If you are a passive investor with no time to actively manage your real estate investments, then investing with a multifamily syndication is one of the best options you have. They can help you land the best deals and provide you with decent returns on investment. But, working with a syndicator who can take your investment’s best interests to heart, is a process.
You must vet a syndicator and lead sponsor prospects based on some pertinent grounds. If you are wondering what questions to ask multifamily real estate syndicators to find the one who is suitable, look no further.
You will find some guidance in the following sections.
5 Top Questions to Ask Multifamily Real Estate Syndicators
What is the syndicator’s investment approach?
Some chase the high returns, while some thrive on low risk. It is always best to work with a syndicator who addresses the risk involved with a deal the same way as you do.
It is also important to discuss how the syndicator chooses the right market for investment. Strong employment growth, population growth, and rental growth are a few common aspects preferred by every investor and syndicator.
If you wish for better control over your tenancy then a syndicator who knows the markets with strong landlord’s eviction and rent control privileges. Rent control privileges and value-added deals go hand-in-hand.
You can renovate and improve on the property and charge higher rent, with a value-added deal. In a turnkey deal, renovating the property exterior or unit interiors does not allow you to charge higher rents.
Additional Read: You Asked We Answered! Multifamily Investing FAQs
What does the syndicator’s track record say?
Find out which syndicator prospects have a good operational team that backs their track record. Some syndicators assemble an enterprise, complete with a CPA, a lawyer, a real estate broker, and a lender.
Others, contact these agents on a requirement-basis depending on price, availability, and expertise. To further vet the syndicator’s service you must ask to check their credentials, past syndications, business growth.
Vetting the team for their credentials can help you assess the best representative to syndicate on your behalf. Find out how many deals they are sponsoring at present as well as deals they have closed in the past.
The track record should further give you a broad idea about what type of assets they usually offer in the market. You should seek authentic testimonies from other investors on their client list as well.
A genuine syndication company should have no problem furnishing such information.
How to evaluate a lead sponsor’s success rate?
Past performance is not a surefire indicator of how much the syndicator can get you in returns in future. It is a good indicator indeed, however, that they have helped their clients make sound returns in the past and that they have sufficient experience to manage the properties.
Legitimately good syndicators shall never shy away from demonstrating the best of their work. Ask them if they can show you records for their past projections versus actuals.
If the syndicator can offer a good explanation to the loss despite risk evaluation, then it can show how well they can help you recover from sour deals and losses. If they routinely underperform in comparison to their actual targets, then you should consider other options.
How many deals are they currently sponsoring?
How to evaluate a lead sponsor on their diligence? Find out how many deals they are currently sponsoring and if they have the bandwidth to sponsor deals for you.
The ‘right’ syndicator will share your vision and help identify the best deals that can help generate the best ROI based on your financial goals and periods.
If the syndicator is not sponsoring any other investments, it can indicate a lack of clientele due to poor service quality. If the syndicator has a busy deal sponsoring schedule but can still find time for your investments, they are worth hiring.
Testimonies from other clients should offer insight into the syndicator’s diligence to each client, even in a busy market.
How do they scrutinize and sanction a deal?
A syndicator who knows their vocation always formulate a personal investment philosophy. How well they can assess and investigate returns and investment risks involved, respectively, with an asset, is a primary indicator of their ability. They must be able to explain their motivations for choosing a deal.
If you have opted for a syndicator already for a deal, go through the Private Placement Memorandum (PPM) they prepared and their past PPM draft for similar assets. It should help you gauge how much they have improved.
You should also investigate their strategy, so your money is not held up in investments that do not appreciate as fast as you want.
Well-charted investment criteria can help you hunt the right syndication talent for your property investments. If you want a bang for your buck service, you must roll up your sleeves and do the hard research yourself, so you’re more confident in your investments.