Ep 92 - How To Avoid A Bad Syndicator

Hey, everybody. Flip and Danny here, founders of the Freedom Real Estate Group family of companies. And welcome to another episode of our.

Podcast called Freedom through Passive Income.

That's right. And today's episode is called how to Avoid a Bad Syndicator. Yes, Bad syndicator.

Yes, bad. Bad syndicator.

So am I doing, I'm doing the odds, right?

Yeah, yeah, we have six here. You're in charge of the odds?

I'm doing the odds. So number one is experience. Finding out if the syndicator has experience. What experience is basically their history.

Yes, 100%. And I'll go, I was going to tag onto that, but I think I might have to. Well, let's just go to number two.

There you go.

Sometimes my brain just moves so fast. I'm like, where do I insert this?

Stop stepping on my number.

Number two, finding out and identifying whether they're an operator or a syndicator. So here's the difference. A syndicator is somebody who is offering up a syndication opportunity to investors, passive investors like yourself to invest in. That doesn't mean that they are the operator. The operator is the person handling project management, asset management, property manager type roles, rehab, renovation, all the hands on stuff, the stuff that goes wrong. That's the operator. We talk often about the fact that operator, operator, operator has to be somebody that's experienced, somebody that knows what they're going to do, has grit, is not going to run when the going gets tough. Because the going gets tough very so often in real estate and quickly. Yes. So you really have to know who that operator is. And that's why, number one, people partner with us because they've seen us go through a 56 unit nightmare and we did not run. We embraced it and just plowed through until we hit the finish line. And we know how important it is to have that type of tenacity. And so the people that we partner with, they either have years and years and years of experience or we've seen them go through something similar that showed to us they've got the character and the grit to be able to go ahead and keep on throwing, going through. So just know who you're dealing with. Operator versus syndicator. If you're working with the syndicator who is not the operator, do your due diligence and dig into the operator.

Number three, company values. This is huge. You know, do research. You know, as big as this world is and as many real estate investors there are out there, it's a small world when it comes to real estate investing. And you can. It doesn't take you long to dig into somebody or their past deals or anything like that to find out how they've handled things in the past, what their take is on things and how they run their business to. Because you don't want to align yourself with somebody that doesn't align with you.

Yes, absolutely. Number four is your worst deal. Ask them what their worst deal is. We publicly talk about stuff like this all the time. We talk about the big wins and we talk about the big losses. You need to have that transparent conversation with anybody that you're working with. I think our single family biggest loss was $40,000 on that duplex. Right. Private lenders got paid. We. We lost $40,000 or I mean, maybe close to 50. I can't even remember anymore, but I know that we did a podcast episode about it. But ask them what their worst deal is. So if you're investing in a syndication or multifamily project or whatever it is, what is the project that is similar to that? Same class. Right. You don't want to ask them what's your worst single family when you're investing with them on a 56 unit apartment complex. So for now, our nightmare 56 unit is our worst deal. But it's actually turning out to be a good deal. Right. Those are the types of things that you want to find out.

Right. Everybody always talks about their best deals.

Oh, yeah.

From the mountaintops. Yeah. So find their worst deal. And then communication. This is key.

Yes.

You know, we have a strict policy, just you and I. It's a personal policy.

Yes.

You know, if somebody emails you, even if you're busy, just write back, hey, I got your email. I'll get back to you in the next couple days. Cause I'm busy with this or I'm out of town or whatever, blah, blah, blah. You know, making sure there's constant communication. Making sure that there's not one second somebody goes to D. Are they still. Are they around? Are they doing something with us?

Yes. Yes.

So communication, making sure that right from the beginning. Because if it's bad communication from the beginning, it's just going to get worse.

That's right. When you're in your honeymoon, you better be getting the most superior service possible because it's going to probably not always probably go downhill from there. Number six is due diligence. And I really hit on this when I was talking in number two. But when you're doing due diligence on whoever it is that you're working with, if it is A syndication, which we're talking about right now. How to avoid a bad syndicator. You want to do the due diligence on the operator first, the deal second. I don't know how much I care about the syndicator. You know, I want to know them. I want to know that they're trustworthy. I want to know that they're aligning themselves with people like them, like that. But if I'm going to dig in, I'm going to dig into the operator, I'm going to dig into the deal, and then I'm going to feel, you know, pretty confident about whether I want to invest in it. And sometimes if I believe in the team and I already know them, I don't even dig into the deal as much. I look it over, see if I see any red flags. But it's up to you how much you dig in, depending on how much you know, because sometimes you don't know where to dig in. So. And I'm reading a book right now, and so I put this quote right at the bottom and it says, at the end of the day, the moral character of the sponsor can be the most critical variable. And a sponsor is your syndicator. There's usually a sponsorship team. They are the people who are syndicating the investment. They. There's usually one to four people, I would say, on average, in a sponsorship team. So they're the people that you want to know, like and trust.

Right. So here's a quick question. She doesn't know. I'm gonna ask her this question.

What?

So here's the question. You get a deal, and it's an amazing deal. It cash flow is more than anything in the world. But then you see the operator is someone that you don't like because they've done bad business in the past.

Me as a passive investor. Pass. There's no way I'm touching it because I don't trust where my money is going, us as who we are and what we can do. I'm going to talk to the people in that deal and I'm going to say, this dude's not really good. Or that we haven't seen him perform and it could have been him or her, sorry, they haven't performed. And so I would negotiate with them and just say, hey, I would love to be a part of this deal, whether it's a passive investor or as another general partner sponsor or whatever, but here's the stipulations on how I'm going to be a part of it. And I'M going to make sure that we have enough control to take the deal over if the operator fails.

Again, smart.

That's my answer.

There we go. Well, we like to try to keep these as short and sweet as possible. Make sure that you head down to our website, freedomcapitalinvestments.com and join our investor club.

Yes, Investor Club is going to allow you to get communications directly from us and our team. Sometimes it's monthly updates, but many times it's private deals that we cannot publicly advertise. So nobody's going to see them unless they're a part of our investor club. And you get those private communications.

Right. And we're still out on all the social media platforms. Make sure you're out there talking to the guys and gals.

Yes.

And make sure you get any questions that you may have. Again, there are no stupid questions.

That's right.

But. And if you're out there watching on YouTube or any of the podcast platforms, make sure you give us a review. We'd love to get reviews and recommendations and questions and whatnot.

Yes.

But we always end all of our episodes with Invest Smart. Live happy. Bye, everybody. Hey, everybody. Flip and Danny here, Founders of the I didn't take a deep breath. I was like. Founders of the I was out of breath already. That was a long walk from the camera over here. Goodness gracious.

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