Podcast Episode 12 Investing in Syndicated Real Estate

I had the pleasure of speaking to Alina Trigub. Alina works full time in corporate America while in her free time she actively runs a real estate syndication firm. Alina focuses in on investing in syndicated real estate investments in the multi family and the commercial niches.

There were several things that Alina covered during the course of our conversation about Real Estate Syndication. The first was exactly what real estate syndication is, who can invest in it and the general structure of the investment. The second thing that we covered is how she would recommend someone get started with investing in real estate. The third thing that was covered was how to build a team and how to establish your role on it.  

Real estate syndication is an investment tool that allows a group of investors to be able to pool their funds together to be able to invest in real estate deals they wouldn’t be able to typically afford. Then there is usually an operating partner or manager of the investment that actively manages the investment for the passive investors that have ponied up the cash for the investment.

A good analogy is in starting a bar. Say Fred and George have deep pockets and they want to invest in a bar. They find Al who can run and manage the bar while Fred and George just provide the money to get the bar started. That is a very simplified example of how syndication works.

There are limitations on the individuals that you can involve in your real estate syndication deals. There are typically two ways of obtaining investors the first is to reach out to accredited or wealthier investors. The paragraph below details the specific information on accredited investors.

If you are looking for accredited investors then if they are single they have to have had an income in excess of $200,000 in the two most recent years. If the individuals are married this income must have exceeded $300,000 in two of the most recent years. Their income should be expected to remain the same or continue to rise in the future. Also they must have a net worth in excess of $1 million excluding their primary residence. You will find a link  to Cornell’s Legal Institute’s definition for accredited investors.  

The most startling fact about this is that these laws were made in the 1970’s and they haven’t been adjusted for inflation. If you were to adjust these amounts for inflation using a 3% rate of inflation and assume a 40 year period then the amounts would be significantly different. The necessary income to meet the minimum required investment for a single household would be $652 thousand and the joint amount would be $978 thousand. The net worth necessary to be able to be considered accredited would be $3.26 million. These numbers are the minimums necessary to be able to be considered an accredited investor.

The second way to be able to participate as an investor in a real estate syndication deal is to have a preexisting relationship with an individual. If you were to work with, be child hood friends of or have an existing relationship with the individual raising money then this would be able to invest with them. They couldn’t solicit or seek funds from you unless you had that preexisting relationship or were an accredited investor.

Finding the investors to be able to invest in syndicated real estate is important because you need to be able to have the investment capital or money to be able to afford the property or down payment. This isn’t the entirety of the investment either instead it is only a part if of it. This only covers the action of raising the funds to be able to afford the property. The next step after raising the funds necessary to be able to afford a property is to identify which property to invest in.

Alina mentioned there were two important things when looking to find a piece of property the education that you have and the relationships that you have built. Without any formal type of education or experience you will not be able to tell whether a particular property is a good investment or not. Alina originally invested in multifamily properties because she had a good understanding of the underlying investment. That knowledge plus her investment in podcasts, books and other education material allowed her the confidedence to invest. Alina used two books "Best Ever Syndication Book Ever" by Joe Fairless and "It's A Whole New Business!: The How to Book of Syndicated Real Estate" by Gene Trowbridge  to be able to help her learn about syndications.

If you don’t go out and educate yourself on the type of property or investment that you are putting money in then you will never know if it’s a good investment. You will be utterly reliant upon the knowledge of other indviduals to be able to determine if  an investment is a good one or not.

The second point of networking is about being able to find deals. If you actively network and build up a list of contacts in a particular industry or region you will be able to continually source deals. People will be interested in providing you with deals because they will profit from the transactions that they engage in with you. Your network is your net worth so to speak, because it will reflect the quality and quantity  of the deals that you will be able to obtain.

The final part of the syndication process is to be able to put the manger or operating partner in place to be able to manage the deal. This individual will be found by networking with individuals in the region that you want to invest in. Also  it is extremely important to be able to match up your goals with the individual that you are investing with. Obtaining references for someone that you are trusting your and your investors money with would be prudent.

Then once you have all of these things put together you have the foundation of a syndicated real estate deal. Then you can sit back drink your pina caladas and have a good time at the beach. No in all honesty any one deal will probably not make the life changing kind of income that you need. You will have to repeat this process over and over again to be able to get to a sizeable amount of cash flow. The more often that you do something like this the better at it you will be.

Alina got her start being a passive investor in someone else’s real estate syndication deal. She was one of the passive investors that got involved by investing their money only into the deal. As she became more experienced with the process she was able to start doing these deals on her own.

If this seems very complicated because of all the moving parts one of the things that you can do is read websites like Alina’s at Samo Financial or Bigger Pockets. You can educate yourself very thoroughly about the whole process to be able to learn how to do it. If you are still feeling unconfident in your ability to perform this type of investment the other thing that you can do is to go work for a real estate syndicator. Imagine that you were networking and looking for someone like Alina, you go and offer them some type of value for the information that they can offer you. Don’t go in and expect someone to just be generous with their time. Some people are like that but you’ll have a much warmer lead if you bring something to the table. You could even inquire about some pain points in their business and see what you can do to alleviate it to learn how to do this. I’m an accountant by day so if someone like Alina needed help with their bookkeeping I could offer them that for free to be able to get them to help or teach me how to do this. You could also go to work for a real estate syndicator to be able to figure out how this works. The way to look at this would be as a paid internship and take every single opportunity to be able to learn how the business works. If you are reading this and want to do something other than syndication this can be one of the greatest things that you can take way from this post. Go work for someone in the field or doing the thing that you want to and you will be paid to learn. In two to five years you could have your business up and running knowing all of the insider secrets on how to make it work.

The biggest take away that I received from my interview with Alina was what she said at the end to take a look at the varied types of investments that are available. During the course of this podcast I will look at a number of things from single family investing like Episode 1 with Gagan Marwaha to investing in syndication's. Not every type of investment will  appeal to everyone

If  you want to find out more about real estate syndication you can reach find more information about Alina at Samo Financial. 

Please note the disclaimer below:

THIS IS GENERAL FINANCIAL ADVICE THAT MAY NOT APPLY TO YOU. PLEASE CONSULT WITH YOUR TAX, LEGAL, INSURANCE OR FINANCIAL PLANNING REPRESENTATIVE BEFORE MAKING ANY CHANGES.