| Real Estate syndication is by far the most profitable | | | | teleconference, I turned the tables and asked |
| aspect of the real estate industry. The reason is that | | | | participants two tough questions in advance of the |
| it encompasses all the other areas including | | | | call. The first question was "How much money could |
| brokerage, lending, ownership, management and | | | | you raise for a good real estate syndication project |
| more. Each month, I host two Q&A | | | | right now?" |
| teleconferences to help experienced people in the | | | | On one end of the scale, 16% responded "I don't |
| real estate business attain success in syndication. And | | | | know," "it depends," or "not enough." On the other |
| with every call, I find there are two groups of | | | | end of the scale one confident participant said |
| people. There are those who are properly organized | | | | "unlimited!" Enthusiasm is great, but it may not be |
| and ready to get started on the right path to real | | | | bankable. |
| estate syndication. And then there are those who | | | | The bulk of the answers I received were fairly |
| are having trouble getting out of their own way. | | | | typical. The largest percentage, one-fifth of the |
| The folks who are not succeeding are the ones | | | | participants, said they could raise $500K right now. |
| whose first question is "where do I find a good | | | | Close behind were those who said $1-3M. The |
| deal?" Early stage syndicators think they need to find | | | | remainder was spread between $4-6M and |
| a great deal, then raise capital, and they will be on | | | | $250-$600K. |
| their way toward success and profit. I usually counter | | | | In my experience, what you think you can raise and |
| that with some tough love and a reality check. | | | | what you can actually raise are not the same. First, it |
| Instead of looking for deals, a prudent syndicator | | | | takes time to raise money. Next, the deal has to be |
| needs to put the horse in front of the deal, and start | | | | right. Not only the real estate deal, but how you |
| with the question of how to raise capital. | | | | structure the profit sharing has to work for both the |
| Believe it or not, a bag of money is not going to | | | | investor and for the syndicator. Frequently, early |
| drop out of the sky as soon as you find a good deal. | | | | stage syndicators have trouble figuring out how to |
| It's not going to happen. There are lots of good deals | | | | create a deal that investors want to say "yes" to, |
| out there that most people can't put together. That | | | | and at the same time, promote a deal that works |
| thinking is like putting the cart before the horse. | | | | for them. |
| Somebody is getting the deals done, but it's the | | | | Keep your eyes open to these issues. There is a lot |
| people who have lined up the money in advance -- or | | | | of money to be made. But if the horse is not |
| it's the ones who know where the money is and | | | | positioned properly, no one will move and the deal |
| how to get it when the deal is ready. | | | | won't get done. There are a lot of horses in the barn |
| Doing a syndication is not a one-time deal. It is a | | | | that never have the opportunity to see the light of |
| business. And with any smart business plan, the key | | | | day. And one more thought: the way that investors |
| to success is to have a plan -- and that means having | | | | think about investing in deals is a lot like how |
| the capital on hand first. So on my last Q&A | | | | gamblers operate at the horse racing track too. |