Small Syndication: get deal first or funding first?

Question

Hello everyone,

I'm looking to get started in real estate, but don't have money for a down payment or can't get a mortgage. I'm great at analyzing deals. Should I get the deal first or the funding?

And if I get the deal first, do I need to put in under contract before I look for the funding?

Thank you!

Alina Trigub · Answer

@Dominick Dahmen

I don't think "syndication" is the right term in this case. Nevertheless, I agree with the general idea of finding the money to invest. You should consider finding potential money partners. You mentioned you're good at analyzing deals, so consider finding the partners that are lacking such skill but perhaps good with construction and/or have the funds. Essentially your goal is to fill in the gaps to move forward with your strategy.

Network by going to REI events so that you are in the right environment to find your potential partners.

Best!

Theo Hicks · Answer

Always secure funding first. Because if you place a deal under contract and cannot close because of your lack of capital, you will lose all credibility with the broker and lender..

Keep in mind that if you are raising money and all investors are passive, it is considered a syndication. If the deal is really small, the cash flow or other profits will likely not support the added syndication costs.

Taylor L. · Answer

The money. Get the money first. You won't lock up a deal if you can't prove you can close it.

Ryan Sajdera · Answer

I would try to secure your funding first. Do you have any commitments from investors to partner with you? It’s difficult to convince someone to invest with you if you have no experience or money. I would pitch a few sample deals to your investors first and see how they feel, then start getting deal flow. The other option is to just wholesale the deal to another experienced investor if you find a deal but cant get financing/partners.

Really its the story of what came first, the chicken or the egg? I’ve had investors say “find me a deal, then we will talk numbers”, but talk is cheap. Find investors that are educated and know what they want for returns. After all, “luck” favors the prepared.

Small Syndication: get deal first or funding first?

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