We were recently asked: “Some LinkedIn posts suggest that 70% of syndicators have less than 3 years’ experience; is this true? “
I haven’t analyzed the data, but it wouldn’t surprise me if this is correct. There are MANY real estate trainers teaching an army of people how to syndicate; mostly multi-family. We do have a lot of first-time syndication clients, most of whom raise money from their own family and friends for their first few years, or who team with other experienced syndicators if the deal will be advertised. All of them, even the trainers, had to start somewhere.
Our advice to clients is that they shouldn’t try to advertise for investors or start a fund that will acquire multiple properties until they have 5-6 deals under their belts with family, friends and acquaintances, which could take them several years to achieve.
Before investing in a syndicate, it’s always good practice to ask the syndicator how many deals they’ve done and to closely examine the experience of their team — making sure that those with the experience are meaningfully participating in the deal.
If you are a new syndicator, it’s always good practice to get someone with previous experience on your team, or hire a coach, who will help you avoid $100k mistakes with other people’s money. Alternatively, you can seek to join an experienced syndicator’s team by providing something they need, whether it’s deal-finding, underwriting skills, property management skills, bookkeeping, graphic design, or capital raising.
Your family, friends and acquaintances will invest with you while you build your own track record, so ALL of our clients who go it alone, start with Rule 506(b) offerings that allow them to include up to 35 non-accredited, but sophisticated investors.
If you advertise for investors, the first question you’ll have to answer is, “How many properties like this have you syndicated before?”
Joint ventures or single-family flips with private lender money don’t count as syndication experience. If you don’t have the experience, you’ll need to talk about the experience of the team — and they had better have some, or the people you meet via advertising will likely pass on your deal.
