How to successfully invest in a syndication

Question

Hello everyone I am reaching out to see if syndication investing is right for me I want to invest in real estate multi family properties but I want to be hands off just put money down and get a check each month how and where is a place I can get in contact with investors      What are some questions I should be asking the investors that I will invest with.                  What are good returns rates thank you for your time and advice have a nice day

Taylor L. · Answer

It's a complex topic. There are numerous questions to ask. The top level questions to ask typically pertain to the operator's experience, their skin in the game, and how they're paid in the deals they do.

The Hands-Off Investor by @Brian Burke was recently released by BiggerPockets, that is a good place to start. Many books, blog posts, and podcast episodes have been published to get at this topic.

Paul Moore · Answer

Hi @Michael Berth. I agree with others that this is a great route to achieve your goals.  And Brian Burke’s book is critical in helping you vet the syndicator.  This is the most important step in your journey and over a 5 to 10 year hold, should take you more time than all your other syndication activities combined.

As @Jim Pfeifer said, finding your community and getting honest reviews is important as well.  A few options include Left Field Investors and The Real Estate Crowdfunding Review.

I recommend you narrow your search in the community and then use the information you gain from The Hands-Off Investor to finalize your decision.  Good luck!

Jim Pfeifer · Answer

I think the most important factor in your success investing in real estate syndications will be your network.  I recommend joining a Community, or several, where you can meet other like-minded people who are interested in investing in assets that produce cash flow - as you said, you want to get monthly checks!  This type of investing is very different from the stock market or active real estate investing.  You won't control the asset and it's a very long term, illiquid investment.  It is very difficult to find quality operators.

When I started investing in syndications, I listened to podcasts, read books and did internet searches when looking for new sponsors.  That is what you should do to learn and get education, but that is not the best way to find sponsors.  You will find some quality sponsors, some quality marketers and maybe some who are both.  I have found that using my Community to find sponsors is the most effective way.  Now, I only invest in a new sponsor if they are recommended to me by  someone I know, like an trust from my Community who has already invested with the sponsor.  I still do all of the same due diligence on the operator, but I am starting from a completely different place - many steps ahead from when I was finding sponsors on my own.

Many have mentioned here, that the sponsor is the most important part of the the deal - I agree with that and that is why it is so important to find an effective way to find quality operators to invest with.

Join a Community - or several - and you will see your investing success grow as the Community grows!

Lane Kawaoka · Answer

Agree with @Brock Mogensen, interviewing the sponsors is great, but talking with other pure-passive investors is probably the best way to see what the true experience is like. You'll see a lot of projections of around 15-20% IRR, but at the end of the day these are just projections, what you should really be looking for is a solid track record.

Zachary Inman · Answer

Hi @Michael Berth. Full disclosure: I work with a real estate syndicator, but I joined the team because of how passionate I was about this topic!

If you're looking for a check in the mail every month without lifting a finger, real estate syndication is a great choice. I help people with this every day. Your biggest risk when investing in syndications is always the same - operator risk. When trusting an individual or team with your hard-earned capital, you should do some digging to see if their business plan is based on a proven track record or wishful optimism.

A good first step is googling the operator to see if they have a reputable online presence. Ask around within your network or look in investing forums to get an idea of their reputation. When evaluating, ask for an audited track record of full-cycle deals. When looking for reliable passive income, you don't want to be an operator's test guinea pig.

Mike Cloys · Answer

I've thought about this as well, but I'm concerned the returns will be low.  8% or less.  Is that thinking correct?

Brock Mogensen · Answer

There are lots of questions to ask and due diligence to complete on the sponsors you are investing with. Referrals from other LP investors is a great way to connect with good sponsors.  I suggest first defining what sort of deal and market you want to invest in. That will narrow your search for syndicators.  Then once you have a group of 3-5 syndicators identified - set up calls with them and create a list of questions to ask.  Follow along as they send you deals and make a decision on who and what deal you want to invest in.  Always good to have options..

How to successfully invest in a syndication

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