February 15, 2022
With options, come decisions! The Marketplace gives you plenty to choose from so how do you even choose? Often investors approach deals based on lofty projected returns when instead they should be looking for the right type of sponsors to invest with.
Great Sponsors are constantly learning and networking. They attend conferences to learn more about the changing dynamics of the industry.
As Mark Cuban famously said “Sweat equity is the most valuable equity there is. Know your business and industry better than anyone else in the world. Love what you do or don’t do it.”
They are passionate and knowledgeable about the industry. They will be just as passionate to treat your money as their own and deliver on their word.
As Mark Cuban famously said, know your industry better than anyone or you’ll be eliminated from the competition.
More units do not equal better returns if the property is mismanaged. Consider this: what if more than half the units are unoccupied or occupied by delinquent tenants.
There are several variables to consider so we cannot just look at the number of units alone. Deals should be assessed holistically based on the syndication team and strategy.
New syndicators may charge fewer fees to build their reputation, credibility and cast a wider net of investors. More skin in the game
Syndicators make money from fees and profit split. By charging fewer fees upfront, syndicators are incentivized to ensure that the deal’s performance and exit strategy meet and preferably exceed projected returns.
More to lose
If the deal does not perform well, they are essentially out of the game. Reputation and credibility are solely based on the first few deals.
More time on each asset
With fewer deals in their portfolio, syndicators can be more hands-on with operations instead of delegating tasks as they are still learning.
They work harder
They will work harder to treat your money as their own. They are essentially contributing sweat equity to gain their investor’s trust so that they reinvest in future deals.
New syndicators have more to prove to their team, investors, and themselves.
In-person interactions are more meaningful than virtual meetings. If you are able to, connect with syndicators in your local area by grabbing coffee with them. Learn about their background, experience, and who they are!
Real estate is a very relationship-driven business so you want to ensure that it’s a mutual fit. First impressions are important to determine if both parties have similar goals and investment strategies.
You don’t always need to be a Limited Partner in all of their deals. If you are exploring different markets, you can use it as an opportunity to learn about the type of deals that are happening in that specific market.
In fact, if you are a co-sponsor, you can use the Marketplace to find other operators or boots on the ground. It is a networking platform for both sponsors and investors!
You can view syndicator’s scorecards to see which type of asset they specialize in (e.g. multifamily, self-storage, mobile home parks, etc). Each asset type is widely different so you want to ensure that the syndicator you are connecting with can provide you with value and insight.