A lot of people would think I’m crazy to invest $50,000 in a mobile home park I’ve never been to, located over 1,000 miles away from where I live, with a team of people I’ve never met in person, at the height of the COVID-19 pandemic.
And they might be right.
More Than Money
However, I think I will look back on this decision and see it as an excellent one that greatly contributed to wealth generation for my wife and I. But that is just one way in which it will benefit us. This is my first foray into the real estate syndication world, and thus far, I have a seemingly insatiable desire to learn as much as I can about the process. In the real estate context, a syndication is a method of investing in which multiple investors pool money together to purchase an asset. This is commonly used for assets like apartment complexes, self-storage facilities, and mobile home parks. I’m listening to syndication podcasts and reading articles every day. I’m having conversations with individuals in my mastermind about it and consuming as much as I can on the topic. So even if the deal doesn’t work out as well as I think it will, I am GUARANTEED to learn a great deal from the process.
I had a conversation a few weeks ago with a gentleman in my mastermind group who has much more syndication experience than I do – which isn’t saying much! He said the sponsors (the team of individuals who are doing the actual work in the syndication) will send out quarterly statements with information on how the property is performing. He said that just by reading this information, I will be ahead of most investors. Apparently, not only do most investors not read these documents, most don’t even open this email. This is baffling to me. Wouldn’t you want to know how your investment is performing? Then again, people throw lots of money at the stock market and have no idea about the companies or funds in which they invest.
Invest in People, Not Deals
One thing I’ve learned so far is when you invest in a syndication, you’re not investing in the deal, you’re investing in the people doing the deal. The numbers make sense, and I wouldn’t do it if they didn’t, but the team and their actions and character will likely determine the success or failure of the venture. I found out about the opportunity through Stu. I have purchased two turnkey properties through his company and both have been great experiences. I trust Stu and David (his business partner) completely, so when Stu sent me an email about the mobile home park, I knew this would be a good opportunity even before I read the specifics. Literally the day before I received his email, I was reflecting on how much money I had saved during deployment and wondered “what am I going to do with all this cash?” Stu’s email seems serendipitous in retrospect.
Stu and David are only two of the people on the syndication’s team though. I asked Stu how he knew the others on the team and if he trusts them. He said he has known the lead sponsor – Byron – for over 3 years and trusts him completely. If Stu trusts him then I do too, but I still felt like I had more work to do before I wired the money.
Due Diligence
As part of my personal due diligence process, I reached out to Byron – the “Chief Vision Officer” who is overseeing the syndication. I had a number of questions for him, and not only did he respond within a few hours, the responses were excellent and significantly increased my confidence. I also read his bio which mentions his experience as an attorney, business owner, and the work he has done in other real estate syndications. A key element of his bio that jumped out at me was his 24 years of service as an Army officer. Though this alone is not indicative of someone who will manage a syndication well, it does indicate to me that he can be trusted, he has integrity, and he will work hard to accomplish a task. Prior military service – especially over two decades worth – speaks a lot about someone’s character, in my opinion. After reviewing his biography and reading his thorough email response, I decided I would wire the $50,000 and commit to the deal as an investor.
These early steps and due diligence just reinforce what I have heard about the importance of relationships and networking. Your net worth is determined by your network. I feel thankful I have developed such a network around me to help me as I begin this journey, and I will continue to grow my network regularly – to help myself and to help others.
Look out for my quarterly updates on my first syndication deal. Thanks for reading and please let me know your thoughts in the comments section below.