Summary: Real talk…vetting your apartment syndicators is very important before investing in apartment syndication. This resource will give you the insider scoop of the best questions to ask potential deal sponsors – so you have alllll the info to make your decisions!
This shouldn’t come as a surprise, but the Kitti Sisters are BIG fans of investing in apartment syndication. We share all about the benefits of getting in on the apartment syndication action, because we know first-hand how life-changing that action can be. 😍😍
Aaaand, as apartment syndicators ourselves, we also have a lot to share about the other side of the curtain – the deal sponsor side. We’re in a unique position to offer insights into apartment syndication from literally every angle.
You miiiight even say we’re in the know on all the industry secrets. 🤫🤫
Now, we’re not in the business of holding back info that can help others create their dream life and find financial freedom. We’re out here trying to be as transparent as possible about what apartment syndication investing is like for anyone interested.
See, we’ve been in the real estate industry a longggg time, and know the ins and outs of investing like the back of our hands. And there’s one important thing we know for sure…
👉 The people you invest with can make or break your entire experience.
No doubt about it.
You wouldn’t want to throw your money into just any cute little deal you come across, right? Well, don’t expect to partner up with apartment syndicators without FULLY vetting them first.
So, today we’re sharing some insider tips for really getting to know your potential syndicators.
There are certain things that some syndicators would NOT want you to know before investing with them. Here are the 4 questions that will help you decide which deal sponsors are (orrr are not) the right choice for guiding you through your apartment syndication journey.
The 4 questions are ⏬
1️⃣ How much skin in the game do you really have?
Most syndicators will tell you that they have “skin in the game,” which means they have risk involved in the same deals as you. This catchy little phrase is meant to create trust with potential investors.
Butttt this phrase is also meant to sound vague, while not really communicating how much of their money is actually at stake. If the deal goes bad, it would clearly affect the investors involved.
How much would it affect the syndicators? 🤔🤔
It’s a good idea to ask what percent of the investment they are willing to put into the pot.
You can just rest easier knowing that your syndication team will do everything in their power to get positive results from the deal you’re investing in.
If they aren’t willing to tell you how much money they’re investing, that could be a red flag. If the number is very low, it may not even move the needle for the syndicator’s finances.
Now this doesn’t necessarily mean you haven’t found someone who will help your investment succeed.
But it is something to look out for in your syndicator search. You want to feel like you can totally trust your deal sponsors to get the most bang for your buck – high returns with lower risks. 👌
2️⃣ Do you have any bad deal assets under management (current or past)?
Listen, stuff happens in the world of investing. Not every single deal can be the best one ever, ya know?
There are certain risks involved with any type of investing. Even though apartment syndication offers the lowest risk possible, there are still things that can go wrong.
By directly asking your potential deal sponsors about any less-than-perfect deals they’ve navigated, you’re getting a sense for how they handle challenges that arise. Because, yes…challenges do arise when it comes to real estate.
Bringing bad deal assets to the surface is really just a first step in opening deeper lines of communication with your apartment syndicators.
An occasional bad deal does NOT mean they are bad syndicators.
But not being open and honest about their track record? Well, that’s certainly not a solid starting point for a successful working relationship.
So, when asking about any bad deals, be sure to ask some follow up questions too. Ask what the outcome of each deal was, and what actions were taken as a result of any missteps or challenges.
Their answers will paint a picture of how hard they will work to mitigate risks in your investment deals. When partnering with the right syndicators, you’re forming a trustworthy, reliable team.
Perfection isn’t the goal.
You just want to know that your teammates will have your back, communicate with you every step of the way, and do everything in their power to keep your money safe. 🤩🤩
3️⃣ Do you have an exit strategy, and what the heck is it?
Okay, if something does go wrong with your investment, there should be some sort of exit strategy already in place. Good deal sponsors will be able to lay out exactly what would happen if – well, if the worst case scenario were to happen.
You want to know your options for getting the heck out of an investment deal if needed.
Honestly, the chances of needing your exit strategy are pretty low with apartment syndication. The risks are low, as long as there’s a high demand for the basic human need of shelter.
Yup…that’s the good news. There will alllllways be a need for real estate. 😏😏
But preparation is the key to success. Having an exit strategy will not only help protect you and your money from potential risks, but it will also help you feel secure and confident in your investments. And feeling confident goes a longggg way in keeping you and your syndicators focused on the prize.
AKA…big investment returns.
Dependent on market conditions, your potential syndicators should also be able to tell you about projected hold periods, so you truly know what to expect.
We personally prefer to invest in newer asset classes, because they offer multiple exit strategies for our passive investors. Newer assets (Class A or B) come with lower risk due to things like better tenant profiles and less necessary repairs.
4️⃣ Finally…what are ALL the fees associated with my investment?
Our last question is a big one. While fees are a normal part of the apartment syndication process, you definitely don’t want to be blindsided by any hidden charges coming out of the blue.
That just feels shady.
You just want your syndicators to be clear about what types of fees are necessary for things like funding deals, raising capital, and handling property management. Not every deal is the same, so it’s not uncommon for certain fees to be involved that you might not have expected.
For example, there will already be an ownership fee, but you might see an increase based on hurdle rates or return thresholds. The good thing about the fee increase, is that it also leads to increased returns for investors.
👉 Asking questions about what the purpose of the fees are will give you clarity and confidence that it all goes into funding your future financial freedom. ✨
Because trust us…
The RIGHT deals in the hands of the RIGHT apartment syndication team will be worth eeeeevery single penny of capital you invest.
Just don’t be shy about asking hard questions. Being well-informed about your investments, and being able to completely trust your team will pay off big in the long run. 😌😌
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