01/2024 - Thoughts on Syndications / Investment Clubs

[Andres Mata]

Hello all!

I have been researching a lot about syndications / investment clubs lately and was getting ready to start investing away, but I have found a couple of posts that mentioned that it might not be the best time to invest in syndications due to the current market conditions (many people mentioning awful returns and many even stopping distributions). I know it's not smart to try and "time the market", but what are your general thoughts on syndications / investment clubs in these current market conditions? I understand that these tend to have a return in 2-3+ years, which I am okay with. 

Am I looking at this all wrong? Any other tips for a new real estate investor? Thanks in advance!

[Brian Burke]

Quote from @Andres Mata:

Hello all!

I have been researching a lot about syndications / investment clubs lately and was getting ready to start investing away, but I have found a couple of posts that mentioned that it might not be the best time to invest in syndications due to the current market conditions (many people mentioning awful returns and many even stopping distributions). I know it's not smart to try and "time the market", but what are your general thoughts on syndications / investment clubs in these current market conditions? I understand that these tend to have a return in 2-3+ years, which I am okay with. 

Am I looking at this all wrong? Any other tips for a new real estate investor? Thanks in advance!

Syndications are simply a business structure where a group of people combine to carry out a business or project. It doesn’t have to be real estate—syndication as a structure is used even to fund start-up companies, oil drilling, and even race horses. So worry less about whether it’s a good time to invest in syndications and instead focus on whether it’s a good time to invest in the underlying asset class.

So if you are thinking of investing in a syndication that is acquiring multifamily real estate, for example, ask yourself if this is a good time to invest in multifamily real estate. If it is, then investing in such a syndicate is similarly well-timed.  

If you are interested in hearing some differing opinions on the multifamily market, check out the BiggerPockets podcast episode I just recorded with Matt Faircloth:  https://www.biggerpockets.com/blog/real-estate-876

Despite my current negative feelings on the large Multifamily market, you’d likely be better off investing in a syndication today than 1-2 years ago—it was the shift in the environment (rent growth, interest rates, etc) that caused the ills in the industry that sparked much of the posts you’re reading.  Done properly, an investment made today should have “priced in” the factors the were previously unexpected and resulted in trouble. 

But before you invest a single dollar, please thoroughly educate yourself on these investments—while they can be great, there are land mines and you need to know how to spot them.  Fortunately BiggerPockets happens to have a book written by yours truly to assist with this knowledge.  You have plenty of time to read it—this is hardly a rapidly-rising market that you’ll miss out on if you take your time…