All Forum Posts by: Andrey Y.

My grandfather was a giant Syndicator of RE.  He said its a great way to the Riches of Babylon,  for the syndicates of Operators. He said the investors are being fleeced, not in those words. 

He said look at Wall Street hedge funds.   Ask yourself who are the billionaires?  Surely not the investors. 

Not one Hedge fund manager will invest in another HF as an investor. 

He also said anytime you join a pool of money gathered by an operator...... Watch Out you are being plucked one feather at a time. Sure you make 7 per cent in $10,000.  You happy.    See what the Big Kahuna rakes in. 

The pitch goes I'm Ben let's Syndicate together.  The investor thinks Ben is on his side.    He is in a way but actually the deal is so heavily skewed Ben's way no legit investor will invest. Only those who 🐝 live in the Tooth Fairy. Ben's services are not FREE. 

@Andrey Y.

Obviously we don't have the full details of a deal you're referring to. There might be reasons for higher costs (perhaps lumping multiple costs together or something like that) or there might not be. 

As others said, there's one way to find that out AND ... report back to this forum. The response itself will give you an indication whether it is an operator you want to invest in. 

Looking forward to hear back from you. 

All financial research done points to the same conclusion - costs matter. At the end of the day, costs come directly out of the investors pockets. You should read the old book: Where are the customers' yachts? It's written from the perspective of a stockbroker/investing in stocks/bonds but the exact principles apply. 

Also, I am assuming you work hard for your money. If after research you feel the sponsor is doing something that you would feel (somewhat) dubious in nature, then run for the hills. Just because a sponsor is hitting their numbers does not justify bad behavior.

you know all those pics of successful syndicators sitting in private jets :)  someone is paying for those.. or maybe its just fluff.. ? along with lambo pulled up next to said Jet.. :)

@Randy Bloch I think it depends on your definition of success. In my mind, if you aren’t financially free yet, then 401k and diversification offered by 3 buckets is slowing you down. If you’ve achieved your goals then by all means diversify and worry about taxes. I don’t want to become free when I’m old. I want to pump everything into passive income and expense reduction. Not stuff it all in a time capsule of a 401k and then, when I’m weak old and institutionalized, start asking “so how do I actually create some income with my money?!”

There is an ample amount of research (dating back decades) into this topic and it all points in one direction - costs matter! 

I have to agree with @Andrey Y. initial reaction at balking at these costs. As @Brian Burke mentioned, one should dig deeper and not go off first impression only but at the end of the day it DOES matter (by a lot) what the sponsor is doing, how they are conducting themselves and, most importantly, how they are spending the funds entrusted to them. This goes to the core of how this or any other commercial transaction transpires ie the sponsor should act as a fiduciary and is not living the high life off investor funds. 

Or in simpler words, it is doubtful that the average sponsor (again, deeper research needs to be done) would be eating lobster if this was their own money.

 Well, this certainly is the opposite viewpoint to what Jingwen said above. I'm not sure so far how I feel about it.

Well, on the surface that sounds high, but without visibility behind the scenes it's not fair for me to judge.  Perhaps a good place to start is by asking the sponsor for a breakdown of exactly what those line items are intended to cover, and an explanation/dialogue surrounding that issue to see if it all makes sense.  I suppose if they were buying hundreds of notes and had to get appraisals on each property, or had to send someone to get eyes on the properties or something similar those costs could add up.  But I'd really want to know more from the sponsor before investing in that.

$200K to $300K is insanely high.  A clue here is it says "Travel and Inspection Costs / Due Diligence."  So could this possibly include third-party reports, lender inspections, lender's travel costs (yes, lenders bill the borrowers), and so on?  And would this be for multiple properties in a fund?  I can see maybe $50K or so per property for all of that stuff, including lender thirds, survey, zoning reports, etc.  But for sponsor travel?  No way!  I budget around $15K for DD related travel and we usually don't come close to spending all of it, meaning any remaining balance goes to cash reserves or offsets another line item that goes over budget (it happens!).

I have not seen anything like this. Are you sure you’re looking at travel costs and not acquisition fees? Travel and due diligence is separate and usually only around $20k or so for a $10 million deal.