Originally Posted by Gunfighter

Thanks for sharing. There are a couple key points that are worth emphasizing. First, the level of risk associated with a development deal is astronomical. Reaching pro-forma numbers that are tossed about in advertising materials or even a PPM requires near perfect execution in multiple areas. You need site selection, civil engineering, architectural, financial, construction, leasing and management perfection. There are multiple points of interference that can derail the deal from city officials, lenders and contractors. If none of the above collapse the deal, then another developer with more optimism, more cash, more risk tolerance and a lower cost of capital is likely to read the same market data and build a competing project. I've done development and although it was highly profitable, the projects would have failed without financial support from other property in the portfolio. As a stand alone company two of my best investments would have gone down in flames. It took cash flow from existing properties to get them stabilized. Development deals are often under capitalized due to overly optimistic projections by a syndicator that is looking to collect a fee for putting a deal together. The sponsor may not have any of their own money in the deal or possibly only a small amount.

Secondly, the fee structure of a syndication tells you most of what you need to know about the sponsor's motivations. If you see an acquisition fee, refinance fee, construction management fee and disposition fee you know they make a bundle even if there is no profit. When the sponsor only gets paid from the profit with a small override for asset/property management, they have different incentives. The only syndications I've invested in pay the sponsor based on profitability, not deal making activity. The property may not be profitable at acquisition, but if there is existing revenue with a clear path to add value by improving the property and/or the management, I'll invest. The sponsor must be investing at least double the amount I am committing to the project.



It sounds like you are ready, just afraid. I was scared to death buying my first rental property. I had imagined all of the possibilities from eviction to meth lab with fire, flood and lawsuits all scattered in between. At some point, you just pull the trigger and go. The Lifestyles Unlimited group has a simple, straightforward approach for bread and butter rentals. It is boring, basic, vanilla real estate investing, but it works. The entry level program is geared toward a novice single family investor who has never owned rental property. You can find everything they teach for free somewhere else on the internet and they do not hide that fact. You are paying a couple hundred bucks for the packaging and the spoon fed delivery.

You don't get into syndications with a basic membership. It will cost you thousands of dollars to join the group that does those deals. That group consists of two distinct sets of members. There are syndicators who are putting deals together and passive investors who are there for the returns. The syndicators range from experienced single family investors who are moving into multi-family property all the way to experienced sponsors who have done hundreds of millions of dollars per year. The sponsors follow a strict code of conduct that spells out compensation and behavior standards. You must approach a sponsor, they will not approach you to invest. The passive investors are mostly high earning professionals who have money, but not the time or interest for doing their own acquisitions. I've met many doctors, lawyers, engineers, pilots, a day trader, business owners and numerous retired people who moved their IRAs and 401ks into syndications.

I genuinely enjoy putting deals together, but have only done so with personal investment capital. I would lose some of the enjoyment if I had a responsibility for other investors money. Being responsible for bank money doesn't bother me, because there isn't a face or family attached to it. As part of our retirement and estate planning, we are moving capital into passive investments. As much as I enjoy creating passive income, I have other interests like family, travel, fitness and social activities that I want to do. I'm analytical and love playing the game Monopoly. It's also fun to play in real life.