Where to look for a solid MFH Apartment syndication investment? I have been getting multiple offers, most of them look good on paper, but I am not able to differentiate a good from a bad deal.

Is it more important the deal/place rather than the reputation of the Syndication group?

Thank you!

Carlos Suarez 

Hello @Carlos Suarez

Going to give @Brian Burke credit for providing a link to the thread with many ways to find synidcation deals: 

https://www.biggerpockets.com/forums/50/topics/645...

Regarding reviewing syndications the deal and place is important but also the track record of whether a syndicator and successfully execute the business plan is a key part. If historically they were not able to execute, then they it may but your money at risk.

Let me know if you have any other questions or concerns. Would love to connect

The experience level and track record of the sponsor is the key component.  The deal is secondary, but still important. If you are investing with a top-drawer sponsor they would most likely be bringing good deals to their investors.  Inexperienced sponsors suffer from the same problem you have—recognizing a good deal from bad.

If you search on the BP blog for “Multifamily Myths”, you’ll find several articles I’ve written on things to look for when analyzing multifamily opportunities and some common misconceptions.

One way to help you sort out good from bad is to evaluate a number of offerings from a number of different sponsors without investing in any of them.  Your goal is to learn over time what a good offering package looks like and how to make sense of the underwriting.  You’ll soon start to notice which are thorough and make sense and which are pipe dreams or simply not based in reality.

An important point is that the best deals aren't the ones forecasting the highest returns. The best deals are the ones underwritten with reasonable assumptions that the sponsor can explain and back up with data. I can take the worst real estate deal and make it look like an amazing investment opportunity by manipulating the assumptions. I wish I were saying this to just talk theory, but I actually see this happening in the real world as I look at offerings out there. Just the other day I saw an offering that looked great if you are shopping for return—almost 20% IRR, 8%+ cash-on-cash year 1 and over 2x multiple in 3 years. But when I looked at the underwriting and the assumptions I can see very quickly that the chances that the sponsor will be able to deliver that performance is less than zero.

Quality sponsors are the ones that use realistic assumptions which is why sponsor selection is so much more important than the deal.

Originally posted by @Brian Burke :

The experience level and track record of the sponsor is the key component.  The deal is secondary, but still important. If you are investing with a top-drawer sponsor they would most likely be bringing good deals to their investors.  Inexperienced sponsors suffer from the same problem you have—recognizing a good deal from bad.

If you search on the BP blog for “Multifamily Myths”, you’ll find several articles I’ve written on things to look for when analyzing multifamily opportunities and some common misconceptions.

One way to help you sort out good from bad is to evaluate a number of offerings from a number of different sponsors without investing in any of them.  Your goal is to learn over time what a good offering package looks like and how to make sense of the underwriting.  You’ll soon start to notice which are thorough and make sense and which are pipe dreams or simply not based in reality.

An important point is that the best deals aren't the ones forecasting the highest returns. The best deals are the ones underwritten with reasonable assumptions that the sponsor can explain and back up with data. I can take the worst real estate deal and make it look like an amazing investment opportunity by manipulating the assumptions. I wish I were saying this to just talk theory, but I actually see this happening in the real world as I look at offerings out there. Just the other day I saw an offering that looked great if you are shopping for return—almost 20% IRR, 8%+ cash-on-cash year 1 and over 2x multiple in 3 years. But when I looked at the underwriting and the assumptions I can see very quickly that the chances that the sponsor will be able to deliver that performance is less than zero.

Quality sponsors are the ones that use realistic assumptions which is why sponsor selection is so much more important than the deal.

Originally posted by @Brian Burke :

The experience level and track record of the sponsor is the key component.  The deal is secondary, but still important. If you are investing with a top-drawer sponsor they would most likely be bringing good deals to their investors.  Inexperienced sponsors suffer from the same problem you have—recognizing a good deal from bad.

If you search on the BP blog for “Multifamily Myths”, you’ll find several articles I’ve written on things to look for when analyzing multifamily opportunities and some common misconceptions.

One way to help you sort out good from bad is to evaluate a number of offerings from a number of different sponsors without investing in any of them.  Your goal is to learn over time what a good offering package looks like and how to make sense of the underwriting.  You’ll soon start to notice which are thorough and make sense and which are pipe dreams or simply not based in reality.

An important point is that the best deals aren't the ones forecasting the highest returns. The best deals are the ones underwritten with reasonable assumptions that the sponsor can explain and back up with data. I can take the worst real estate deal and make it look like an amazing investment opportunity by manipulating the assumptions. I wish I were saying this to just talk theory, but I actually see this happening in the real world as I look at offerings out there. Just the other day I saw an offering that looked great if you are shopping for return—almost 20% IRR, 8%+ cash-on-cash year 1 and over 2x multiple in 3 years. But when I looked at the underwriting and the assumptions I can see very quickly that the chances that the sponsor will be able to deliver that performance is less than zero.

Quality sponsors are the ones that use realistic assumptions which is why sponsor selection is so much more important than the deal.

 Great suggestions!

Thank you!

@Carlos Suarez The sponsor is 99% of the time more important than the deal. Like Brian mentioned, if they are a strong sponsor (operator) they won't be bringing you crap in the first place. That being said, without an education and a good understanding, it will be very hard for you to decipher which operator are good. Spend some time understanding what makes a good deal, how it's underwritten, the story behind the asset, and the team who is running it. Once you learn the numbers and what makes a conservative deal you will be able to find very quickly who is and isn't a strong operator. Look at many many offerings before you jump on one. You need to be comfortable with the sponsor and truly understand the assumptions they have made in their underwriting before investing your hard earned money.To answer the first question on where to find a a solid investment-- there are many operator who write and help out on bigger pockets. There are also dozens more who you will never see on BP or any other social media site. One of the ways to find them is to set a good alert up. For example, "North Carolina multifamily sale or north Carolina apartment sold" you will then get a google alert for anything that trades in that state. Read the article and do some digging on who bought it and you will be able to see if that group/firm syndicates deals. Hopefully this bit of info helps you make your first successful syndication investment. If you have any other questions please reach out. 

@Carlos Suarez  

Searching for syndications' deals these days is not hard, find the quality ones is much harder. I second @Brian Burke tips. Aside from that, network with other LPs to get a sense of what other are investing in and looking for in a deal. Once you identify the sponsors you want to invest with, educate yourself and can compare various deals, it will become easier to sift through the offering sent your way and pick what works best for you. Keep in mind - these are NOT going to be the best deals in everyone's eyes. Rather, each individual investor must decide for themselves as to what would work best for them in their particular case. 

Prior to getting to the deal analysis, you'll be interviewing the sponsors you potentially would like to work with, here's an article I wrote that will give you guidance on the questions to ask deal sponsors: https://www.biggerpockets.com/blogs/10850/76728-qu...

Best!

@Carlos Suarez Lots of great advice already. I'd echo it loudly. 

My own 2 cents: evaluate 100 deals before investing and you'll develop a finger tip feel for what a good deal should look like. Most importantly, you'll start to recognize when key ingredients are absent from the offering. Happy hunting!

Originally posted by @Ivan Barratt :

@Carlos Suarez Lots of great advice already. I'd echo it loudly. 

My own 2 cents: evaluate 100 deals before investing and you'll develop a finger tip feel for what a good deal should look like. Most importantly, you'll start to recognize when key ingredients are absent from the offering. Happy hunting!

 @Ivan Barratt: I agree with doing a lot of evaluation. Already doing it. One of the conclusions I am making is that, for Numbers to be good or even OK, houses cannot be expensive or even newer. My question to you is  Does a good deal always start with a low price of the investment? 

@Carlos Suarez ; great question. Personally speaking I think "houses" are a bad model. At best they are a "get rich very very slowly" model. At worst they lead to negative cash flow; especially C/D assets!  How do I know this? I used to manage a lot of this product as I was growing my property management company. The model is broke (not if, just when?) unless all you care about is cashing in the equity 20 years down the road. If that's the case by B homes!

At this stage of the cycle we are seeking quality assets in the B- to A- range where we can further add some value but most importantly; greatly manage downside risk. Better assets have better residents that pay higher rent and are easier to manage. Not to mention; there's always a buyer for nicer assets. Not always the case with the lower end (at least not at the exit price you're hoping for!).   

Hope all that helps Carlos!

Ivan

Some excellent information in this thread on learning how to find and evaluate.  I, too, am researching syndication at the moment (versus owning my own smaller MFH) so threads like these are great for those of us just starting out.  Thanks all.

Originally posted by @Ivan Barratt :

@Carlos Suarez; great question. Personally speaking I think "houses" are a bad model. At best they are a "get rich very very slowly" model. At worst they lead to negative cash flow; especially C/D assets!  How do I know this? I used to manage a lot of this product as I was growing my property management company. The model is broke (not if, just when?) unless all you care about is cashing in the equity 20 years down the road. If that's the case by B homes!

At this stage of the cycle we are seeking quality assets in the B- to A- range where we can further add some value but most importantly; greatly manage downside risk. Better assets have better residents that pay higher rent and are easier to manage. Not to mention; there's always a buyer for nicer assets. Not always the case with the lower end (at least not at the exit price you're hoping for!).   

Hope all that helps Carlos!

Ivan

 Thank you Ivan!

Originally posted by @Alina Trigub :

@Carlos Suarez 

Searching for syndications' deals these days is not hard, find the quality ones is much harder. I second @Brian Burke tips. Aside from that, network with other LPs to get a sense of what other are investing in and looking for in a deal. Once you identify the sponsors you want to invest with, educate yourself and can compare various deals, it will become easier to sift through the offering sent your way and pick what works best for you. Keep in mind - these are NOT going to be the best deals in everyone's eyes. Rather, each individual investor must decide for themselves as to what would work best for them in their particular case. 

Prior to getting to the deal analysis, you'll be interviewing the sponsors you potentially would like to work with, here's an article I wrote that will give you guidance on the questions to ask deal sponsors: https://www.biggerpockets.com/blogs/10850/76728-qu...

Best!

 Thank you Alina!

Originally posted by @Scott Morongell :

@Carlos Suarez The sponsor is 99% of the time more important than the deal. Like Brian mentioned, if they are a strong sponsor (operator) they won't be bringing you crap in the first place. That being said, without an education and a good understanding, it will be very hard for you to decipher which operator are good. Spend some time understanding what makes a good deal, how it's underwritten, the story behind the asset, and the team who is running it. Once you learn the numbers and what makes a conservative deal you will be able to find very quickly who is and isn't a strong operator. Look at many many offerings before you jump on one. You need to be comfortable with the sponsor and truly understand the assumptions they have made in their underwriting before investing your hard earned money.To answer the first question on where to find a a solid investment-- there are many operator who write and help out on bigger pockets. There are also dozens more who you will never see on BP or any other social media site. One of the ways to find them is to set a good alert up. For example, "North Carolina multifamily sale or north Carolina apartment sold" you will then get a google alert for anything that trades in that state. Read the article and do some digging on who bought it and you will be able to see if that group/firm syndicates deals. Hopefully this bit of info helps you make your first successful syndication investment. If you have any other questions please reach out. 

 Thank you Scott!

Originally posted by @Carlos Suarez :

Originally posted by @Scott Morongell:

@Carlos Suarez The sponsor is 99% of the time more important than the deal. Like Brian mentioned, if they are a strong sponsor (operator) they won't be bringing you crap in the first place. That being said, without an education and a good understanding, it will be very hard for you to decipher which operator are good. Spend some time understanding what makes a good deal, how it's underwritten, the story behind the asset, and the team who is running it. Once you learn the numbers and what makes a conservative deal you will be able to find very quickly who is and isn't a strong operator. Look at many many offerings before you jump on one. You need to be comfortable with the sponsor and truly understand the assumptions they have made in their underwriting before investing your hard earned money.To answer the first question on where to find a a solid investment-- there are many operator who write and help out on bigger pockets. There are also dozens more who you will never see on BP or any other social media site. One of the ways to find them is to set a good alert up. For example, "North Carolina multifamily sale or north Carolina apartment sold" you will then get a google alert for anything that trades in that state. Read the article and do some digging on who bought it and you will be able to see if that group/firm syndicates deals. Hopefully this bit of info helps you make your first successful syndication investment. If you have any other questions please reach out. 

 Thank you Scott!

 You are welcome my friend!

@Carlos Suarez

I would not head to a local reia because there will likely be broke people there and house flippers.

You will need to spend 500-2000 to find a national conference or seminar.

@Carlos Suarez you have gotten some good information here, but i'd strongly suggest heading to some multifamily specific events. Learn from the speakers, but you'll also be able to find people with deals. Evaluating the sponsor and the track record is going to be huge. Really good operators are (most likely) going to bring really good deals. Still do due diligence, but i'd be weary of an okay deal from a first-time sponsor. It's too easy to miss a step and make a crappy deal look like a decent deal on paper. 

Originally posted by @Lucas Miller :

@Carlos Suarez you have gotten some good information here, but i'd strongly suggest heading to some multifamily specific events. Learn from the speakers, but you'll also be able to find people with deals. Evaluating the sponsor and the track record is going to be huge. Really good operators are (most likely) going to bring really good deals. Still do due diligence, but i'd be weary of an okay deal from a first-time sponsor. It's too easy to miss a step and make a crappy deal look like a decent deal on paper. 

 Good idea! Thanks!