product, but "good" returns. I want solid singles and doubles, not homeruns
I look at many, across many asset types and risk profiles. I prefer groups that specialize in one specific product type vs diversified operators
I am indifferent to owner operators vs operating as investment manager. This is also a function of size, i.e. I don't trust a group that has 500 doors to be as efficient at property management as a group with 5,000 doors.
Biased to value and long term appreciation, as long as the plan to achieve it seems sound. I want cash flow today as a risk mitigation strategy more than a need for money in my bank account or creating a passive income stream.
As both an investor and operator, to me building the relationship, trust, and establishing credibility with the track record of the team are of utmost importance. Of course the potential returns (IRR, COC, EM) will initially draw the attention of an investor, but what's more important is how they plan to balance the risks/returns such as assumptions in underwriting, how they plan to execute the business plan, and the track record of the management team.
As far as location: Personally I'm investing in areas of high growth across several markets within the southeast for some diversity.
Great points Andrew!
As a general partner in syndication deals, these are things that I would want my potential investors to keep in mind before moving forward in the deal.
Making sure that the team you work with are people who you can confide in and that has a good track record. A syndication team can be quite big so you want to make sure that you take everyone who is on the team into account when doing your due diligence on them. You can look at past deals that they have done and see if they met all of their expected returns and if the investors enjoyed working with them. Also be sure to invest in a market that you think has great potential and is doing well in regards to various different factors (Population growth, Economic diversity, job growth, Anchors in that area, Job diversity, Climate risk, etc). All of these things and more lead to a wise decision when choosing which syndication to invest in!
"What do you look for when investing your money into an apartment deal?"
Right market for me, deal size not too small, class desired, business plan and assumptions, payout structure, fees, financing, operator that is seasoned and sees LPs as more than ATM, etc.
"What do you look for in your returns?"
LPs need to comprehend the GP loss risk picture; it can often be lower than is usually inferred and LP should seek better alignments and transparency first. Better transparency of analyzer inputs and outputs. Returns generally seem dialed in to trim LP more than GP. Same way I saw banking work. If you can find one that is more equitable and transparent in adjustments of the deal flow components, they may tend to care more for all partners, so keep them close.
"Do you diversify syndicators?" Yes
"Do you like them to be owner operators as well?"
When GP owns a professional PM entity it can/should help sync property goals and boost all processes. A bad PM (owner or 3rd party) is a massive issue! Not a fan of owner/operator in the mom/pop sense. LPs should note that a GP owned PM entity has also created another GP income stream on day 1. Same for Construction Co etc. Not bad nor good. Assuming competitive (or superior) billing and skills, it's just not an issue on negatively impacting deal returns. Alternately, the owner attention, if spread over multiple service entities, should be buffered by skilled staff or the deals become a numbers only process. Some teams are edging closer and closer to the same Wall Street methods/ideals that some are seeking to avoid.
"Value or Yield?" - Mix that readjusts over time.