1st Syndication- first hand advice needed

Syndications & Passive Real Estate Investing
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1st Syndication- first hand advice needed

Doug Henderson
SC · Member since 2017 · 11 posts · 3 votes

Im looking for a tried and true syndicator to do my first syndication with.  It seems a lot of syndicators have popped up in the last several years, and im looking for someone who has been through the trenches, especially someone who navigated past down turns successfully.  Chiefly Im looking at it from a tax benefit stand point, but also want to make sure the principal investment is secure as possible. Im looking for someone who focuses strictly on syndication and run the numbers with a bearish perspective.  If you have any first hand experience with someone as described above, Id love your recommendations. Likewise- if you have someone who you do not recommend, Id like that advice as well.

Thank you!

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Brian BurkePro Member
Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
3y

I appreciate the vote of confidence, @Steve Vaughan.

@Doug Henderson, there aren’t a lot of syndicators with multiple cycle experience on BP—as you’ve astutely already pointed out, many of them started in the last several years as a rising tide has lifted all boats.  There are a few, however.

I can’t confidently say I speak for everyone, but I’d like to think that any syndicator who has been through adverse cycles and underwrites conservatively isn’t buying anything right now. I haven’t bought anything in two years and using my underwriting I couldn’t get anywhere close to a price even motivated sellers would accept. 

Someday that’ll change...

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Doug Henderson

    What are you bringing to the table ?

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  • Doug Henderson
    OP
    SC · Member since 2017 · 11 posts · 3 votes
    3y

    @Chris Seveney would be brining capital.

    0Reply
  • Jesse OttesenPro Member
    Investor · Staten Island, NY · Member since 2016 · 32 posts · 23 votes
    3y

    I got in to my first syndication in February 2022.  The GP team had both seasoned and newer partners.  They have followed their business plan and increased rents above their forecast.  Cash flow has been good however vacancy rates have dropped.  The LPs have only ever received one distribution because the GP team wisely held further distributions because they realized that when the rate caps expire, we are going to have a huge cost to by new rate caps or possibly a cash in refinance.  I did receive good bonus depreciation. However, I think I stand a very good chance of either losing all of my investment or getting a cash call to try and hold on to the property.  Even good syndicators have a rough time with Black Swan events.

    2Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Chris Seveney

    We will do a co-GP with min $10M investment.

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  • Doug Henderson
    OP
    SC · Member since 2017 · 11 posts · 3 votes
    3y

    @Jesse Ottesen thanks for the reply. I appreciate the honesty of your situation. Yes-given market conditions and where the data shows the market to be trending, is the reason for my post in trying to find experienced operators who have succeeded in downward facing markets.  Tax advantages are nice, but not at the expense of losing the principal investment. If you dont mind- DM who you are involved with on your current deal.

    0Reply
  • Doug Henderson
    OP
    SC · Member since 2017 · 11 posts · 3 votes
    3y

    @Chris Seveney Im currently looking at this from an LP standpoint.

    0Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    3y

    RE syndications from ~2012 to 2021 were virtual cannot miss and provided great returns. 

    I am negative in a syndication for the first time and the sponsor has not been communicative.  When a syndication is not performing, the communication should increase.  My value in this syndication is down more than 50%.  A named partner (part of the fund name) has left and the fund has been renamed.  I am not optimistic of the outlook.

    I state this so you are aware that syndications have risk and the current environment has higher risk than in recent years.  do thorough research before joining a syndication.  Do not join a syndication just because a BP user recommends one.  Understand the asset class, the plan, the underwriting, the syndicator’s track record and history.  Recognized different syndications have different risk profiles.   Never invest in something as risky as syndications what you are unable to lose.  

    Good luck

    2Reply
  • Josh YoungPro Member
    Rental Property Investor / REALTOR® / Property Manager · Gilbert, AZ · Member since 2023 · 386 posts · 421 votes
    3y

    @Doug Henderson I have not invested in a syndication yet, but when I do I plan to start with Open Door Capital https://odcfund.com/ This is Brandon Turner's fund, if you don't know him he was a host of the BP podcast for years.

    [email protected]802-274-8121
    0Reply
  • Joe Archbold
    Investor · Batavia, IL · Member since 2014 · 102 posts · 81 votes
    3y

    Doug,

    I would be interested to hear more details about the type of asset, market, and returns that you have interest in. We work with a several operators that have strong performance track records. Offer debt positions as well as debt and equity. Single asset offerings as well as Funds.

    let me know how I can help.

    Joe

    0Reply
  • Doug Henderson
    OP
    SC · Member since 2017 · 11 posts · 3 votes
    3y

    @Dan H. Thank you for the insights. I agree with everything you are saying and thats part of the reason Im reaching out to the community. Im interested in operators with a  long track record of success and who have navigated previous down turns successfully. I want someone who is underwriting their deals with a worst case scenario in  mind. Im looking for tax advantages but principal security is paramount as well. Good luck with your current syndication, I hope things turn positive for yall. 

    0Reply
  • Doug Henderson
    OP
    SC · Member since 2017 · 11 posts · 3 votes
    3y

    @Josh Young  yes Im aware of them. From a personal standpoint, they are to new to the syndication world for me. Im looking for someone who has been successful in a recessionary environment. Additionally, they seem to have a ton of funds (10 I believe) in a very short amount of time, which does raise questions at least for me regarding underwriting an more importantly operation of each funds. I like Brandon Turner a lot and what hes done for the investor community- just looking for someone who has been through a downturn environment and navigated successfully from a syndication standpoint

    0Reply
  • Doug Henderson
    OP
    SC · Member since 2017 · 11 posts · 3 votes
    3y

    @Joe Archbold Thank you for the response. Given the direction I believe we are heading Im looking at stable assets preferably Multi family -not Mobile Home Communities, and possibly self storage depending on operator and saturation of the market its located. In a perfect world-Id like to see low LVT with low to mid fixed debt. Chiefly Im looking for tax advantages and principal security with a principal return in 3-5 years. Im willing to take a bit off the table in terms of return to partner with operators who are underwriting very conservatively and have a track record of success in down markets. In my day to day business we are very speculative with real estate, but by underwriting worst case scenarios, coupled with nimbleness and experience we have been successful. Im lloking for the same in an operator.  

    1Reply
  • Ian IppolitoBusiness Member
    Investor · Tampa, FL · Member since 2015 · 1k+ posts · 1k+ votes
    3y
    Quote from @Doug Henderson:

    Im looking for a tried and true syndicator to do my first syndication with.  It seems a lot of syndicators have popped up in the last several years, and im looking for someone who has been through the trenches, especially someone who navigated past down turns successfully.  Chiefly Im looking at it from a tax benefit stand point, but also want to make sure the principal investment is secure as possible. Im looking for someone who focuses strictly on syndication and run the numbers with a bearish perspective.  If you have any first hand experience with someone as described above, Id love your recommendations. Likewise- if you have someone who you do not recommend, Id like that advice as well.

    Thank you!

    Doug, eEvery investor has a different risk tolerance, comes from a different financial situation, and has different financial goals. So a sponsor that's great for one investor will probably be terrible for another (and vice versa).


    I'm a conservative investor, so when I invest in multi-family I prefer sponsors that have at least one full real-estate cycle of experience (which sounds similar to your post), little to no money lost, low leverage, and high skin in the game.

    And there is an apartment operator that has multiple real estate cycles of experience (decades) with no money lost, low 65% less LTV, and high 10%+ skin in the game.

    They market under 506B so are prohibited from posting publicly on the Internet and instead function by referrals. So if you're interested, private message me and I can give you their details.

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  • Joe Archbold
    Investor · Batavia, IL · Member since 2014 · 102 posts · 81 votes
    3y

    Doug,

    Our Multifamily operators are focused on Class B assets in healthy markets where they already operate a footprint of assets. Having working assets in the market gives the operator real insights into market comps and rents. Their proforma numbers include their own experience in the market when defining their goals of the value-added strategy.  

    We use a 3rd party financial analyst to review the operator's business plan and financials. Our group shared a dozen offerings last year both 506B and 506C.

    Glad to discuss how we assist investors with access and evaluation of these offerings.

    Regards,

    Joe

    Glad to discuss further

    Joe 

    0Reply
  • Rachel H.
    San Antonio, TX · Member since 2009 · 3k+ posts · 1k+ votes
    3y

    @Doug Henderson Feel free to send me a DM and I can send you some resources. Hope that helps! 

    0Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    3y

    I haven't bought into a syndication ,  but I will name drop a couple proven, tested ones I'd consider first if I went that route, if I could even get in /if they had an offering:  

    @J Scott of Bar Down Investments and @Brian Burke of Praxis Capital

    Both have written excellent books as well as posted and blogged about how to vet sponsors if you want to do further research.  








    2Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    3y
    Quote from @Steve Vaughan:

    I haven't bought into a syndication ,  but I will name drop a couple proven, tested ones I'd consider first if I went that route, if I could even get in /if they had an offering:  

    @J Scott of Bar Down Investments and @Brian Burke of Praxis Capital

    Both have written excellent books as well as posted and blogged about how to vet sponsors if you want to do further research.  









     I would add Barret Asset Management to that list as well..  BAM.  A class garden apartments in a market they live and know extemely well.  

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  • Brian BurkePro Member
    Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
    3y

    I appreciate the vote of confidence, @Steve Vaughan.

    @Doug Henderson, there aren’t a lot of syndicators with multiple cycle experience on BP—as you’ve astutely already pointed out, many of them started in the last several years as a rising tide has lifted all boats.  There are a few, however.

    I can’t confidently say I speak for everyone, but I’d like to think that any syndicator who has been through adverse cycles and underwrites conservatively isn’t buying anything right now. I haven’t bought anything in two years and using my underwriting I couldn’t get anywhere close to a price even motivated sellers would accept. 

    Someday that’ll change...

    Podcast Guest on Show The Truth About Real Estate Investing in 2024 (What Investors NEED to Know)
    3Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Doug Henderson:

    Im looking for a tried and true syndicator to do my first syndication with.  It seems a lot of syndicators have popped up in the last several years, and im looking for someone who has been through the trenches, especially someone who navigated past down turns successfully.  Chiefly Im looking at it from a tax benefit stand point, but also want to make sure the principal investment is secure as possible. Im looking for someone who focuses strictly on syndication and run the numbers with a bearish perspective.  If you have any first hand experience with someone as described above, Id love your recommendations. Likewise- if you have someone who you do not recommend, Id like that advice as well.

    Thank you!


     Here's the criteria that you should look for :
    - They are managed by professional company that already existed prior to 2008 GFC crash.
    - They have open public track record for all prior investments
    - They are conservative in their underwriting
    - They invested in regional basis to the same asset class.
    - They have vertical private management for each company
    - On the financing side, made sure they have at least 55% LTV with no floating debt
    - They are not looking for new investors, but old investors that keep chasing their deal
    - Not part of any crowdfund, such as crowdstreet.

    2Reply
  • Dan Rowley
    Investor · Cary, NC · Member since 2012 · 218 posts · 196 votes
    3y

    @Doug Henderson  I have experienced business partners in SC like you that are doing solid deals in the Upstate region.  I am happy to forward you details if you'd like to an intro.  Please PM me if so.  

    0Reply
  • Andrew Davis
    Investor · Asheville, NC · Member since 2023 · 16 posts · 19 votes
    3y

    @Doug Henderson

    Would 2nd the votes of confidence for OpenDoor, @Brian Burke, and BAM.

    I'd also recommend my firm - DLP capital.

    Wish you all the best as you land on the best sponsor for your capital.

    0Reply
  • Roy Mitle
    Palo Alto, CA · Member since 2014 · 104 posts · 14 votes
    3y

     I created a list on how to vet sponsors for the future. This is based on scraping the internet - I only have 5 years of experience so would love to learn from others if such a list exists or we can collaborate on this message board to enhance. Some of these terms are not clear to me

    Also I'm super interested in hearing the average around all these numbers. I put in the numbers my syndicate charges me in brackets. Are these high/low? Is there some source of truth that is published nationally. For instance, I thought their upfront fee is high but have been told that is reasonable.

    what is upfront fee...to source, due-diligence etc- (7%)

    what is your operating fee through the life of the asset. (0.5%)

    what is hurdle rate and split after hurdle rate- (10% and then 50-50 split of profits)

    do you have downside protection- (what does this mean?)

    how much money you invested by yourself- (5%)

    What is LTV (patient money)- (~60%)

    For best after tax return can we get max depreciation  and max long term capital gain - (yes)

    history of operating partners - (done 13 deals before)

    have they gone thru recessions and executed- (yes)

    2Reply
  • Brock Mogensen
    Real Estate Syndicator · Milwaukee, WI · Member since 2018 · 1k+ posts · 907 votes
    3y

    Very good criteria set here. I think syndicators who have shown a track record is key heading into unknown economic environments. Conservative underwriting from a proforma and debt perspective is also critical.

    0Reply
  • Zachary Inman
    Real Estate Broker · Indianapolis · Member since 2023 · 11 posts · 9 votes
    3y

    @Doug Henderson It's an interesting time to get into syndications. Many are just now experiencing their first real downside market with OPM, and many have expanded into funds where they need to buy. I would weigh your desires for a secure principal investment and tax benefits because those things are slightly at odds. Syndications use your capital at their discretion once you wire it over, which is less secure, but you get tax benefits and possibly returns.

    If you're looking for safer yield with capital preservation, T-bills aren't a bad option. A little north of 5% for a 1-year hold. If you want more control and tax benefits, buying and operating yourself is less passive but gives you a lot more options. A third route would be to connect with a smaller, trusted syndicator in your market rather than throwing money at the flashy online syndicators.

    0Reply
  • Jason Clendenen
    Member since 2025 · 1 post · 0 votes
    1y

    What about syndicated debt funds? Anyone with good (or bad) experience, recommendations, etc? Looking for solid sponsors with good track records.

    0Reply
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