Real Estate Syndication Questions & Answers: Part 6

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As we prepare for our seminar program that covers the concepts of successful syndication, many people are sending in questions that they have about the topic. We are organizing them into categories and I am answering them so that everyone who is interested in learning how to make money the same way that Wall Street makes money, can begin to understand how the business works.

In the coming weeks, I will continue to answer the real estate questions that come in using our weekly column. Feel free to submit your own questions as well. To register for our upcoming live event, go to www.SyndicateFast.com. To submit a question of your own, go to www.joelblock.com/capital.

More Questions about Real Estate Syndication

1. How is it that some people perform badly but their clients continue to invest with them? Unbelievably, in the stock market, during turbulent times when things weren’t going well, even when investors were taking losses, the brokers would continue to get investment instructions from their clients, largely because they learn to be good communicators. If they called the client and they told them what was going on, the client would retain their confidence and continue moving forward. The issue of dealing with hardship is always one of communication. Be a good communicator, be honest, and people will respect the good effort that you make on their behalf.
2. How do you deal with some investors who want straight interest, while others want an equity position, or some who may want both? If you have different kinds of investors who want different kinds of returns, you can create multiple classes inside of your operating agreement. You have to know what kind of investors you have access to. If you have investors who simply want a strong rate of return and a secure interest in the property that gets paid before others get paid, then structure a deal where they provide a certain kind of loan to the deal, while the equity investors get a subordinated interest in the property. By doing that, you can accommodate many different kinds of investors.
3. Should the syndicator always be a partner in the deal? When the syndicator is an investor in the deal, it provides great confidence to the investors because you put your own money on the table. That puts you on the same side of the table as the investors. However, as a syndicator you have to ask yourself if you have enough money to put a lot into every deal. Putting a lot into every deal is contrary to the concept of leverage that the syndicator gets. Therefore the syndicator needs to take a small and properly calculated interest in each deal that he takes. And the syndicator needs to manage when the cash gets put into the deal. The syndicator does not necessarily have to write a check on day one to get into the deal. The syndicator may instead place that money into the deal over time, as his cash flow permits. There are strategies that we will discuss in the live seminar program that help the syndicator to manage this very delicate situation.
4. How do I show a private lender that his investment is going to be secure? If a private lender is sophisticated, he or she will take care of securing the real estate against the funds that he or she has provided. That’s assuming that the private lender you’re referred to is actually making a loan. In many cases, most people who want to do syndication think of people who are providing capital as lenders, but, in fact, they can be either lenders who are secured or unsecured, or they can be equity investors who participate in any number of levels in ownership of the property. As owners, these equity investors can be passive or active, and they can have large amounts of equity or small, based on the infusion of capital that they put into the deal.
5. How do you identify appropriate partners? Appropriate partners, which is different than appropriate investors, are people who have complementary interest and complementary skills to your own. If you're strong on the real estate side, then you need to pick people who are strong on the finance, the business, the operations, the management, and the maintenance sides. You need to have people around you who can make sure that you have complementary skills to one another. You need to have people who can do the tasks that you are not able to do. That is the best selection criteria for a partner.

All this material and a lot more will be addressed at our live seminar in April called “How to Raise Money for Real Estate: Harnessing the Power of Syndication.” If you are a real estate professional or someone who is involved on the capital side either as an investor or facilitator, then this incredible two-day event is for you. For more information, go to: www.syndicatefast.com.

Real Estate Syndication Tele-Seminars!

Join Joel Block and his Expert Syndication Instructors www.syndicatefast.com

About Joel G. Block

Well known in the business community, Joel Block is a best selling author, speaker, and business strategist. Frequently a principal in his transactions, Joel has raised tens of millions of equity dollars for his ventures, which have included real estate syndications and privately held businesses.

Joel’s career is highlighted by the launch of a financial publishing company which he grew nationwide and later sold to the Los Angeles Times. More recently, Joel works with scientists, engineers, technologists and others to help them optimize their entrepreneurial opportunities. Would you like to get a private phone consultation with Joel? Visit www.joelblock.com/capital for details.

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