Syndication: Is It Even Worth The Trouble?

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Most of you know by now that I’ve dedicated myself to learning the art of syndication.

I’ve also committed myself to writing about it so that you don’t have to re-invent the wheel.

The forthcoming is another installment of Ben is just a dumb landlord, but he is learning…

There are many “problem” areas as part of syndicating a deal.  Today I want to address 2 of the difficulties that need to be negotiated as part of a successful syndication.  And, at the end, I feel compelled to attach a short life lesson.

Let’s Talk About Money

Relative to all things money, the process of syndication is fraught with difficulties.  First thing is first:

Syndicating costs money – a lot of money.  While I don’t mean to get into legal entity structures and how things work at this time, let me just say that the sponsor (that’s me) could be needing to drop $50,000 – $120,000 out of pocket just to get the ball rolling!

Anyone having a heart attack yet?  I did. There I was thinking – no problem, I’ll just have the investors pay for everything.  And you know, I wasn’t wrong – all of these up-front costs are reimbursable by the investor capital that comes in.

But, and it’s a big but, the investor equity won’t come in until legal entities are set up, subject is identified and vetted, due diligence is completed, institutional financing is arranged, etc – these things cost money; tens of thousands of dollars.

The SEC attorneys alone run no less than $10,000, and then there are inspectors of all stripes, CPA, a bank loan application which can be as much as $10,000 for MBS loans, etc., etc., etc.

Do I Have Capacity to Write $100,000 Worth of Check?

Not exactly…But, I am the king of creative finance.  Stay tuned to find out how I roll!

Who Gets the Bank Loan?

That, my friends, would be me again.  Why – because none of the investors would ever think of personally signing on the note.  Understand – when people put money into a syndicate, they are aware that they can loose all of it.  They feel that this should be enough – and it is.  To ask them to personally sign onto the note is impossibility.

No problem – I can get a totally non-recourse loan (when hell freezes over, that is).  So, most that I can hope for is that the note is recourse to the general partner (that’s me), but non-recourse to the limited partners.  Sure, this is easy enough.  I am going to hold my head high and walk into the banker’s office and throw down my expansive (and fully financed) balance sheet on his desk to collateralize that $5,000,000 note.  Consider it done…

If I can’t line this up, there is no deal.  Sure, I could do smaller deals for all cash, but this prohibitively drives down the IRR.  I need to get the banker to say yes…

Syndication is Hard

It’s not impossible, but it is certainly difficult.  I fully realize by now that success requires total commitment to the cause, action outside of the comfort zone, and pure and simple guts and time!

As you can imagine, I have doubts.  For a guy who has been living on his terms for several years now, without traditional employment, the proposition of willingly putting myself through this “meat-grinder” is enough to ask – what the hell am I doing to my life…?

Indeed, I have to admit that even though I’ve committed to syndicating, I have been questioning my commitment.  I am so comfortable; is it really necessary to do this?  And then there is pure and simple FEAR of messing up…

Providence Speaks Through my Patrisha

On Valentine’s Day my wife took kids from The Music Factory (the music school that I set up and she now runs) to a local retirement community as part of our community outreach program – we do that a lot throughout the school year.  Since my daughter was to sing in the show, I came along.

The performance was great indeed.  The kids did an excellent job.  Patrisha, whose talents are seemingly endless, sang a few songs, and then it happened…

She takes the microphone and says – “and this song I’d like to dedicate to my family…”

She went on to sing the most beautiful rendition of Fleetwood Mac’s Songbird.  I couldn’t take my eyes off of her…I cried!

The show was over.  I went to get the van in the parking lot.  I climbed into the driver’s seat, put the key into the ignition, and then and there I knew why I was going to step as far out of my comfort zone as necessary in order to find success in syndication.

My Family! 

I don’t know how to explain this in a way that will make you believe, but I really don’t care about the money.  Performing at the top of my capacity and providing for my family define my actions.

I don’t know about you, but I work best when success is not simply one of the options, but is the only available option.  My wife knows this about me, and she skillfully, artfully, and lovingly creates an environment in which I can shine as a man and as a real estate entrepreneur.  Patrisha – thank you baby!

Question – Does your spouse bring out the best in you that you can be?

About Author

Ben Leybovich

Ben Leybovich has been investing in multifamily real estate since 2006. His area of expertise is creative finance. Ben works extensively with private as well as institutional financing. Ben the author of the Cash Flow Freedom University and creator of a cash flow analysis software CFFU Cash Flow Analyzer.


  1. Hey Ben, have you looked into the HUD 223 loans for multi family? Or is that the type of loan you are talking about? What kind of down payment do you need for a $5,000,000 note and have you had any luck finding any purchase candidates? Good luck!

    • HUD has several programs that I am considering. However, as someone I trust entirely put it: thought of government involvement makes my head spin…

      Here’s the deal with FHA – when was the last time they changed regs; was it 1 month ago; was it 3 months ago? It is difficult to plan exit strategy with gov-nt in the formula. But, I am considering them, though there are some very significant disadvantages even as those are written.

      You guys will be the first to know when I decide!

      Thanks so much Mark!

  2. Hmmm, the other syndication bloggers make it seem so simple….

    Really refreshing to get an inside look at what transitioning into something like this is really like, and what it entails. I can’t wait to see “how you roll” haha!

    Your wife seems pretty special. To answer your question, yes, my hubby is beyond supportive. Not sure how it would work any other way. Hang in there, Ben!

    • Hey Sharon!

      Simple comes after the systems are perfected. I plan on doing 10 of these over the next 10 years, so I am taking the time to understand what’s involved intimately now. Lots of moving parts. I don’t just want a loan. I want a lender who gets me!

      Thanks for reading Sharon!

  3. Hello to all the BP’ers!

    Please don’t get the wrong idea about my commenting on this article. I have absolutely no intention of becoming a regular voice on BP as I prefer to operate behind the scenes in terms of my husbands activities. I do, however, want to accomplish two things:

    1) My husband deserves public acknowledgment for the respect and tributes he pays me.
    2) I felt one aspect of his article required reinforcement.

    In his closing, he stated the following: “she skillfully, artfully, and lovingly creates an environment in which I can shine as a man and as a real estate entrepreneur.” This is in reference to the idea that success is not an option for him because of the duty he feels toward his family. It is the element of the environment that we create together which ensures that we will maneuver whatever is thrown at us as a team. Successes and failures treated as equal. I am adamant he knows this every day, which is way he is able to act under pressure. Blame isn’t permitted in our home under any circumstance, nor is inaction regardless of reason. For all the credit he gives me, the truth is that we have the capacity to bring the best or the worst out of each other. It’s a daily choice to focus on the best which makes his environment for success possible. Your doing great things, Ben! I’m infinitely proud of you and the man you choose to be.

  4. Ben,

    I’m learning more about you all the time. Until today, I never thought you had a comfort zone .. . I just figured you to be like Great Uncle Oleg – save you probably smile from time to time – stern, ambitious, a little ruffled, with sense of humour on the dark side.

    Then, on top of that, you seem to have a sentimental side ?…?

    Are you sure this syndication thing is meant for you 😉

    • Hahaha Roy – you are surprised to find out that I am human?! That I feel?

      This is what makes me great at what I do. I look at all sides. I consider the downside very seriously. And yes, I do have a conscience about all things that I am involved with.

      A while back my good friend Brandon Turner wrote an article proclaiming that the most important trait of a real estate investor is to be teachable. I respectfully disagreed with Brandon in a follow-up post. Lot’s of people can learn, but only a few will ever put the car in first gear and hit gas. I absolutely have done that at every step of my journey thus far, and see no reason to change!

      As to the question of whether syndication is right for me, I’ll say this:

      An awful many people, all of whom understand RE intimately, and some who are absolute masters of the sport, seem to think that I will succeed. Furthermore, many of these people appear willing to back their thoughts with their wallets, and in some cases even their reputation!

      Yes – I feel the gravitas of the situation. Absolutely, I do, and this is what you are sensing in my posts. I have a conscience, and I plan to use it. RE is not about money…!!!

      Does this begin to answer the real question you didn’t ask 🙂

      • Yes, those are fine answers Ben.

        I’m not surprised your human …. like Great Uncle Oleg, I suspect your more of a teddy bear wrapped in sand paper.

        If I were not in the midst of swallowing my own elephant, I’d would probably sign-on to your maiden voyage, but I’ll have to settle for a subsequent voyage.

        However, I will still virtually poke once in a while just to reassure your still whole and healthy.

  5. Great article! Having a supportive spouse can make the difference between a successful career in REI or no career in REI. You are very fortunate! Just remember one thing, when she says “don’t do this one”, don’t take it as being unsupportive, even if you are totally in love with the deal, it might just be the advice that saves you from a big mistake. Ask me how I know this…

    • Absolutely Brian!

      Mistakes are a necessary part of success – early on in the career when one has lots of time to fix things and not much to loose. I can not afford mistakes now. I have to do things right. I have worked very hard for everything I have. My life does not belong to me any more – it belongs to my children and my wife. I always and without exception listen to my wife; there is a lot to be said about woman’s intuition…She knows my limits better than I do. Right now, though, she is completely behind and very excited about what I am doing, how, and with whom!

      Stepping stones and stumbling blocks look a lot alike from a distance. Knowing the difference is a matter of perspective. If I feel lack of perspective due to lack of experience – I ask for help!

      Thank you indeed for reading Brian!

  6. Ben,

    This was one of the most awesome articles that you have written. Not just because you continually expand your horizons in investing, not because you put the welfare of your family first, but because you do both so well. I think this article brought a tear to my eye when I read it a few days ago. Ben, you are just the man for standing up and making the life that you desire for your family. I am sure it is not all sunshine and rainbows, but I guarantee that the Leybovich household is a mighty happy one.

    Yes, my wife does bring out the very best in me. I often find notes of inspiration, praise and gratitude among my personal effects or in my car. There can be no better motivation than the love of a good woman and your children.

    Thank you for writing this article Ben.


    • Thank you so much Doug!

      Yes – we are a tight family indeed. The point that I try to get across is that Patrisha truly is the “glue” that makes everything stick together. I would be totally lost if it weren’t for my wife – flat out! We are a team…though, as you said, it’s definitely not all sunshine.

      Sounds like you are lucky in this way as well! It is amazing when you think that truly the right person is one in a million. We just got lucky – I’ll take it. In REI and Love better lucky than good 🙂

      Thanks so much for reading my thoughts Doug!

  7. David Wright

    Ben, are you still in the syndication business? The last post from you was in this Feb 2014 timeframe, from what I can see. I’m interested in learning how to syndicate, as well, but if you’ve learned the hard way why not to syndicate, I’d love to learn that from you early on 🙂 If you’re still on this path, how many deals have you closed and how many have you exited (assuming no exits yet, as I’m guessing this first deal in 2014 isn’t plan to exit until 2019 or later)?

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