Backstage Guide to Real Estate: Produce Passive Income, Write Your Own Story, and Direct Your Dollars Toward Positive Change by Picheny Matt

Author:Picheny, Matt [Picheny, Matt]
Language: eng
Format: epub
Publisher: Sloan Rose Publishing
Published: 2022-02-09T00:00:00+00:00

You can have a fantastic deal in a fantastic market but if the team that’s running it doesn’t know what they’re doing, it can go south very quickly. Make sure you vet whomever you’re working with very carefully as you are going to be investing tens or maybe hundreds of thousands of dollars of your hard-earned cash.

Make sure your sponsor is going to be a good steward of your capital. Take a look at their background and their experience when it comes to real estate and managing finances. I’m not suggesting that you shouldn’t give someone an opportunity, even the most successful people had to start somewhere. But especially if it’s the first time you’re investing in a syndication, I would recommend that you go with someone with experience. Their experience doesn’t necessarily have to all be in real estate syndications. Maybe they’ve had a parallel experience in a different industry.

When looking at the sponsorship team, find out what sort of track record they have—what other deals they’ve done and how those deals have performed. If you can get references from a few other people that have invested with them, that’s great, but obtaining those references can be difficult and awkward. Sponsors can be reluctant to give out the names of their investors, who are usually very busy professionals.

My favorite way to meet a sponsor is to be introduced by another investor that I trust. That way, I know they vouch for the sponsor. I find that’s the best way to have confidence in someone you haven’t worked with before. If a friend of mine tells me they worked with a sponsor and that sponsor was great, very communicative, and kept them informed through the whole process (and by the way, made a handsome profit) then that is someone I want to meet!

Talk turkey with your sponsor right from the top

As a passive investor, I want to work with a sponsor who matches my communication style, has similar goals, the same approach to project management, and common values. Having a conversation about these things at the beginning can give you an understanding of the sponsor and how they handle their deals.

How is everything going to be run? How communicative are they going to be? How frequently will they communicate? Are they going to send out monthly updates? Quarterly updates? Are you only going to get an update when there’s bad news? Will they devote the time to actually get on the phone with you if you have questions? If you have concerns, will they discuss things with you? Transparency and accessibility are two of the things that I look for most in a sponsor. I want to know I’m investing with someone I can get ahold of, and who will answer questions when I have them.

A great way to test a sponsor’s communication and openness/transparency is to watch how the exchange goes at the beginning. Are they easy to deal with? Are they able to get on the phone and

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