Looking for Guidance on Becoming a First-Time GP / Co-GP

[Lamont Ellis]

I’ve been in real estate for several years (wholesaling + acquisitions) and recently started studying the GP side of multifamily syndication.

I’m comfortable underwriting, deal sourcing, and creative structuring — but I’m brand-new to the GP/operator side, and I want to make sure I move correctly.

I’m currently reviewing small multifamily opportunities (10–20 units), and before I go any further, I want to get clarity from people who have actually operated deals.

Here are my questions:

1. For someone stepping into their first GP/co-GP role, what are the most important skills or responsibilities to master early?
   (Underwriting, debt conversations, due diligence, asset management, etc.)

2. What mistakes do new GPs tend to make when approaching their first acquisition?

3. How do experienced GPs typically bring on a new co-GP?
   Is it usually operations, underwriting, capital systems, boots on the ground, or something else?

4. Is mentorship/common guidance normal in the GP world, or is it more of a “learn-by-doing” environment?

To be clear, I’m not raising capital and not pitching a deal.
Just trying to get direction from people who’ve been through the process so I can build the right habits as I move toward my first acquisition.

Any insight is appreciated.

[Mark Kenney]

@Lamont Ellis

I have syndicated 120 deals and certainly have experience in this area.

First off, you should decide why you want to be a GP and syndicate deals. There is no doubt you can go much faster and buy larger deals if you syndicate. But, you need to also be aware that there is more involved once you start raising capital from others. Outside of the legal aspects, you also now have others that you answer to.

Even if you are comfortable with aspects such as deal sourcing, it is very unlikely you will be able to go get deals unless you have someone else that already has a track record and experience in multifamily.

Many people downplay all the aspects of syndicating multifamily deals and it is a bit of a challenge to provide everything you need to know, but some considerations are below…

Understand your debt options and the related risks. Are you using fixed, long-term debt or floating rate debt? Is it recourse debt or non-recourse debt? But, don’t be fooled by the term “non-recourse” because you can be personally liable for a lot more than you think. You need to know how to structure (revise) the loan documents and what should/should not be in there. Also be aware that some debt has huge pre-payment penalties (e.g., yield maintenance, defeasance).

You need someone that truly understand contracts and what should/should not be in there. Multifamily contracts are much more involved than residential contracts.

You will no doubt have partners and this opens up a new potential set of issues. Who makes the decisions? What if you can’t agree (tip: always have a tie-breaker in your operating agreement). Know that you can also be responsible for your partners’ actions. You need to understand the term “joint and several.”

Your operating agreement needs to be written assuming everything will be horribly wrong. When I hear people say they “trust” someone…I have to ask…have you ever trusted someone in the past either personally or in business and that person did something that surprised you? Then make sure you account for all of this in your operating agreement.

All areas of syndication need to be mastered. It does not mean that you need to be a master in every area, but you need people on your team that are experts in every area. I would say that underwriting and raising capital (there are legal aspects to this) are the 2 areas that are easiest to get involved in a deal. Note you also need someone that has the net worth and liquidity for the loan. As a general rule, net worth of someone (or multiple people) needs to be 100% or more of the loan amount and post-closing liquidity needs to be 10% or more of the loan amount. You also need someone that has experience.

Mistakes people make…they underestimate just how much is involved in a syndication. They don’t really understand debt; how important location truly is; tax ramifications; what it really takes to operate a property.

You will want a partner that has a lot of experience. This does not necessarily mean you have to pay for it, but you want a really experienced multifamily partner.