How do you actually evaluate a syndication deal before writing the check?

Question

Evan Polaski · Answer

@Ryan Foster,  it amazes me how many investors don't do a basic LinkedIn search first.  Or if they do, they allow the sponsor to talk around lack of actual operating experience.  (I see many with almost no real world experience, but also a good number that try to translate some other type of experience and successes into how they will be successful in real estate).

I would search company name and look not just at first page results, but push into pages 2 and 3.  This does take some general critical thinking about who may be posting reviews and feedback.  Commonly, you will get far more negative reviews than positive on any online forum, but this is true with amazon products and really anything people review overall.  Disgruntled people will go out of their way to let others know, while happy customers rarely leave reviews (without being pushed or incentivized).

The hardest part is really coming to your own understanding of market conditions and where things are moving.  At the end of the day, market conditions will have a much larger impact on your investment returns than any individual sponsor, as we are seeing with many previously successful sponsors that are taking baths in today's market.  Not to say the sponsor isn't to blame to some level (they didn't need to keep buying, but investors also didn't need to keep writing checks).

At the end of the day, one of the best things you can do is have a lot of conversations with various groups before writing checks.  There is no "right answer" but I would say 20+ is reasonable.  Have a set of questions you ask all of them, and also dig deeper into various topics they bring up.  As others noted, you will get some good sales guys but when you dive into nuanced questions they fall short.

Questions I always ask:- Track record.  Types of deals, years bought, last deal sold.  When they got started (both company and principals in the industry).  How waterfalls and fees on full cycle deals compare to current deal.  How do realized returns compare to initial projections for these deals?

- Alignment: co-investment by GP.  Fees charged by GP (often ask for both percentage and absolute dollar amount).  If proforma ends up being correct, how much will the sponsor make in cumulative fees versus how much will they make from their carried interest?  Major red flag: if acquisition fee, alone, nets GP more than their co-invest

- How current deals are performing relative to initial proforma.  Ask for current financial statements and original offering memos to confirm.

- Referrals - I ask this only to hear if there is any hesitation in their answer.  The right answer is: "yes, how many would you like".  Note: I know they will only ever share happy investors, so I don't ever actually reach out to these people.

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Denise Supplee · Answer

Hi @Ryan Foster, It’s completely normal to pass on a lot of deals. We review operators extensively, stress test the assumptions, dig into their past deals, compare realized vs projected returns, evaluate their communication style, and look closely at how they handled challenges.

Our model is a bit different because we do it together as a Club. We review deals as a group before investing, dissect the assumptions, ask sponsors tough questions on live calls, and share side by side comparisons so members can see how others are underwriting the same opportunity. It turns due diligence from a solo guessing game into a collaborative process and dramatically shortens the learning curve for newer passive investors. Your more then welcome to come on a deal vetting call to see us vet a deal in real time.

Ryan Foster · Answer

@Chad Ackerman The buy box concept makes total sense and I've heard many others in the space say this. I’ve been so focused on the mechanics of evaluating individual deals that I hadn’t stepped back to think about the framework first. Really appreciate you taking the time to lay this out. Quick question — when you built your own buy box, did you use any specific tools or templates, or was it more of a mental framework you developed over time?

Doug Smith · Answer

Hi Ryan, My first move...look up the operator/sponsor. Check their resume/Linked In profile. What experience do they have? If it's a lending investment, does the operator have a formal credit background as a lender? If a new construction project, what projects have they done in the past and did they have a pattern showing progressive growth from smaller deals to larger deals? I just saw a conference/guru session advertised where the financial expert/"pied piper" that was charging people for advice literally was working in a restaurant prior to that. How does that qualify someone to provide advice? Ask yourself what is this person's experience? What does their track record look like? Do the returns and projections make sense? Have they included projections for setbacks? ...and here's a big one..."have they managed similar opportunities through a crash like 2007-2008?" We were recently talking about managing a loan fund for a family office when they informed us they were thinking of going a different direction because someone else was offering massively higher projected returns. When you looked at those folks, they had zero lending background, had never run a loan fund before, were advocating the use of heavy leverage on the portfolio, and were advocating unsecured business lending to provide high returns. Obviously this isn't an exhaustive list, but it's a pretty good start. I would answer all of the questions above before getting into your questions about cap rates and how many deals to pass on before committing. I wish you well in your endeavors.

Dimitrius Kiritsis · Answer

Hey @Ryan Foster. I'd say the most important variable to consider when evaluating different syndications/funds is the Sponsor. A few key items to consider are: How many years have they been in the space? What's the history/experience of the leadership team? How many deals have they exited and what returns have they achieved on those deals? Have they ever done a capital call or paused distributions? Do they audit their financials with a third party? What are their standards for reporting and communication? Hope this helps!

Ryan Foster · Answer

@Denise Supplee Thanks Denise, I’d love to sit in on a vetting call — that sounds incredibly valuable. What’s the best way to join one?

Nicholas L. · Answer

@Ryan Foster

i don't invest in syndications myself, but are you:

-networking with other successful LPs, and

-talking to the actual syndicators or their reps?

IMO the best syndications should be the ones I don't know about, and can't get into.  if you can find it at greatsyndicationforanyone.com... probably not a good idea

hope this helps

Ryan Foster · Answer

@Nicholas L. Appreciate the perspective, Nicholas. Good points on networking.

Chad Ackerman · Answer

Great questions Ryan, and I can tell you're approaching this thoughtfully. But I'd actually encourage you to take one step back before diving into the mechanics of evaluating deals.

The reason due diligence feels like a mess for most new LPs is because they haven't yet defined what they're actually looking for — so every deal feels like it needs to be evaluated from scratch. Before you stress-test a sponsor's rent growth assumptions or cap rate projections, ask yourself some more foundational questions first:

• Why are you investing passively? Income now? Long-term wealth building? Tax efficiency? Portfolio diversification?
• What does your ideal return structure look like? Regular cash flow distributions, or are you comfortable waiting for a big payout at exit?
• What's your risk tolerance and timeline? Are you okay with a 5-7 year hold, or do you need more liquidity?

Once you have that clarity, you can build a real buy box — the specific asset classes, deal structures, hold periods, and return profiles that actually align with your goals. And here's the key insight: different asset classes behave very differently. A stabilized multifamily acquisition is a completely different animal than a value-add play, new construction, or a debt fund. If your goals don't match the deal structure, no amount of due diligence on the numbers will make it the right investment for you.

Only once you have that foundation does evaluating a specific deal become focused and intentional. You'll quickly be able to filter out deals that don't fit your box before ever opening the OM — which saves you enormous time and protects you from chasing the shiniest projected returns (which, as others in this thread have pointed out, often underdeliver).

Build the strategy first. Then the due diligence process gets a whole lot cleaner.

Chad Ackerman · Answer

For me it started as a mental framework that I refined over time through a lot of trial and error — and honestly, some mistakes that could have been avoided if I had been more intentional upfront.

What I found is that most people have a general sense of what they want but haven't actually written it down in a structured way. There's a big difference between thinking you want cash flow and actually defining what that means for you — minimum preferred return, distribution frequency, acceptable hold period, debt structure comfort level, etc. When you put it on paper it forces real clarity.

Over time I formalized that into a structured template that walks through the key questions you need to answer before ever looking at a deal — defining your why, mapping your goals to the right asset classes, and building out the specific criteria that make up your buy box.

The real power of having it written down isn't just knowing what to say yes to — it's being able to say no faster. Most of your time as a passive investor gets eaten up evaluating deals that were never right for you in the first place. When you have a clearly defined buy box, you can filter those out in minutes rather than hours. And when a deal does make it through that filter, you can go into deeper due diligence with real confidence that it's already aligned with your goals — not just that the projected returns look attractive.

How do you actually evaluate a syndication deal before writing the check?

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