Vetting a Syndicator: Prior Experience

Investing in syndication projects can be a lucrative venture, but you have to choose the right sponsor or operator to ensure the success of your investment. To make these types of investments work, you have to find a syndicator that is the right fit. Some key factors to consider when vetting syndicators are experience, high-quality references, a proven track record, and consistency in the asset class. By evaluating potential candidates based on these factors, investors can mitigate risks and make informed decisions to maximize their investment potential.

When assessing a syndicator, it is essential to evaluate their prior experience in similar projects. This experience serves as an indicator of their expertise and ability to navigate the complexities of real estate investments. By reviewing their track record and assessing previous deals, investors can gain insight into the syndicator’s operational competence.

One effective method of verifying a syndicator’s capabilities is by requesting references from previous projects. These references should ideally be individuals who have collaborated with the syndicator or other limited partners (LPs) in the past. Engage in personal conversations with these references to learn about the syndicator’s communication skills, problem-solving abilities, and how they handle unforeseen challenges. This step allows potential investors to gauge the syndicator’s reliability and adaptability.

The right candidate should have a consistent focus on the asset class they intend to invest in. While an operator may excel in operating multifamily projects, it does not guarantee proficiency in managing other asset classes like RV parks or self-storage facilities. To minimize risks, investors should seek syndicators who have a proven track record in their chosen asset class.

Investing in syndication projects involves evaluating not only the asset class but also the specific investment strategy employed by the syndicator. For instance, if a syndicator has experience in multifamily projects but not specifically in value-add multifamily, their ability to execute the chosen strategy may be questionable. Opting for an operator who consistently implements the same strategy within their chosen asset class increases the likelihood of success.

Investors should be aware of any changes in the syndicator’s team composition compared to their previous projects. While it is common for general partners (GPs) to partner with local operators for asset management in different locations, these new variables should be considered. Although involving local forces can be advantageous, investors should be informed about any new partnerships and evaluate the impact they may have on the project’s overall execution.

When venturing into syndication investments, you have to prioritize the vetting process to avoid unnecessary risks. By thoroughly evaluating a syndicator’s prior experience, seeking references, and ensuring consistency in asset classes, investors can make informed decisions and maximize their chances of success. Remember, simplicity is key, especially for those starting out in this investment realm. By paying attention on the front end, investors can build a strong foundation for their syndication investment journey while minimizing potential pitfalls.

To finding the perfect match!

Paul David Thompson