RESPONSIBILITIES OF AN APARTMENT SYNDICATOR
Prior to making an investment in real estate, passive investors need to have a general understanding of the general partner's (GP) duties and how those duties are distributed among the members of the GP so you become familiar with how a syndication operation works.
I often get asked…
What is it that you DO?
It's a difficult question to answer. I'm accountable for certain things, and it's my job to locate team members who can fill the voids. In the grand scheme of things, the team is able to get a deal across the finish line and carry out the business plan quite well.
Being an apartment syndicator requires a significant amount of hard work on the part of the individual. A significant amount of energy is burned before one even reaches the negotiating table.
The syndicator has examined more than one hundred properties for each property that is currently under negotiation. Due to the high level of competition and the historically low interest rates, the syndicator is examining close to two hundred different properties before committing to any one of them.
Finding offers that are suitable for us involves playing a variety of different games. A syndicator simply does not have the financial flexibility to take unnecessary risks or overextend himself. The syndicator is responsible for ensuring that investors will obtain a high return on their investment despite the inherent risk that comes with participating in a multifamily syndication.
After identifying a transaction that would provide returns for investors, it is the responsibility of the syndicator to uncover sources of equity, organize the financing, and streamline the process of the transaction until the agreement is finalized.
After the transaction has been finalized, the syndicators will be required to take care of all of the back-office operations that are associated with the multifamily syndication. This includes maintaining frequent communication with the property management team in order to ensure that the project is proceeding in accordance with the investment strategy they devised. This is analogous to an increase in income, cash flow, and profitability for all investors participating in the transaction.
The role of the passive investor is to contribute equity. After the acquisition of the multifamily property, the passive investors will begin to earn passive income on a regular basis (from the ongoing cash flow of the property), and they will also receive a return upon the sale of the asset.
Despite the fact that some of the stages are rather obvious, some are not. The simplest way to do this, in my opinion, is to match the required duties with the life cycle of an asset. I have divided the primary responsibilities of the GP into four distinct phases: (1) the deal locating phase, (2) the pre-contract phase, (3) the contact-to-close phase, and (4) the post-closing phase.
It is not expected that every single GP will carry out each and every one of these activities. Nevertheless, these are the activities that are carried out by the most effective general partners.
The Following Is a List Of The 45 Most Important Obligations and Tasks of The General Partners In An Apartment Syndication:
Phase Prior to Locating A Deal
Select potential target investment markets
Evaluate potential target investment markets
Select one or two potential target markets
Assemble a team member and partners PER market
Define the roles and responsibilities of each member of the GP
Build relationships with strategic vendors: commercial brokers, property management companies, commercial mortgage brokers, SEC securities attorneys, CPA’s
Set investment criteria for deals
Implement marketing strategies to generate off-market deal leads
Phase Prior To Going In To The Contract
9. Filter deal flow
10. Underwrite deals that meet preliminary acquisition criteria
11. Have meetings with partners to figure out offering parameters
12. Ask broker questions on potential concerns from underwriting/OM
13. Tour the property (If necessary)
14. Submit Offer/LOI (Letter of Intent)
15. Negotiate with broker/seller on the offer
16. Negotiate PSA (Purchase and Sale Agreement)
17. Interview potential property management company
Phase From Contract To Closing
18. Perform due diligence on the deal
19. Appoint and coordinate property management company
20. Create an investment summary
21. Announce new deal to investor list
22. Perform new investment offering conference call or webinar
23. Send conference call or webinar recording to investors
24. Create legal documents and send to investors
25. Create LLCs for this specific property
26. Ensure passive investor money is transferred
27. Set up operating bank accounts
28. Secure best financing option
29. Supply all necessary documents the lender requires
30. Close on deal
Phase After the Deal Has Closed
31. Notify investors of closing
32. Send bi-monthly property update emails to investors
33. Send quarterly financials to investors
34. Send K-1 tax documents to investors
35. Answer incoming questions from investors
36. Oversee property management company (Ongoing until the sale of the property)
37. Bi-Weekly performance call with property management company (Ongoing until the sale of the property)
38. Ensure progression of business plan (Ongoing until the sale of the property)
39. Frequently analyze competition to set rents (Ongoing until the sale of the property)
40. Ensure the correct distributions are sent on time
41. Frequently analyze the market to determine when to sell
42. Entertain and assess offers made by prospective buyers (after 3 yrs)
43. Negotiate offers with the buyer
44. Oversee the sale of the asset
45. Administrate final distributions after the sale has been completed
Conclusion
It is necessary for you as the passive investor, to know what are the responsibilities of the syndicator. You can use this list to put together some of questions you might want to ask the GP about their business plan, who does what, and why that person has been assigned that duty if you are a passive investor. You can use this list to develop questions to ask the GP about their business plan as well. Investing with someone is a significant commitment that should not be taken lightly. We humans tend to collaborate with those individuals that we are familiar with, enjoy the company of, and have faith in.
WE'RE HONORED TO BE IN BUSINESS WITH YOU
Building wealth doesn’t always require you to do all the work you normally would as an independent real estate owner/investor. You can also accomplish the same goal by taking advantage of a syndicated real estate project.
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