5 Things Every New Investor Should Do Before Investing In Their First Real Estate Syndication
Every article I read and every conversation I had built my certainty until I began to feel confident toward taking the plunge. If you’re considering your first syndication and feeling hesitant, I recommend doing your research, connecting with other investors, reading through previous deals, and taking your time.
Several years back, I figured I had real estate investment all figure out. I had done several buys and holds, a few flips, renovated a few small multifamily properties. Now it was time to up my game. I was going to buy an apartment, or so I thought. I started to search for a 16 unit with a broker, and I began to realize the risk by going it alone. My next thought was to partner with a few other investors. We would not only spread the risk around, but it would get us into a nicer asset - together, we were going to bring more capital. Then that word was presented to me - Syndication. Syndication is pooling large groups of investors to buy more substantial assets that can take advantage of economies of scale. You are significantly reducing your risk, because now you are spreading your investment across, say 200 doors, as opposed to 16. Four people leave your 200 unit, then you are 2% vacant. Four people exit your 16-unit, and you are 25% empty. My mind became clear that I was going to start investing in syndications ( click to check past syndication investments).
When you first consider real estate syndication as an investment option, it can feel lonely, intimidating, or even like you’re going in blindfolded. I experienced fears around investing in a property I’d never seen. I had concerns about how I’d get my money back, and doubt around the inability to log into an account and see my money. These fears were addressed head-on through research. Every article I read and every conversation I had built my certainty until I began to feel confident toward taking the plunge. If you’re considering your first syndication and feeling hesitant, I recommend doing your research, connecting with other investors, reading through previous deals, and taking your time.
Do Your Research
The best way to build your investing confidence is through self-education and research. Listen to podcasts, read books, and find websites on real estate.
Rich Dad, Poor Dad by Robert Kiyosaki
It’s a Whole New Business by Gene Trowbridge
Principles of Real Estate Syndication by Samuel Freshman
Best Real Estate Investing Advice Ever with Joe Fairless
The Real Wealth Show with Kathy Fettke
Relevant Facebook groups and forums like BiggerPockets can help you learn what questions you should be asking. Other people have likely asked about your same concerns. Just by reading through the forum’s questions and answers, you’ll gain clarity. Remember, there are no dumb questions and that you have the right to be diligent about gathering answers to your concerns.
Connect with Other Investors
A successful investor needs a supportive community and considering that syndication is a group investment, you’ll want to get networking. Any new investors will share similar anxieties, questions, confusion, and excitement. Experienced investors can provide invaluable firsthand accounts of their experience with various projects and sponsors. Find other investors through online forums like BiggerPockets, local networking events, or by asking sponsors if they’ll connect you to their current investors.
Review Previous Deals
Finding comfort with financial projections, summary data, and investment lingo may feel overwhelming. As you review more investment summaries, you’ll start to understand the flow of the deal packages, how each sponsor communicates, and exactly which investments interest you.
Take Your Time
Each new investment opportunity fills up quickly. It can make new investors panic and start to believe they are missing the best deals. Remember, there will always be another opportunity. Allow yourself time to complete the steps laid out here. When you make your syndication choice, you are confident about every level.
If you take nothing else from this article, remember it’s completely normal to feel skeptical, anxious, and even timid when making your first syndication commitment.
The ability to take action is what separates the successful from those who give up.
Your first real estate syndication deal is a massive milestone in your investing journey. Even though your head might be spinning now, this is a time to savor.