Direct syndication vs on syndications via web platforms

Direct syndication vs on syndications via web platforms

Member since 2021 · 4 posts · 0 votes

Hello everyone,

It seems like sites like crowdstreet, cadre, realtymogul etc offer specific syndication opportunities for a $25k - 35k minimums whereas "directly" working with folks doing syndications not through such web platforms requires $70k+ minimums typically. And there seems to be no difference in the the projected returns (IRR, multiples etc) in general.

It seems one would be able to distribute the risk across a couple investments working with web platforms as opposed to the off platform investments which seemingly offer the same returns at higher minimums. Even the sponsors seem to be more exprienced ones (as opposed to off platform folks) on the platforms in general and platforms claim to have some vetting process. I am new to this and only have invested in one syndication so far, we will see how it goes. I am looking to invest in more and am wondering if there is any point in looking at off platform opportunities (several bloggers, podcast folks often have websites where opportunities are advertised). What are some of the benefits of going with off web platform opportunities in general?

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Paul MoorePro Member
Commercial Real Estate Fund Manager · Lynchburg, VA · Member since 2015 · 1k+ posts · 1k+ votes
4y

Hi @Rachit M. and @Inessa Bliznetsova. You are talking with the man who has perhaps more experience in this realm than anyone: @Ian Ippolito. You should definitely go to his site, The Real Estate Crowdfunding Review. He has a lot of information on how to vet a syndicators through a crowdfunding platform or off-platform. There are many experienced investors there who will give you their honest opinions. Happy investing!

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  • Ian IppolitoBusiness Member
    Investor · Tampa, FL · Member since 2015 · 1k+ posts · 1k+ votes
    4y

    Yes, many of the platforms have strict minimum requirements (such as years of experience, amount of skin in the game, competitive terms etc). On the other hand, anyone can do an off platform syndication. So, yes, many times there is a higher bar with the platform.

    At the same time, there’s also a small group of sponsors with alot of experience (full real estate cycle) and who have built up enthusiastic investor bases over time and whose deals fill up very quickly. These often have no need to go to the platform sites, so are also found off platform.

    The Real Estate Crowdfunding Review
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  • Member since 2021 · 4 posts · 0 votes
    4y

    Thank you so much. Makes sense. 
    Would you have any advice on going about identifying some of the the small group of off platform sponsors you mentioned. 

    And overall there does not seem to be any downside of going with web platform folks, correct?

    Thanks a lot!

  • Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
    4y

    I would generally say that most "off market" syndications are a $50k minimum and would suspect you to have a variety of very seasoned operators and some new ones. The Crowdfunding platforms will mostly have moderately experienced companies with some sort of track record. We have talked with a few about putting our deals on their site and I was surprised at how little they cared about our past performance, so do your own due diligence. Ultimately we passed on using the platforms and instead opted to do it the old fashioned way. 

    You mentioned projected returns as well. Be careful looking too closely at those. The only guarantee with projected returns is that they will not be right. Look more at the sponsor, the team, the market and the track record. I have seen many deals with attractive looking returns that I would run a long ways from. 

    Here is an article on vetting sponsors: https://www.biggerpockets.com/...

  • Member since 2021 · 4 posts · 0 votes
    4y

    Thanks a lot. This is super helpful and makes sense. 

  • Ian IppolitoBusiness Member
    Investor · Tampa, FL · Member since 2015 · 1k+ posts · 1k+ votes
    4y
    Originally posted by @Rachit M.:

    Thank you so much. Makes sense. 
    Would you have any advice on going about identifying some of the the small group of off platform sponsors you mentioned. 

    And overall there does not seem to be any downside of going with web platform folks, correct?

    Thanks a lot!

    You can find them through networking, joining an investor club, talking to other investors etc. 

    Many of the most experienced ones still operate under 506B (which was the only option back then before Crowdfunding rules) where they are not allowed to solicit publicly. So in that case you need a referral from an existing investor.

    I’ve invested in a couple in multi family etc. sponsors that have full real estate cycle experience (or more).So if you want more information, send me a private message.
     

    As far as the web platforms: in my opinion it’s the same as off platform. You still need to do your own due diligence to make sure that the deal is correct for you and don’t assume that someone else has done it for you. And as long as someone is doing that, then having the web platforms it’s just a nice additional source of deal flow.

    The Real Estate Crowdfunding Review
    View Page
  • Don KonipolBusiness Member
    Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
    4y

    @Rachit M.

    Third party platforms usually have a built in additional fee(s).

    Private Mortgage Financing Partners, LLC
  • Tarrytown, NY · Member since 2015 · 12 posts · 1 vote
    4y

    How do I start educating myself about about real estate syndications? @Ian Ippolito - where should I be networking, what is a good investor club to join? (e.g. I found Passive Investment MD who invest with MLG Capital, but I'm not an MD, so not a right club for me; still can invest with MLG of course).

    I will be reading https://www.therealestatecrowd... 

    Is this an investor club you recommend: https://www.privateinvestorclu...  ?

    Many thanks for everyone's sharing information!

    Inessa B.

  • Paul MoorePro Member
    Commercial Real Estate Fund Manager · Lynchburg, VA · Member since 2015 · 1k+ posts · 1k+ votes
    4y

    Hi @Rachit M. and @Inessa Bliznetsova. You are talking with the man who has perhaps more experience in this realm than anyone: @Ian Ippolito. You should definitely go to his site, The Real Estate Crowdfunding Review. He has a lot of information on how to vet a syndicators through a crowdfunding platform or off-platform. There are many experienced investors there who will give you their honest opinions. Happy investing!

  • Member since 2021 · 4 posts · 0 votes
    4y

    Thanks Paul.

  • Tarrytown, NY · Member since 2015 · 12 posts · 1 vote
    4y

    How do I start educating myself about about real estate syndications? @Ian Ippolito - where should I be networking, what is a good investor club to join? (e.g. I found Passive Investment MD who invest with MLG Capital, but I'm not an MD, so not a right club for me; still can invest with MLG of course).

    I will be reading https://www.therealestatecrowd... 

    Is this an investor club you recommend: https://www.privateinvestorclu...  ?

    Many thanks for everyone's sharing information!

    Inessa B.

  • Tarrytown, NY · Member since 2015 · 12 posts · 1 vote
    4y


  • Tarrytown, NY · Member since 2015 · 12 posts · 1 vote
    4y

    Thanks, Paul, I am doing just that :) Have a great day, everyone!

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