I recently read “Syndication is a B*tch – And Other Truths You Haven’t Been Told” by Bruce Peterson and it is a game changer. For anyone who wants to someday syndicate multi-family deals, this is a must read. Whereas other books and resources speak primarily about how the process of syndication and the the wealth that syndicators can create, Bruce talks about the ugly side in hopes to convince others to take it seriously and decide seriously whether syndication is for them.
Below I share three reasons from the book that becoming an apartment syndicator is not for everyone. But read all the way through. Just because you may not be the right fit for syndicating, that does not mean you cannot invest passively in apartments. Check it out.
Time and Effort
Apartment syndication is a business, and just as with any entrepreneurial effort, it takes time, focus and attention. Syndicators put in consistent effort to develop industry relationships, line up potential investors, find deals, secure financing, and manage the asset. This is no half-hearted approach. Furthermore, understanding and abiding by the rules and regulations pertaining to apartment syndications is an essential ingredient. Syndicators do not just wake up one day and decide to create a real estate business. They likely evolved from other entrepreneurial ventures, lower stake real estate business models, or executive leadership roles at corporations. Such experience prepared the best ones for what they do today.
Risk Aversion
In an early post, Two Approaches to Real Estate Investing, I share about the transition from the individual mindset to the team player mindset. Such a shift allows for great benefits such as scale and synergies that allow for bigger investing, bigger cash flow and quicker wealth creation. However, when you start investing on this level, there are certainly more responsibilities than you would have as an individual, traditional investor. Having the stomach to manage such responsibility is critical. Residents depend on syndicators; investors depend on the same. Syndicators must continually be at the top of their game, use their network and operate under the pressure. Great syndicators have experience under their belts, and while each deal could be different, this experience is what prepares them for the next unknown.
How Anyone Can Invest In Apartments
Even if syndication is not right for you, or you are a working professional with the honest admission that you do not have the time to make the effort or the stomach to shoulder the responsibility and risk, that is perfectly fine and even expected. You can invest as passive investor with an experienced syndicator.
Being a passive investor allows for you to gain benefits of scale, diversification, tax benefits, cash flow and appreciation, while not being the sponsor in the deal and being able to do what you do best each day with your professional job. At the bottom of this page, I share some helpful resources, including our free Passive Investor Startup Guide that can help anyone learn more about taking their first steps as a passive investor.
Regardless of whether you syndicate or not, starting as a passive investor allows you to learn from the best (read about how to find a great sponsor) during your time as a limited partner so that you can someday use that knowledge to take down your own deals.
