Here’s a 10-step checklist on how to start a Real Estate Syndication:
1 – Select an asset class
Figure out what asset class you want to buy (multifamily, shopping centers, hospitality, self-storage, development projects, single family residential, etc.).
2 – Obtain training in that area
Get some specific training in buying, owning and selling your chosen asset class. You should learn as much as you can from the pros who have done it before you. The narrower you make your selected asset class, the easier it will be to get appropriate training, and to stay focused on your target without getting distracted by the shiny new object syndrome. HINT: All of our successful syndication clients who have done more than 1-2 deals have been from a real estate coaching program.
3 – Brand your company
Decide on the name of the company you want to brand that will be common to all of your syndication pursuits, form it and get some business cards made. Don’t forget to have an attorney draft an operating agreement if you have more than one member in your company — you will need this later; trust me.
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4 – Pick a business model
Decide on your business model, including:
- What you are buying.
- Why you are buying it.
- What personal goals buying it will help you achieve and by when. Write this down and be specific, as you will need to constantly remind yourself of this when your business gets hard — and it will.
5 – Get training on syndication
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6 – Build your database
Start building a database of prospective investors. Write down the names of everyone you know; buy a copy of Raising Private Capital: Building Your Real Estate Empire Using Other People's Money
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7 – Analyze deals and make offers
Start analyzing deals and sending Letters of Intent. You need to make a ton of offers before you get one that will stick. The people who are successfully finding deals are not sending out one to two Letters of Intent (LOIs) per month — they’re sending 10-100 LOIs per month. Remember the fairy tale: You have to kiss lot of frogs before you find a prince. The more LOIs you send, the more viable deals you will find.
8 – Get a property under contract
Get a property under contract and do some preliminary due diligence before you start sharing information with investors. At a minimum, you should have a signed purchase agreement, review the past two years’ financials, and physically visit the site, do your own analysis, and start working on your Property Overview.
9 – Hire the right attorney
Hire a competent securities attorney to draft the appropriate Real Estate Syndication Offering Documents and review your Property Overview. Make your choice wisely — you wouldn’t let your general practitioner M.D. perform brain surgery on your kid, right? Find a securities attorney who does this day-in and day-out (like us), and get them started on drafting your documents. The right attorney should be able to do more than just draft securities offering documents — they should be able to give you solid practical and legal advice based on their years of experience with hundreds of syndications about:
- How to structure your companies.
- How to split money with your investors.
- How to select and follow an appropriate securities exemption.
- How to approach investors.
They should be able to write the offering documents in plain English that you and your investors will understand — customized to your specific situation.
10 – Finish due diligence and line up lender, investors
While your attorney is drafting your documents, finish your due diligence, get your lender lined up and get your investors ready to invest.
Finally – Once you get the final offering documents from your securities attorney — GO RAISE MONEY AND BUY SOMETHING!
After you have done all of the above steps, you will have started a Real Estate Syndication and you will be well on your way to fulfilling your dreams (remember those goals you set in Step 4?). Don’t get discouraged, the first syndication is hard; your second one will be easier and the third and fourth will be a breeze.
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