Responsibilities of aN Apartment Syndicator
Whether you are a passive investor, an active investor, or planning to become an investor, understanding the responsibilities of the General Partnership (GP) is vital. Understanding these responsibilities would simply allow investors to determine which roles they are capable of fulfilling and which roles they have to cover by a partner or partners.
I often get asked…
What do you DO?
It’s a complicated answer. I’m responsible for some things, while I find team members to fill the gaps. Overall, the team accomplishes SO much to get a deal across the finish line and execute the business plan.
There is an immense amount of work that goes into being an apartment syndicator. A lot of calories are spent before even getting to the closing table.
For every property that’s under contact the syndicator has looked at 100+ properties. In today’s competitive, low-interest-rate environment, the syndicator is looking at closer to 200 properties before closing on one.
Finding deals that meet our criteria is a numbers game. A syndicator cannot afford to take risks or overextend himself. The syndicator should ensure that investors will receive an excellent return for the provided risk of the multifamily syndication.
After finding a deal that provides returns for investors, the syndicator is responsible for sourcing equity, arranging the financing and streamlining the transaction process until the deal closes.
After closing on the deal, syndicators will also be required to handle all the back-office operations relating to the multifamily syndication, including interfacing with the property management team often to guarantee the project is on track with their investment strategy. Generally speaking, this resembles increasing income, cash flow, and profitability for all investors involved.
The passive investor’s role is to bring equity. Once the multifamily property has been acquired, the passive investors will regularly receive passive income (from the property’s ongoing cash flow) and receive a return upon the sale of the asset.
While some steps are evident, others are not so obvious. I find it best to correlate the required duties with the life cycle of an asset. Below, I’ve broken down the responsibilities per milestone in the syndication process.
- 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
- Set investment criteria for deals
- Create partnership structure per deal
- Find passive investors to fund down payment of a deal
- Implement marketing strategies to generate off-market deal leads
- Underwrite deals
- Submit LOI and negotiate PSA
- Perform due diligence on the deal
- Appoint and coordinate property management company
- Create an investment summary
- Announce new deal to investor list
- Perform new investment offering conference call or webinar
- Send conference call or webinar recording to investors
- Create legal documents and send to investors
- Create LLCs
- Ensure passive investor money is transferred
- Set up operating bank accounts
- Secure best financing option
- Close on deal
- Create investor guide
- Notify investors of closing
- Send monthly recap emails to investors
- Send quarterly financials to investors
- Send K-1 tax documents to investors
- Answer incoming questions from investors
- Oversee property management company
- Weekly performance call with property management company
- Ensure progression of business plan
- Frequently analyze competition to set rents
- Frequently analyze the market to determine when to sell
- Ensure the correct distributions are sent on time
- Oversee the sale of the asset
- Administrate final distributions
If you’re reading this and thinking, This sounds like a lot of work with no instant gratification, you are CORRECT! A lot goes into bringing a deal AND people together.
I propose that the actions required to be an active investor are simple. However, simple is NOT the same as easy. Operating long term and sustainably in this space requires consistency.
Whether you’re interested in creating passive income or shadowing an operator with the intent to be an active investor, you must do your due diligence on the syndicator. You can use the list above to understand what you need to do to create a successful business and to assign each role to a member of the GP based on their unique skills and background.
Investing with someone is no small commitment. As humans, we work with people we know, like, and trust.
If you want to learn more about our strategy and how we position our assets, check out www.tbcapitalgroup.com