Well – I guess it’s no big secret that I am working on my first syndicate.
I don’t think that I couldn’t have been more transparent about this fact if I got on top of the roof of my house and put the loudspeaker to my lips.
What can I say – I am excited indeed!
I am in the opening minutes of the first quarter of this game, having made my final decision to pursue syndication just a few days ago. This decision was not an easy one and required some soul. But, as of this writing I am all in – as they say.
I have decided to chronicle my experiences on this journey, and considering my love affair with the written word I think it’s not unreasonable to assume that my thoughts will eventually find their way into a book. For now, I am one of the lucky few who get the opportunity to share knowledge as it becomes available to them on a platform as magnificent as the one we lovingly call the BP Nation.
Don’t worry, not every article over the next year will be concerning syndication; I am sure that I’ll run into things on the forums that will be appropriate to address.
I mentioned above that I’ve just recently and upon doing a lot of should searching have committed myself to the syndication game – the operative words being soul searching. I’d like to let you in on some realities that exist in this world of which I did not realize and you likely do not either:
Syndicating, at its’ core, is doing the same thing that I’ve always done, but on a bigger scale; simply pulling more money together to buy bigger properties. But, the fact of how BIG it is tends to give me a moment of pause…
Think this through with me. I am looking at a $4,000,000 building. A 25% down-payment would mean that I have to raise $1,000,000. Additionally, there are closing fees, pre-pays, in-pounds, deposits, acquisition fees, due-diligence, legal, and more – all of this can easily add up to 4% – 8% of the purchase price; let’s say $250,000.
Finally, there’s the rehab costs and even if all this pig needs is some lipstick, we can run through $250,000 in a blink of an eye. This means that in addition to the 25% down-payment of $1,000,000, I have to raise an additional $500,000 to be able to close on the building.
Where’s this money coming from – people; it’s coming from people who, having evaluated the deal are choosing to bet that I will manage it to a successful conclusion. WOW – can you say RESPONSIBILITY?
Let’s say someone is an accredited investor with Net Worth of $2,000,000 and they choose to come into the syndicate at $100,000 – do you see how through this syndicate I am controlling 5% of their wealth? What if they come in at $200,000; what if their Net Worth is 1.3 million?
The deal may make all of the sense in the world, and this may in-fact be a wise decision for them, but are you able to ponder the responsibility this puts on me as the guy at the helm? May be you are not, but I feel the gravitas of this situation indeed!
This is one reason I felt that I needed to take some time to think this through. Here comes the other:
The Warren Buffett Way
While to a lot of us small guys on BP Cash Flow is everything, this is not necessarily the case for the people who have the means of investing in a syndicate. They already have money, which in most cases means that they have very high-paying jobs.
With high income, as you know, come high taxes, and for a lot of these folks Cash Flow would simply mean a higher tax bill.
No, what they want is to grow their wealth exponentially by way of organic inflation and forced appreciation of property.
They want to roll the profits from one deal to the next, to the next…this is what I am being asked to do as a syndicator – to be the guy who gets paid in Cash Flow and Equity for running the operation which makes big wealth for investors by continually acquiring assets, managing assets, selling assets, and rolling the dough into more assets; and in order for the program to work I would have to commit to it for the foreseeable future…
There is a Potential Problem With That
If I agree to this, then what I am agreeing to is a JOB – no ifs, whats, or buts! Crap – I spent a decade practicing techniques that would allow me to get out of having to have a job. I did pretty well considering I haven’t had a traditional job in a couple of years.
Do I now trade the freedom I have found for a job?
This was the other reason I needed to take time to think.
As you by now realize, having thought things through I did indeed make the decision to commit myself to a career of a syndicator. I am learning at a rate that I didn’t think was possible at my ripe-old age of 39, and I will continue to share my thoughts with you for as long as you’ll have me.
I hope that there is some value that you can derive out of the present discussion. I know – this one is a bit on the liberal arts side of things, but I feel it is important. Besides, I don’t have too much time to think of things to write, and as such you will have to just get used to reading my diary. This week it is indeed liberal arts 🙂
Photo Credit: Jon_Tucker