All Forum Posts by: Trevor Oldham

As @Taylor L. mentioned, it is critical to vet the sponsor before you evaluate the deal.  You are effectively hiring an asset manager to manage the property you are investing in.  If you hire a poor asset manager, your investment will suffer regardless of how good the deal is or how good the sponsor makes the deal look.  It is very difficult to vet sponsors - these are long term, illiquid investments that are completely out of your control.  Once you send the wire, there is nothing you can do except receive reports and hopefully distributions.  Finding an operator who can effectively manage the asset and maximize returns is great - but they also need to be able to serve their investors.  Communication with LP's is critical - if they don't respond to emails and phone calls before you have wired them money there is little chance they will do so after you send the money.  The communication from the GP is the only way you will know how your investment is performing so this is a critical component of the evaluation.

When I started as an LP investor I did not have a strategy at all - I went to a conference and met syndicators and invested with them - I did no due diligence or evaluation.  As you can imagine, the deals I invested in are a mixed bag - some are OK and some are not and none are great!  Then I decided I needed a better way so I started listening to podcasts and reading books.  This was much more effective, but still I couldn't be sure if I was talking to operators who were great marketers/podcasters or if they were great operators - some were both and some were neither.  My results with this approach was much improved but I was still not confident I was finding amazing operators.  Then I changed my approach again - now I only invest with new operators who are introduced to me by someone I know, like and trust from my Community who has already invested with the operator.  I still do all the same due diligence, but trust transfers - so I am starting from a much better place.

This is one of the many reasons, I believe the most important thing you can do to become a better syndication investor is to join a Community. If you walk out your front door and talk finance to your friends and neighbors, they will talk 401k, IRA, mortgage rates and the stock market. If you mention real estate or alternative assets they will think it's risky and if you mention syndications they will go mow their lawn. That is why it is important to find like-minded people who are looking into investing in the same type of assets you are. This is why we all joined BP and why many of us also join Communities that focus on the niche we are most interested in. For me, that is creating financial freedom through investing mostly in real estate syndications. The specialized Communities I participate in have been a huge benefit to me and have made me a much better investor in a much quicker way than I could have done on my own.

@Trevor Oldham I may be biased as a numbers guy but I would ask about their underwriting inputs to understand how they arrived at their estimated investment returns. 

What is the cap rate you used for the purchase price? 

What is the exit cape rate you used in your underwriting? (Red flag if they assume the cap rate will decrease)

What is the LTV % of the mortgage? (Red flag if they are assume unrealistically high leverage)

What is the mortgage rate?

What % of the revenue did you use for expenses? (For conservative underwriting this should be no less than 50%)

Hope this helps!

First step is to vet the sponsor first, evaluate the deal second. For example, new sponsors doing their first deal - that's a no for me.

Googling real estate syndication red flags can turn up quite a few good options for you, I'd recommend digging in that way. Unfortunately there isn't just 1 answer to the question of finding a good deal to invest in, there's a lot to look for.

Lol yup, Grant Cardone. What a joker that guys is. I was recently watching a court proceeding where attorneys were presenting evidence against him. He might be able to evade charges of defrauding his investors, but he can't escape how poor his capital investments were. They laid out a few deals where he paid significantly over value for different properties and lost money. This was at a time that virtually any purchase (2018-2019) was going to make money. 

Out of curiosity how much did you pay for his conference, and did you purchase any additional training?

And thanks for sharing this. No shame whatsoever... this guy is a really good scammer, gets a lot of people.