Accidental Syndicator seeks guidance (also, investors?)

14 Replies

I loaned money to a flipper for a promised return............and got it! All of it, on time, the works. Crazy, right? Even a little extra for referring another investor to the project.

I also loaned money to another flipper, this time pooling my money and the money of a few colleagues. I handle all the interaction, details, and harassing the flipper, they get their principal and return upon completion (only a few more weeks!) Very much a 1-time deal.

The problem is, I like this! And I've discovered that there's a word for it (syndication?)  I'm a little overwhelmed by a cursory google search can anyone recommend reputable resources on where to begin to learn more about this? I want to continue doing this at this level (small investments from members of the military who don't have the time/ability to do real estate on their but want to be involved in some way and want to see their money grow) but I also want to grow as well (I see multi-families! I see apartments! I see commercial! I think I've found something I enjoy doing!)

There's a Syndication Seminar being run the the Real Estate Guys near me in a few weeks. Plenty of time to register but the price is high. Has anyone been to one of these events? I'm a geographic bachelor (work) and very much trying to save pennies to send home to the wife and the mortgage payment but this weekend is almost a mortgage payment itself! Worth it? Thanks in advance, ya'll!

-Brian

The Accidental Syndicator

@Brian Gerardi , I haven't been to the Real Estate Guys' syndication seminar, but we're considering it. We went to Gene Trowbridge and Jillian Sidoti's syndication seminar last week in Vegas that was great, and we're going to Joe Fairless' seminar this weekend in Denver. 

If you don't want to commit to a seminar, I would at least schedule a consultation with a syndication attorney. We use Jillian Sidoti, and she's great. In our first consultation (I believe it was free, too) she answered every question I had, and we even went over the scheduled time. 

I was just talking to a fellow investor yesterday about possibly starting a fund to use for flips. I'll be curious to see how everything works out for you. Good luck!

@Brian Gerardi as @Sam Grooms said, Jillian Sidoti is an amazing syndication attorney and usually willing to help. She's been on the podcast that I work for to discuss syndication and is a genius in that space.

I've heard good things about the Real Estate Guys seminar, I've spoken to the attorney who will speak there Mauricio Rauld he seems to know his stuff too. It would probably be worth it to go IMO.

In my signature is a link to our website that has a TON of syndication information via blog posts, podcasts, and YouTube videos. Reach out to me via PM or email if you have any questions!

Thanks everyone! @Luke Weber I received 10% of my principal investment on a 6 month promissory note for a flip in Fayetteville, NC (plus some additional for referring another investor)

I am promised 20% on a 3 month note of a similar principal in Norman, OK, but I have not been paid yet so not counting these chickens just yet. There have been a few delays but I  they're mostly on schedule, no reason for me to believe that they won't the established timeline. I'm meeting with the contractor and the listing agent this weekend (they're married) to discuss the way ahead but I'm not worried.

I will be reinvesting with my business partners in Fayetteville again, and would love to bring you in if you're interested!

Thanks Brian, I actually flip my own properties.  I'm always curious as to what other investors are paying/getting.  We pay our private investors 10% AROI.  If you are getting 20%, that's pretty good.

@Luke Weber , I have received 10%, haven't gotten 20% yet lol, but looking good so far. Would love to work with you on your next project or maybe push some people your way. Let's connect!

Technically, it sounds like you are hard money lending. I think the rule is if you do this more than 5 times, then you need to be registered. With a syndication you would typically become a part of the LLC as a limited partner and receive your payments through either a debt or equity split. Most syndication are pooling several investors together to buy larger assets, like apartments, self-storage, office buildings, etc. There are some that pool to do flipping, but those are usually a raise of say $1 million to complete many flips over a period of time.

@Todd Dexheimer , thanks for the information! This definitely captures what I'm doing and gives me a clearer idea of the questions I need to be asking. This is very much a small pool for a flip and operates more like hard money than anything else. Thanks!

Doesn't matter what you call it... or whether it was on purpose or accidental. Unless your investors are accredited, after the first bad transaction the ship will go down, the captain with it.

Expect to pay a few thousand dollars in attorney fees to set this up properly if you've never done this before.

To prevent what @Tom Gimer is referring to, you'll just want to setup a Reg D 506(b) or Reg D 506(c) fund. 

(b) allows you to raise money from nonaccredited investors, but they must still be sophisticated, and understand investments. However, you must have a prior relationship with anyone who invests. Establish these relationships before forming your fund with your attorney. 

(c) allows you to bypass the existing relationship requirement, and even allows you to advertise and solicit for investors. The drawback is you can only raise money from accredited investors, and you have to actually verify they're accredited (in (b), accredited investors just self-certify). 

If you're only raising $1M-$2.5M for the fund, expect to pay attorney fees of $10-13K. 

@Brian Gerardi

Hi Brian

I would contact Kim Taylor, a syndication attorney and begin the conversation on next steps. I would look up @reed goossens, who is a good friend and successful syndicator to pick his brain.  You've got a great problem on your hands!

Hope you make the transition into time freedom and having fun

Best

Gino

@Brian Gerardi

Something to thing about:  

Example: Investor #1 puts in $10K, Investor #2 puts in $50K, Investor #3 puts in $30K on a deal.  They are just the lenders on the deal.  Some rehabber is doing the flip.  When you set up the loan, who is in 1st position?  Let's say the deal goes belly up and you need to foreclose.  Who does the foreclosure?   The person that put in the most?  The person that put the deal together?  

In the past, when I have co-lended with someone, we have had an attorney set up a "lending trust" that puts the "trust" in 1st position.  Therefore, it avoids the example above.   

Good words of caution from @Tom Gimer , thank you! Definitely working to avoid that. And thanks @Sam Grooms for clarifying those, these investors are not accredited and I think I'm a ways off from "only raising $1M-$2.5M" but now I have a better idea of what to be looking ahead for. 

@Gino Barbaro I will reach out to Kim and read to get more information, thanks for the refer!

@Cindy Veit all good questions, thanks for your advice and experience.

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