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Multifamily syndicators make the lives of investors easier by leveraging their expertise, experience, and network to successfully acquire, manage, and operate multifamily real estate properties. We’ve spoken to many potential investors who think that they can simply acquire real estate themselves, bypass the fees that firms charge, and manage/control a property themselves. The truth is that those individuals can do just that, purchase real estate themselves. However, what is the value of peace of mind? This is where the syndicator steps in. Keeping this is mind, I’ll explain how it is that syndicators provide value to investors.
1. Deal Sourcing, Due Diligence, and access to deals: Syndicators use their industry knowledge and network to identify potential investment opportunities that align with the investment criteria of their investors. They conduct due diligence, assessing factors such as location, market trends, property condition, financials, and potential for value-add opportunities. More so, many quality multifamily investment opportunities are off-market or require connections to access. Syndicators often have relationships with property owners, brokers, and other industry professionals, allowing them to access deals that individual investors might not have access to. In short, syndicators have teams in which they leverage their time, experience, and money to gather resources and create connections faster. At the end of the day, syndicators are literally on the constant lookout for deals and ways they can increase the efficiency of their operations, that is their bread and butter so to speak.
2. Expertise in Underwriting, Structuring Deals, and Risk Mitigation: Syndicators are skilled in analyzing the financials of potential investments to determine their viability. They assess income potential, expenses, cash flow projections, and return on investment, helping investors make informed decisions. In addition, syndicators understand how to structure deals and are able to bake that into their models. It takes a certain degree of expertise and experience to be able to structure deals, especially when it comes to having to balance the goals of investors and themselves. Let’s also not forget that syndicators spend countless hours securing financing and negotiating purchase terms on behalf of their investors. The knowledge and competencies that operators bring to the table also reduce risk, which allows investors to worry less.
3. Property Management, Value-Add Strategies, and Active Involvement: Successful syndicators typically have a team or partners with expertise in property management. They ensure efficient day-to-day operations, tenant management, maintenance, and improvements to enhance property value and rental income. Beyond adding value from a day-to-day operations standpoint, operators tend to specifically target renovation and repositioning projects to bring properties to their max efficiency. The implementation of these strategies are a win-win scenario for investors and operators by generating value through enhanced cash flow and backend appreciation. The key thing to remember here is that syndicators are actively involved and are able to save investors time and money (in the form of their connections with vendors/suppliers).
4. From Reporting and Transparency: From day 1, syndicators maintain clear communication with investors, providing regular financial reports, updates on property performance, and insight into the overall investment strategy. At JP Acquisitions, we send out monthly investor update reports and the culmination of all of the reports allows for investors to see if we are exceeding our projections or falling behind. Independent ‘mom and pop’ operators often don’t have the time or don’t care to keep such detailed records, however, they certainly want the best return possible. It’s the detailed reporting and in-depth insights that syndicators have on their operations that sets the stage for maximized returns.
Conclusion
In return for the services that syndicators provide, they typically earn a portion of the investment’s profits or other compensation, which is often structured as a share of the property’s cash flow and/or a percentage of the property’s appreciation upon sale. The question to ask yourself is, “Are these services worth the fees that syndicators charge?” I can’t deny and say I’m not at least somewhat biased when answering that question. Considering the market is expected to grow at a 10.2% compounded annual growth rate (source), I think it’s safe to say investors don’t mind exchanging control and capital for peace of mind and maximized returns. That being said, I’ll almost always note that it’s important for investors to conduct thorough due diligence on syndicators before committing capital to ensure that they have a proven track record, aligned interests, and a solid reputation in the industry.
If you have any questions regarding the terms and concepts in this post or previous ones, don’t hesitate to reach out to either me (tedi.nati@jpacq.com) or someone on our team so we can help explain what is causing the confusion. If you’re interested in investing with us at JP Acquisitions, you can contact us via email (contact@jpacq.com), LinkedIn, Instagram, or our investor portal to set up a meeting.
As always, I hope you enjoyed reading this post as much as I have writing it. Best of luck!
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About the Author
Tedi Nati is the Managing Partner of JP Acquisitions. In his role he is responsible for broker outreach, establishing deal flow, underwriting, marketing, and assisting in the closing process. In addition to his role at JP Acquisitions, he is an Assistant Equity Underwriter at Cinnaire, a non-profit Community Development Financial Institution (CFDI). In his role at Cinnaire, he is responsible for assisting the underwriting team in evaluating and structuring real estate equity investments and assessing the risks and mitigants associated with such. Tedi earned his Bachelor of Science in Finance from DePaul University, where he graduated Summa Cum Laude. In his free time he enjoys reading, looking for multifamily deals, and working out.
Make sure to always do your own research before making any final decisions on buying/investing real estate, stocks, or other securities. I am not a CPA, attorney, insurance, or financial adviser and the information in this blog post shall not be construed as tax, legal, insurance, construction, engineering, health and safety, electrical or financial advice. If stocks or companies are mentioned, I sometimes have an ownership interest in them – DO NOT make buying or selling decisions based on my posts alone. If you need such advice, please contact a qualified CPA, attorney, insurance agent, contractor/electrician/engineer/etc. or financial adviser.
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