Posted over 4 years ago

10 Rules to Successful Multifamily Syndication Investing


If you want to know what you need to start investing in successful multifamily syndications, I can help. My wealth of knowledge and success in real estate investing for more than 40 years can help with your education in multifamily syndication investing.

I have completed more than 25 syndications. Here is what I practice daily that has helped lead me to success as a multifamily syndicator today:

No. 1 – Educate yourself

Spend the time and money upfront to relieve yourself of as many mistakes as possible. Just one big mistake can wipe you out. To excel in any field, I firmly believe we need to get obsessed with learning it in depth — all the intricacies, foundations, procedures, systems and the structure of the business.

Knowledge is power.

It’s great to find the very best role models in that field, discover what methods they are employing and imitate them. Try to find a great mentor in them, get a coach or a mentor, especially in the beginning. See how you can contribute to their organization their goals.

No. 2 – Dream big

Set realistic concrete goals with deadlines and expectations for massive action daily, weekly and monthly. A goal is different from a wish; you may wish to be rich, but that doesn’t mean you’ve ever taken steps to make your wish come true.

Setting clear and specific investment goals with specific deadlines becomes your roadmap and action plan to become financially independent. You are statistically far more likely to achieve financial independence by writing down specific and detailed goals than not doing anything at all.

Your goals can include the following:

  • The number of units you need to acquire each year.
  • The annual cash-flow they generate.
  • The type of property.
  • The location of the emerging market

No. 3 – Buy in emerging growth markets and location

Always invest with a long-term perspective in mind. Never speculate on quick, short-term gains in appreciation, even in a heated market experiencing double-digit gains. You never know when a market will peak, and it’s usually 6 to 9 months after the fact when you find out.

As a syndicator, you want to do extensive research and decide on an emerging market that will bring lots of jobs. You see, you will need to sell that market to your “valued investors” who would look at all the reasons to invest in your opportunity.

The best approach:

  • First, choose your city or town based on the health of its housing market and local economy (unemployment, job growth, population growth, etc.).
  • From there you would narrow things down to the best neighborhoods (amenities, schools, crime, renter demand, etc.).
  • Finally, you would look for the best deals within those neighborhoods.

Sell that market to your “valued investors” who will see that you are a professional in your field and care about giving important information articles and links to great pieces of news in the market you are looking to acquire and will help them see all the reasons to invest in your opportunity.

No. 4 – Look for momentum plays and value-add for consistent cash flow every quarter

With few rare exceptions, always buy an investment property with a positive cash flow. Do extensive due diligence and stay true to your standards and the assumptions in your elaborate underwriting.

Don’t fall in love with the property; fall in love with numbers.

Remember, you are building a strong foundation to provide excellent quarterly cash flow returns to investors, so that they can give you more referrals and talk nice about how good you are as a syndicator. I prefer paying quarterly in my companies rather than monthly; investors love walking to the mailbox four times a year to get their nice checks. It’s so very important to be transparent and keep great communication with valued investors.

No. 5- Build a totally transparent business model

This has been our foundation at my four companies. Remember, the investors need to feel secure and confident about you and your business ethics before they give you $50,000 or $100,000 or $500,000. It’s their very hard-earned savings. And as a top syndicator, you have the fiduciary responsibilities to protect their investment more than yours.

Treat their investment as gold and do everything in your power to preserve it and make it grow.

In all our companies, the investors can ask to see ledgers, invoices, bids, bank statements, rent rolls, all financial reports, capital expenditures reports, balance sheets … well, any and everything. That builds trust and makes them comfortable with the organization.

No. 6 – Create new LLCs for each multifamily community and get extra insurance coverage to mitigate risks

Always put each property in its own LLC. Make sure that all insurance, property, wind stream, flood and umbrella insurances are in place for your assets. Read and educate yourself the “SEC RULES AND REGULATIONS” thoroughly.

Find the best real estate attorney and syndication attorney who you can build a relationship with. The operations go smoother by getting help from them. You underwrite their fees in calculations, so don’t try to take a cheaper route, it may come back to haunt you.

I have been extremely blessed with Kim Lisa Taylor, She and her team are amazing, efficient, cutting-edge with laws and very professional. I would highly recommend working with her. She has done all 26 of our syndications. I am so very proud to talk about Milton Colegrove, real estate attorney in Dallas, Texas, who is super-efficient and has been with us since the very beginning. He looks at all my contracts and legal matters through all four companies, counsels me daily/weekly and looks after all my closings — I am never at the closings! Isn’t that awesome?!

No. 7 – Diversify across markets

Focus on one market at a time, accumulating from three to five income properties per market. Once you’ve added those three to five properties to your portfolio, you would diversify into another prudent market that is geographically different than the previous one. Economies of scale prevail and bring better net cash flows by reducing expenses.

Typically that means focusing on another state. One of the underlying reasons for diversification within the same asset class (real estate) is to have your assets spread across different economic centers.

Every real estate market is “local,” and each housing market moves independently from one another. Diversifying across multiple states helps reduce your risk, should one market decline for any reason such as increased unemployment, increased taxes, etc.

No. 8 – Use professional property management or, better yet, run your own property management company

We decided to manage all our acquisitions from day one. It gives so much control over the day-to-day operations.

  • We can take immediate steps:
  • To rectify problems
  • To get better bids
  • To reduce costs
  • To implement strong marketing techniques for high occupancy.

In the beginning, I promote to get a local property management company to see the systems and learn from them; only after a good grasp of the day-to-day-operations and systems should one think to start their company. Never manage your own properties unless you run your own management company. Property management requires a solid understanding of tenant-landlord laws, fair housing laws, operational software, good marketing skills, and strong people skills to deal with tenant complaints and excuses.

No 9 – Build an awesome presentation and credibility kit

Remember, we have only the first seven seconds of any interaction to make a great impression with investors, real estate brokers, loan brokers, attorneys, bankers, landlords and others.

It pays big dividends to get a professionally designed business plan and an educational, simplified PowerPoint presentation as well as rehearsal on some great scripts. I would highly recommend practicing your scripts for each meeting; rehearsals are necessary.

No. 10 – Leverage your investment capital, time and skills; syndicate

Real estate is the only investment where you can borrow other people’s money (OPM) to purchase and control income-producing property. This is a very noble cause in my thinking, as you are providing above-average, excellent returns on the funds for so many investors who are professionals in their field of expertise but don’t have the time or skills to invest their savings to gain high returns in real estate, especially the multifamily/commercial sector. By being honest, trustworthy and following the SEC rules and regulations you are able to build your strong business. Also, you will be helping so many residents who will be living in your multifamily communities that you add value to. Not to forget the job you will provide to the staff at your assets and the hundreds of vendors you also will be giving jobs too.

This allows you to leverage your investment capital into larger multifamily properties than purchasing using “all cash.” Leverage magnifies your overall rate-of-return and accelerates your and investors wealth creation.

It’s much easier to manage and bring about great rates of returns with larger multifamily communities.

Focus on accredited and sophisticated investors.

You are in a very good profession by being a syndicator. You are doing a great job of helping lots of entrepreneurs, doctors, lawyers, managers, high-net-worth individuals, retired businesspeople and so many more, who just don’t have the time and skills to effectively syndicate and bring about great returns.

What do you think? What else should be done in order to become successful in multifamily investing? Share your thoughts in the comments below.

Comments (7)

  1. Brand new to Bigger Pockets and this is my 1st comment.  Trying to learn about being a passive investor in multi family housing.  I'm confused about accredited investor, to participate in a fund as a passive investor do I need to be accredited 1st?

  2. Thank you for a great article.  I haven't yet looked into understanding the SEC rules.  Any recommendations on gaining knowledge on SEC rules quickly?

    1. Hi Viji! Thanks for the great comment! SEC rules can be tricky and require a lot of time to be understood. The best way to address them is to find a lawyer who can help you understand these rules and formally establish your multifamily syndication. 

  3. @Vinney Chopra thank you for this article. I have been thinking about this recently. I believe that I could be successful with most of your ten points, and I particularly like your item #2, about dreaming big(ger), i.e., go big, or go home, type of thing. Where I get caught up is the couple of references to SEC rules and regs, which become a stumbling clock, initially, of wondering where/when, I'd be getting in over my head, attempting a syndication approach. 

    1. I am very glad you like the article, Chris. In terms of understanding SEC rules, it's important to network with people (i.e. investors and syndicators) who have experience in the topic. But for me, it's about finding a great syndication lawyer. 

  4. Great post!!!  

    1. Hello, Ashley! I am glad you liked it. Feel free to read other content on my blog for more helpful lessons on multifamily investing. :)