Syndication Lessons Learned From a 155-Unit Deal

Syndication Lessons Learned From a 155-Unit Deal

Case studies can be valuable teaching tools. They often show us effective strategies and help us avoid common pitfalls.

The instructive case study for real estate pros below is about a syndication deal for a multifamily complex in Texas with 155 units. We won’t name the active investor here, though, and we’ll use the pronoun “they” to refer to this person.

This deal was the investor’s third. In general, when you do something complicated for the third time, you can apply the lessons you picked up the first two times. However, you still have crucial new lessons ahead of you. Those ideas held true in this case.

Specifically, here are three syndication lessons this person has learned on the journey from the novice investor to seasoned dealmaker.

 

1. Play to Your Strengths

Of course, the most useful syndication lessons often come from our mistakes. After we do something ineffectively, we might understand the right way of doing it.

One of the biggest mistakes that this investor ever made was on their first deal. In this instance, this person handled the entire project on their own. They discovered the property, conducted all of the research and due diligence duties, found the financing, underwrote the deal, and closed it, among other tasks.

However, no professional can master every element of a given field. Thus, you should work on the tasks for which you have a natural talent. For the rest, recruit experts.

In this case, the investor grasped the basics of underwriting but was by no means adept at it. They just didn’t have the hundreds of hours of experience that underwriting proficiency demands. Therefore, this part of the project was not as precise as it might have been.

In essence, a real estate team needs at least three experts to thrive. One is an acquisitions manager, someone with a mathematical aptitude and sharp underwriting skills.

Then there’s the money-raiser. This person should be a whiz at networking and pitching investment ideas. Third, the asset manager must have strong abilities in terms of managing people and properties.

Even if you have incredible skills in all three of those departments — and few people do — it would still be unwise to assume all three roles. There are only so many hours in the day, and each component of a deal requires extensive time and effort. Plus, these projects are more fun if you focus on the aspects you enjoy the most.

Ideally, you’d also team up with a business partner, someone whose management talents are different from yours. That way, your company would benefit from balanced, well-rounded leadership.

In short, whenever team members can concentrate on their strengths, the entire group is poised to reach its full potential.

 

2. Be Consistent with Large Distribution Channels

Basically, real estate is all about sales, which means it’s all about marketing. And these days, marketing success requires engaging with people on a regular basis — usually a daily basis.

By doing so, you’ll gain the exposure you need to attract investors and buyers. Plus, you can establish your credibility and gain a key competitive edge in the marketplace.

To do so, target a particular group of people. For example, wholesalers should connect with buy-and-hold investors as well as fix-and-flippers. Rental investors must reach tenants. Sellers should target buyers and vice versa. You get the idea.

Thanks to large distribution channels like YouTube and the industry website BiggerPockets, it’s easy to start your own thought leadership platform nowadays. And, if you place keywords strategically and use other search traffic strategies, the right audience can find you.

Additionally, iTunes is a great home for podcasts, and Amazon is perfect for self-published books. Obviously, you can also reach large numbers of people on Facebook, Instagram, and Twitter. Keep your social media followers engaged with useful tips and appealing photos.

At the same time, don’t expect online success to come overnight. Rather, when you launch such a platform, do so with a multi-year plan in mind. Then commit to this venture, and aim to post winning content once a day, if not multiple times per day. Being consistent will pay dividends. It builds audience trust, loyalty, and interest.

Momentum can take time, but when it finally gets going, it can translate into major increases in conversions. In fact, the active investor in this story has discovered this phenomenon for themselves.

 

3. Raise Money through Recorded Conference Calls

During their first two deals, our investor conducted conference calls with potential investors but did not record them. Instead, they just assumed that serious investors would attend those calls and then finance the deal. As a result, there would be enough cash to close right away.

Unfortunately, that strategy failed. Investors tend to have really busy schedules, and they obviously can’t attend every conference call.

However, you could record your conference calls and send them to all the investors who’ve demonstrated at least some interest in your project. Our investor relied on this plan for the 155-unit multifamily property, and it worked out well.

When you record and send your conference calls, people can watch them whenever they have time. Then, when they do so, they’ll soak in new information, and they’ll get a true sense of your purpose and passion.

Additionally, your viewers can watch your question-and-answer sessions and glean important insights. After all, there’s no way that your investment summary could address every question that potential investors have. On top of that, with recorded calls, people can skip over the questions that don’t pertain to them, saving them time.

For all of these reasons, recorded conference calls are uniquely persuasive and potent marketing tools.

 

Final Thoughts

In the end, experience may indeed be the best teacher. It’s certainly been instructive for the active investor in this story, someone who’s learned indispensable syndication lessons through trial and error. And, if you follow these pieces of advice yourself, you could profit from this person’s experience as well as your own.

 

Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.

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Joe Fairless