Owning Deals vs. Investing Through Operators
Investor · Irvine, CA · Member since 2023 · 27 posts · 4 votes
Owning Deals vs. Investing Through Operators
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2moI do both. But what I look for in someone I invest in is someone who will take my call at 8pm or on a Sunday if there are issues. Those who do that are typically professional, have a good track record (but things can always go sideways) and have weathered storms in the past.
7e investments53 Reviews
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- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes2moI do both. But what I look for in someone I invest in is someone who will take my call at 8pm or on a Sunday if there are issues. Those who do that are typically professional, have a good track record (but things can always go sideways) and have weathered storms in the past.7e investments53 Reviews
- Investor · Irvine, CA · Member since 2023 · 27 posts · 4 votes2mo
Quote from @Chris Seveney:
I do both. But what I look for in someone I invest in is someone who will take my call at 8pm or on a Sunday if there are issues. Those who do that are typically professional, have a good track record (but things can always go sideways) and have weathered storms in the past.
Chris, I appreciate that perspective. I think accessibility is an underrated part of due diligence. Track record matters, but when something inevitably doesn't go according to plan, communication and transparency become just as important. Out of curiosity, have you found that the operators who communicate the most also tend to have the best long-term performance? - 2moDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
Quote from @Chris Seveney:
I do both. But what I look for in someone I invest in is someone who will take my call at 8pm or on a Sunday if there are issues. Those who do that are typically professional, have a good track record (but things can always go sideways) and have weathered storms in the past.Chris, I'd cut you off after 6:30pm😝
Logical Property Management4.9459 Reviews
- 2moCraig De BorbaPro MemberInvestor · FORT WORTH, TX · Member since 2020 · 22 posts · 5 votes
I have done both, currently in two syndications and have owned SFR and multifamily. Both syndications underperform far below projections (I mean not even in the ballpark). Both perform well below my current HYSA. If the exit is based on annual growth (which it usually is) the expected exit multiple will likely miss the projection as well. I advocate for directly owning the property. If you don't want to self manage then it is easy enough to put a PM in place but at least you own the asset.
- Investor · Irvine, CA · Member since 2023 · 27 posts · 4 votes2mo
Quote from @Craig De Borba:
I have done both, currently in two syndications and have owned SFR and multifamily. Both syndications underperform far below projections (I mean not even in the ballpark). Both perform well below my current HYSA. If the exit is based on annual growth (which it usually is) the expected exit multiple will likely miss the projection as well. I advocate for directly owning the property. If you don't want to self manage then it is easy enough to put a PM in place but at least you own the asset.
Craig, that's exactly the kind of real-world experience I was hoping to hear. It seems like a lot of syndications look great on paper, but execution is what ultimately matters. Have those experiences made you completely rule out passive investing, or would you still consider investing with the right operator if the track record and alignment were there? I can definitely see the appeal of owning the asset outright when you've been through a couple of disappointing deals.
- 2moAmit PatelBusiness MemberProperty Manager · Bartlett, IL · Member since 2025 · 153 posts · 63 votes
I lean toward owning the deals directly because control over the asset and the long term direction still matters a lot. At the same time, I also learn, having my company and as an investor too, that the day to day work does not have to fall entirely on the owner. That is where a good property manager with real experience makes the difference.
A strong, experienced PM handles tenant screening, maintenance, rent collection, and the constant small issues so the owner can focus on the bigger decisions without living in the weeds. The key is finding one who actually knows the market, communicates clearly, and treats the property like it is their own. A weak or inexperienced manager creates more problems than they solve, but a solid one lets you keep ownership and control while still getting most of the operational burden off your plate.
Investing with operators can work well for larger or more complex projects where you want pure capital placement and less involvement. In those cases I would look hard at track record, skin in the game, transparent reporting, and how aligned their incentives are with the investors.
For residential and smaller multifamily, many owners find that direct ownership plus a capable, experienced property manager gives the best balance of control and sanity.
Casanomy Property Management564 Reviews - 2moDan H.Pro MemberInvestor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
I do both and have done great with both but i am currently in my first syndication that seems likely to lose investment and possibly 100% of the investment.
Clearly the biggest difference is effort involved.
I have done great on my actively owned properties. This cannot be matched on average by the syndications that I am an LP because my overall return on active is above 50%/year which is outstanding but a lot of work.
I have averaged near 30%/year as an LP on syndications but one of my current ones may be a total loss ($75k) which will lower the syndication returns if it ends up being reality at exit. I have another that I am still optimistic about even though it has had an unexpected capital call. Am I overly optimistic? Only time will tell. The others are doing as well or better than projections. One I recently upped my commitment by $30k so I am real optimistic on this one and expect it will return in excess of 30%/year
Note I do not have enough time to execute actively on every opportunity. In addition, I have limited expertise. I cannot have expertise to execute on every opportunity, but I can share in clear opportunities with experienced operators. Note, this is not to imply the opportunity is more important than the operator (I believe the operator is more important than the opportunity).
Are you aware of an obscure sophisticated value add? Is there an operator that has crushed it with this sophisticated value add? Those could be opportunities.
One of my LP syndications is a great segment, but the operator is new in this segment. I usually would avoid, but this operator literally has a reputation that may be the best anywhere. I have confidence he will crush this new opportunity (it is the one I recently increased my commitment by $30k).
Syndication participation allows diversity that otherwise may not be possible.
Good luck
- 2moStuart UdisPro MemberAttorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
It’s clear most investors prefer direct ownership. That’s always been the case, but the split is even more pronounced today.
It doesn’t matter how strong the GP is or how good their track record may be. Depending on the asset class that has historically been their area of expertise, the numbers are simply broken right now, with no clear path to return of capital or a liquidity event.
And that’s ultimately what retail LPs care about. They do not have patient capital and are not interested in waiting indefinitely for the market or capital structure to eventually work itself out. Yes track record, communication, alignment and investing alongside are all important but most importantly the investment strategy and asset class has to work.
- 2moDon KonipolBusiness MemberInvestor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votesI have invested in real estate directly for 50 years. Indirectly thru syndications for 30 years. And I’ve been a syndicator for the last 26 years.
Quote from @Joshua Patrick:
Curious where everyone stands on this.
I've always been in the mindset that if I'm investing in real estate, I want to own the deal, control the decisions, and be hands-on.
Lately, though, I've been meeting more investors who'd rather put capital behind experienced operators than manage projects themselves.
I can see both sides.
Owning your own deals gives you control.
Investing alongside the right operator can give you access to bigger projects without all the day-to-day work.
For those of you who've done both...
Which do you prefer and why?
If you invest with operators, what are the biggest things you look for before wiring money?
Track record?
Communication?
Alignment?
Skin in the game?Curious to hear everyone's perspective.
There are many qualifications you can set up to screen and eliminate most syndicated offerings. The ones that are left deserve more thorough analysis.
A problem is that most investors do not have the necessary skills, time, attention to detail, or decision making ability to choose the gold amongst the crap.
Here’s my bottom line; (and remember I syndicate deals, so this is “against the grain”. If I was a passive investor and didn’t have an existing relationship with a syndicator I’d skip investing in syndications and purchase a portfolio of carefully selected REIT stocks. In most syndications on 90 - 94% of your investment goes to the asset, so you’re essentially paying 110% of net asset value. You can build a portfolio pf top quality REITS and currently invest at 65 - 70% of their net asset value. Further, that same portfolio has a dividend yield of 6.5 - 7%. Professional management far better (on average) and far less expensive (on a per dollar invested basis) than almost all syndicated offerings.
I believe we’re at a similar point to the early/mid 1980s where large syndicators were syndicating everything they could - their interests and the investors interests were not aligned. Similarly projects that in no way pass the risk return test are being sold and have been sold in bulk the last 3 - 4 years. You can se the results with all the posts of people whose investment has been wiped out.
Of course there are great syndicated investments out there, but you may need to be Warren Buffet to identify them. - 2moMark RobertsonPro MemberInvestor · Salisbury, NC · Member since 2014 · 314 posts · 386 votes
I don’t view direct ownership and passive investing as mutually exclusive. Direct ownership provides control and potentially greater upside, but it also creates concentration and requires time. Investing with operators can provide diversification and access to assets outside an investor’s operating expertise.
When investing passively, I underwrite the operator before the property. I want full-cycle results showing projected versus realized net returns, evidence of how the team handled difficult deals, meaningful co-investment on the same terms, and communications from periods when performance was poor—not only polished reports from successful investments.
I also examine leverage, maturity dates, capital-call provisions, dilution rights, the entire fee stack, and the distribution waterfall. A strong operator cannot rescue every bad capital structure.
Finally, I size every private investment with the assumption that it will be illiquid longer than projected and could lose substantial value. Passive investing can broaden a portfolio, but it should not be mistaken for effortless or low-risk investing.
- 2moMark RobertsonPro MemberInvestor · Salisbury, NC · Member since 2014 · 314 posts · 386 votes
I don’t really see direct ownership and passive LP investing as competing strategies. They solve different problems.
Direct ownership gives you control, but it also concentrates your time, capital and often geography. Investing with operators gives up control in exchange for the ability to diversify across managers, markets and strategies without creating another job for yourself.
The tradeoff is that manager selection becomes critically important.
Before wiring money I want to understand the realized track record, including troubled deals; the debt maturity and extension provisions; GP capital actually at risk; all sources of sponsor compensation; reporting standards; conflicts of interest; and exactly what happens if the property needs more capital.
I’d also be careful using “skin in the game” as a shortcut for alignment. A GP investment sounds great, but I want to know how large it is relative to the fees they receive and whether their economics really depend on LPs doing well.
For me the question isn’t which approach is better. It’s whether the return I’m being offered adequately compensates me for the control and liquidity I’m giving up.
- 1moCraig De BorbaPro MemberInvestor · FORT WORTH, TX · Member since 2020 · 22 posts · 5 votesPrecisely, well put
Quote from @Mark Robertson:
I don’t really see direct ownership and passive LP investing as competing strategies. They solve different problems.
Direct ownership gives you control, but it also concentrates your time, capital and often geography. Investing with operators gives up control in exchange for the ability to diversify across managers, markets and strategies without creating another job for yourself.
The tradeoff is that manager selection becomes critically important.
Before wiring money I want to understand the realized track record, including troubled deals; the debt maturity and extension provisions; GP capital actually at risk; all sources of sponsor compensation; reporting standards; conflicts of interest; and exactly what happens if the property needs more capital.
I’d also be careful using “skin in the game” as a shortcut for alignment. A GP investment sounds great, but I want to know how large it is relative to the fees they receive and whether their economics really depend on LPs doing well.
For me the question isn’t which approach is better. It’s whether the return I’m being offered adequately compensates me for the control and liquidity I’m giving up.
- Investor · Hendersonville, NC · Member since 2016 · 498 posts · 285 votes1mo
Direct ownership gives you control, but it can turn into another job fast. Pure LP investing solves the time problem, but then you’re trusting the operator, the debt, the reserves, and the reporting almost completely.
I’ve owned mobile home parks, self-storage, and smaller commercial, and the setup that works for me is when the roles are clear, one side brings capital and balance sheet strength, the other brings sourcing, diligence, operations, and execution. That can work, but only if everyone is honest upfront about decision rights, reserves, reporting, and what happens if the deal gets harder than expected. The operator matters a lot, but the structure matters too.
- 1moDon KonipolBusiness MemberInvestor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
All the posts on this thread have provided excellent information and well informed opinions. I wish all of BP posts were like this!
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