If someone is an accredited investor they often get on people’s lists and get pitched all kinds of proposals for investments. Many are not even in the real estate realm. These companies are often wanting to talk an investor into buying anything at anytime.

The more important question is for the investor. Do they like the track record of the sponsor? Do they like the type of strategy the sponsor is wanting to deploy and execute on? Do they believe in the sponsors vision and how they want to create value?

Personally the way I set up sponsor deals can be different from other sponsors. I believe in keeping things vanilla and clear to understand. Some syndicators get into complex tranches of debt structures and waterfalls of when certain hurdles are met, they make more (and different) series, and rounds have different options for investors to buy into. The other sponsors also can have different stacks of debt with different lenders as well.

I just do not care for the headache all of that presents. I like keeping things simple. People can hide in complexity. When you do simple deals they either work or they don’t. You have to watch out for syndicators that LIVE off of their fees going in to deals.

What do we mean by that?

Often people read books about how to become syndicators. They see it as a way to quit their J-O-B and get out of the rat race. The problem with that is in the beginning they have little money so the more properties they syndicate the more fees they make going in and the more they hope some of the deals actually work later on. That lends itself to not having the best interests aligned with the accredited passive investors because they can syndicate marginal deals in the name of taking fees upfront.

At NNN INVEST we are different. As a principal commercial broker I make a lot of money with my clients transacting to buy stabilized NNN STNL and MTNL assets. I take that money and put it into properties myself for value add to turn around with cash.

If too much of my cash is tied up in projects at any given time I syndicate the deal with my accredited investors. So for me I only want deals where I think there is high upside potential for cash flow and equity multiple growth or I am not interested in the property. The fees are not the main driver for my syndicating so the passive investors and I have aligned interests both wanting higher cash flow and equity multiples on the back end when the property is stabilized.

I also like STNL NNN value add because as soon as a tenant is in and paying with a long term primary lease term, almost 100% of the value is fully realized. This sits in stark contrast to other syndicators in multifamily, mobile home parks, hotels, offices, building home subdivisions, etc. where the value is created (if all goes well) over typically a 7-10 year timeline. There are so many economic forces in a cycle that can happen during that time where the investment does not reach its full potential as expected. In those cases the property could break even or lose money over time.

There are still some amazing larger property syndicators out there that do a great job, you just have to know how to tell the good ones from the duds. Remember the sponsor can be good but a particular syndicate property could be bad. You are looking for a good sponsor and a solid deal you feel great about investing in. Make sure and ask how often the syndicator gives updates to their passive accredited investors and how accessible they are. The sponsor should take the investor’s money very seriously and work to protect the money and help it grow. While the sponsor should do their best to make a project successful there are not guarantees of that happening. Any sponsor guaranteeing the investment—you should RUN from that sponsor—as they are not being honest about the business.

In addition to syndicates there are also funds. Funds are set up differently from syndicates. In a fund you are putting money into a pool of properties the syndicator selects. Basically the syndicator does not have to do a per property raise but rather give a general parameter for the funds goals and allocations.

So in a fund you do not have total control of what you invest in. You have to believe heavily in the company and the sponsor that they will make good choices and be a great steward of your money and help grow it safely over time.