My husband and I have had great success with our rental properties (we currently own two single-family rentals) and are now looking to branch into self-storage.
We plan to structure our first deal as a real estate syndication, where we will act as the sponsors/general partners—handling deal sourcing, financing, and ongoing management. Our target property is in the $500K–$1M range.
Although we’ve spent years researching and analyzing storage unit deals, we’ve never taken the next step to purchase one—until now. We will also be investing our own capital into the deal alongside our limited partners.
This will be our first time sponsoring a syndication, and we’re looking to connect with limited partners (passive investors) who are comfortable with smaller deals and new sponsors. We expect returns to come from both ongoing cash flow and a capital event (such as a refinance or sale).
For those of you who’ve raised capital for similar first-time or smaller syndications:
What strategies have worked best to attract and build trust with LPs?
Are there specific networking channels, events, or platforms you’ve found effective?
Any common mistakes you’d recommend avoiding as first-time sponsors?
Thanks in advance for your insights and experiences!
Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
1y
Am I the only one has started reading a lot of these types of posts (there was another one the other day too) as thinly veiled solicitations for LPs to reach out?
To directly answer your questions: 1. Attract LPs: these will be the people who already know, like and trust you. So, your mom and dad, your best friends, and likely your coworkers. People who already have your personal number and seen your successes with the two rentals you already own.
2. Thanksgiving, Christmas, birthdays, etc.
3. Thinking you know anything about what you are doing. I am assuming you are not currently an asset manager for large self storage company. So... Who will you call to fix your gate, what management system are you using, what is your advertising budget for the property, who many employees will you have on site, what is your retail mix, how many carts will you own on the property, what is your balance of interior climate controlled and exterior units, will you allow RV and boat storage, how do you handle someone living in a unit or running a business from your self storage unit, what is the real demand for storage in that market, does your client base have enough expendable income to afford storage and/or absorb your rent increases, how long of free rent or other promotions are you providing to get your units full, are you planning on expanding the property, how much are you co-investing, what are your fees, what is your carried interest, what relationships do you have with brokers or owners, what markets are you focused on, how are you different than the hundreds of other self storage syndicators, how much time are you dedicating to this venture versus your "day job", do you have the net worth to secure a loan yourself, what terms are you finding for the loans, are you providing the personal guarantee or relying on someone else, fixed or floating rate, what auction company are you using for unit sales, what have you done professionally that would give me the confidence that you will figure this out on the fly, how frequently are you paying distributions, how can i monitor the health of my investment, how frequently will I be getting updates, do you have an investor portal, have you setup a website and professional email address, who is your management company, how many did you interview before settling on them, how many are operating in that market in case you need to replace them, will this be branded units or creating your own brand...
At the end of the day, the reason you will be raising money from your friends and family is because they typically won't even know to ask these questions. They will already trust you and therefore invest on your relationship and wanting to help you get started more than viewing it as a prudent investment with minimal risks.
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
1y
Raising $500k-$1M is tough to make the numbers work due to the costs of starting the syndication and ongoing reporting for the investors. For example a $1M raise you will easily have 2-4% per year on taxes and bookkkeeping. That's just that one item. Your best bet is to get one person or finance it and put money into it
also as a first time syndicator investors will want you to put in 10-20% of the amount as your own capital
My husband and I have had great success with our rental properties (we currently own two single-family rentals) and are now looking to branch into self-storage.
We plan to structure our first deal as a real estate syndication, where we will act as the sponsors/general partners—handling deal sourcing, financing, and ongoing management. Our target property is in the $500K–$1M range.
Although we’ve spent years researching and analyzing storage unit deals, we’ve never taken the next step to purchase one—until now. We will also be investing our own capital into the deal alongside our limited partners.
This will be our first time sponsoring a syndication, and we’re looking to connect with limited partners (passive investors) who are comfortable with smaller deals and new sponsors. We expect returns to come from both ongoing cash flow and a capital event (such as a refinance or sale).
For those of you who’ve raised capital for similar first-time or smaller syndications:
What strategies have worked best to attract and build trust with LPs?
Are there specific networking channels, events, or platforms you’ve found effective?
Any common mistakes you’d recommend avoiding as first-time sponsors?
Thanks in advance for your insights and experiences!
— Katie
I’m going to give you a real NEGATIVE view of this based on my 50 years experience investing in real estate and my 30 years of syndicating deals
1. You don’t have the experience to be syndicating real property deals. Having no experience in storage, no experience in commercial real estate and very limited experience in residential real estate you would be essentially experimenting and learning with other people’s life savings. This is akin to a mutual fund being managed by a person who had 3 months experience investing in two stocks.
2. You PROBABLY don’t have the knowledge to be syndicating. You don’t know what you don’t know. With limited knowledge of storage you’ll be learning as you go. You shouldn’t be risking other people’s money at this stage
3. Most passive investors want the returns only available thru use of leverage. 50% LTV for financing seems to be the “magic” number. With no experience in storage, commercial property investing, syndication, etc how are you going to be able to secure this financing AT AN INTEREST RATE significantly lower than the ROI of the property?
4. Nobody but the most unsophisticated investors would consider a syndicate deal that wasn’t compliant with Reg D Sec 506. The cost to set up a Reg D deal starts at $10k. Are you prepared to risk $10k before you’ve even approached an investor?
5. 3rd party Online “platforms” for real estate syndications come in two types. Type 1 is those that allow only experienced, well capitalized, large sponsors on their platform and provide value to all parties; Type 2 are those that allow anyone to list their offering and are totally worthless.
6. The self storage industry is very “hot” right now. The best properties are of course bought by the major self storage REITS, private equity firms, and portfolio investors. What’s left are rural/remote/no growth locations, old properties either functionally obsolete or in need of significant rehab, and properties with new large competitors wiling to suffer temporary negative cash flow to put them out of business. How are you going to navigate this to offer investors a sufficient risk/reward return let alone provide enough to pay you a “promote”?
7. PPM disclosure requires a discussion of all risks and negatives of the investment. To comply your disclosure is going to have to read something like “ the sponsor has no experience in self storage assets and little experience in real estate investing in general, which will probably negatively impact your investment and lead to a total loss of your investment. Please engage the services of a qualified professional to evaluate this very high risk offering”. How difficult do you think this will make raising capital?
8.should investors lose capital they may have a case for “piercing” the statutory defense provided by Reg D compliance for personal “gross negligence” due to your total lack of qualification to act in a managerial capacity. This means your personal assets could be at risk.
At a minimum I suggest you search and read the threads on BP concerning syndications “gone wrong”.
Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
1y
Am I the only one has started reading a lot of these types of posts (there was another one the other day too) as thinly veiled solicitations for LPs to reach out?
To directly answer your questions: 1. Attract LPs: these will be the people who already know, like and trust you. So, your mom and dad, your best friends, and likely your coworkers. People who already have your personal number and seen your successes with the two rentals you already own.
2. Thanksgiving, Christmas, birthdays, etc.
3. Thinking you know anything about what you are doing. I am assuming you are not currently an asset manager for large self storage company. So... Who will you call to fix your gate, what management system are you using, what is your advertising budget for the property, who many employees will you have on site, what is your retail mix, how many carts will you own on the property, what is your balance of interior climate controlled and exterior units, will you allow RV and boat storage, how do you handle someone living in a unit or running a business from your self storage unit, what is the real demand for storage in that market, does your client base have enough expendable income to afford storage and/or absorb your rent increases, how long of free rent or other promotions are you providing to get your units full, are you planning on expanding the property, how much are you co-investing, what are your fees, what is your carried interest, what relationships do you have with brokers or owners, what markets are you focused on, how are you different than the hundreds of other self storage syndicators, how much time are you dedicating to this venture versus your "day job", do you have the net worth to secure a loan yourself, what terms are you finding for the loans, are you providing the personal guarantee or relying on someone else, fixed or floating rate, what auction company are you using for unit sales, what have you done professionally that would give me the confidence that you will figure this out on the fly, how frequently are you paying distributions, how can i monitor the health of my investment, how frequently will I be getting updates, do you have an investor portal, have you setup a website and professional email address, who is your management company, how many did you interview before settling on them, how many are operating in that market in case you need to replace them, will this be branded units or creating your own brand...
At the end of the day, the reason you will be raising money from your friends and family is because they typically won't even know to ask these questions. They will already trust you and therefore invest on your relationship and wanting to help you get started more than viewing it as a prudent investment with minimal risks.
Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
1y
That is a really small syndication. A $1M purchase will only need $200k-$300k. I don't think that is worth doing a syndication on. Personally, I would not suggest doing a syndication offering under $2M (the raise amount - not the purchase of the asset).
As for the questions:
What strategies have worked best to attract and build trust with LPs?
Are there specific networking channels, events, or platforms you’ve found effective?
Building trust is about your track record. What have you done and why should people trust you with their money?
Start with your family, friends, and acquaintances. Create a newsletter that goes out monthly that discusses what you're doing and gives them information on investing in RE, the economy, etc.
Next, go to live and online events. This is tougher and works much better with a strong track record.
Any common mistakes you’d recommend avoiding as first-time sponsors?
Too many mistakes to mention. Use a securities attorney. Think through the process. Understand why your offering is good for your investors and good for you. Be conservative. Don't oversell your offering - it's best to offer a 10% return and achieve a 15% return, than to offer a 20% return and achieve a 15% return
perhaps a Joint Venture would be better for a novice small investment :from Google:
How Joint Ventures Are Structured
Entity Joint Venture:Partners form a new legal entity, like a Limited Liability Company (LLC) or limited partnership, which owns the property and manages the venture.
Contractual Joint Venture:No new legal entity is formed; instead, the parties' rights and obligations are defined by a comprehensive contract.
Equity JV: All parties contribute capital to the venture.
Non-Equity JV: One party provides services, expertise, or other non-monetary resources instead of capital.
Key Elements of a JV Agreement
Capital Contributions: Specifies the amount and timing of capital each member will contribute.
Management and Control: Outlines the roles and responsibilities for managing the project.
Decision-Making: Details how decisions will be made and which partners have authority.
Profit and Loss Sharing: Defines how profits and losses will be distributed among the partners.
Exit Mechanism: Specifies the terms and conditions under which the venture will end, including procedures for dissolution.
You do have to start somewhere, but learn as much as you can/communicate with your partners, and fully share with them that this is Ultra high risk. The mom and pop you're buying from also started from nowhere too.
Also a few more single family homes in your portfolio would garner more faith from your investors and improve your odds of success with more experience. good luck :)
