Thread on real estate syndicators.

In the beginning, most real estate investors opt to purchase a single-family dwelling.

Those with a little bit more risk tolerance purchase dwellings that are in desperate need of work (rehab deals).

If I was starting out again (continued)...

...I would skip the single-family game altogether.

I'm not saying this strategy doesn't work (of course it does & I use it too), but larger deals have the economy of scale, superior advantages & efficiency needed to succeed.

Therefore, even if I was only a small investor...

...I would still partner up with a syndicator to get a slice of a pie in larger projects.

While I'm not going to jump into various strategies, locations, etc you can expose your capital towards — the key question is how do you know who will be a reliable fiduciary of capital?

When we are investing capital — irrespective of whether its an equity or a debt deal — the starting point of due diligence and the number one aspect carrying "key importance" is the syndicator / sponsor.

Let me give you a metaphor given to me back in the day.

If you are going to climb a mountain you will need training, experience, preparation, mental fortitude, capital, equipment, experienced team members, and so forth.

Quite similar to business, right?

But I think what will separate one climbing team from another is their Sherpa.

Sherpa is "a member of a Himalayan people renowned for their skill in mountaineering."

With a great sherpa, the climb will go smooth 9 times out of 10 & when it doesn't — a great sherpa will bail you out of trouble when the going gets tough.

This is essentially your partner!

Sherpa is your sponsor / syndicator. Here are some points to remember:

• make sure your syndicator has plenty of experience and a pristine track record over multiple real estate cycles

• if they started after 2010, don't mistake brains for a bull market (they could be lucky)

• make sure you are familiar & comfortable with the strategy the syndicator is running (value add multi-family, prime location developments, etc)

• visit your syndicator in person, walk his past projects, discuss all the current projects s/he has running right now

• talk to the syndicator about equity commitments for every deal they have exposure towards & how many projects they are running simultaneously

• make sure you include questions about their balance sheet to see if they have stretched themselves too thin or over-leveraged

• understand who the key people in the syndicator's team are & what are their strengths

(e.g. development we did in London had a director of construction who can easily complete a task since he has 3 decades of experience with Land Lease building complex infructure projects)

• syndicators who are too eager to grow will sell off their common equity to other investors in the form of pref equity or mezzanine debt so they can recycle their original equity to start another project

(e.g. be careful of syndicators who bite more than they can chew)

• understand the terms & conditions of the deal and use common sense — or just ask directly — to see what the alignment of interest is?

• attempt to gauge skin in the game by syndicator and when will they get paid, what will they get paid & compare it to what you'll get paid

• don't work with syndicators which, at the very minimum, won't invest at least 5-10% equity in their own deals & won't offer you a fair profit split

• at the same time, do not push the syndicator too far negotiating because they won't have the incentive to care about the deal

In summary, taking your time to find a great Sherpa (syndicator) will help you climb that mountain during your whole investment career.

Once you establish a solid relationship with a syndicator, it is a matter of letting that trust work as you accomplish project after project.