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Unlocking Opportunities: Six Creative Strategies to Enter the Multifamily Syndication Business

February 01, 20243 min read

If you aspire to be a multifamily syndicator or operator, you're not alone. Many newcomers are eager to enter this business model. Multifamily syndication involves raising funds from passive investors to acquire apartment buildings. Once you have developed the necessary skill sets for raising capital, as discussed in a previous article, there are six creative ways to get your foot in the door:

  1. Find an Off-Market Deal

One way to enter the business is by discovering off-market deals and presenting them to experienced investors who can close on the transactions. Before searching for multifamily syndication deals or approaching seasoned investors, identify the investors you can potentially take the deal to. Make sure they meet certain criteria, such as having closed on similar properties and being willing to structure agreements in line with your goals. Also, verify their credibility by checking references. Finding a great deal could lead to compensation through a finder's fee or becoming an equity partner in the syndication deal. While a finder's fee can provide immediate income, becoming an equity partner offers long-term financial benefits.

  1. Negotiate Terms and Prepare Legal Documents

If you have a law background you can enter the multifamily syndication business by serving as legal counsel. Your primary responsibility would be preparing the necessary legal documents for syndicated deals. Many real estate investors prefer outsourcing legal services rather than partnering with an attorney. To be a valuable partner, you may need to bring additional skills or experiences to the table, especially if you aim to join a group that requires in-house counsel.

  1. Conservatively Underwrite Multifamily Syndication Deals

If you possess underwriting expertise or are willing to learn this skill, you can contribute by assisting individuals or groups who excel at finding deals but need support in underwriting. For example, some syndicators have enlisted the help of MBA students to handle initial underwriting tasks, with compensation provided upon successful deal closures. This arrangement may offer the opportunity to be involved in future deals and reap long-term benefits.

  1. Raise Capital and Act as the Ongoing Point Person

By partnering with experienced multifamily syndicators, you can enter the business by raising capital and assuming the role of the primary contact for capital sources. Find a seasoned partner who can demonstrate their successful track record, indicating the potential returns on future deals. Ensure your partner also has a personal investment in the deal, aligning their interests with yours. If you have connections to high-net-worth individuals who can provide financial backing, it can further strengthen your partnership. However, keep in mind that without a securities license, you can only raise capital for deals in which you are a general partner.

  1. Secure Debt Financing

Mortgage brokers can leverage their skills to enter the multifamily syndication business. Some mortgage brokers have participated in deals by using their brokerage fees as a form of equity. While earning a fee rather than becoming a general partner is common, exceptions exist where brokers become equity partners.

  1. Become the Property Manager

Experienced property managers have various avenues to enter the multifamily syndication business:

  • Networking with aspiring local investors who lack a track record but can bring funds to a deal, while leveraging the property manager's expertise to turn around the property.

  • Collaborating with an experienced group by offering property management services in exchange for an opportunity to be involved in their next deal. This arrangement demonstrates an alignment of interests and adds value to their pitch when presenting to investors.

  • Combining fundraising for syndication deals with property management services while maintaining your fees. The more money raised, the greater your equity stake in the deal.

As you can see, there are several creative strategies to enter the multifamily syndication business. Once you're ready to become a syndicator, consider one of these six strategies to get your foot in the door.

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