Multifamily Syndication Experiences

[Travis Watts]

Hi All,

I'd like to hear about (positive or negative) experiences with multifamily syndications. I am an apartment investor, who invests with multiple syndicators. I have seen and heard some crazy stories over the past several years. Does anyone have an interesting experience to share? 

[Greg Scott]

I've had mostly positive experiences, but I only invest in syndications with people I know well and ones that have operating agreements that are favorable to the limited partners.

I've had some friends that have been very frustrated about deals they have gotten into.  We've discussed how those deals have gone wrong and I'd say there are a handful of common threads.  Key problem areas include:

- Operating partner should have some skin in the game. Too many out there have $0 invested, so no downside for them.

- Operating agreement should require regular financials.  (monthly is ideal)  Some syndications do not mention financials.  

- Payout formulas should be simple.   Complex formulas (e.g. waterfalls) create misaligned incentives between general partners and limited partners

- Limited partners should share in outsized gains.   One of my buddies was elated that an apartment he was in doubled in value but was super disappointed when he realized he shared only 20% of the capital gain with the other limited partners.