Backgrounds of MF Syndicators
I’ve been looking into the background of some of the MF syndicators commonly talked about here and I can’t seem to understand how a lot of these founders don’t have strong backgrounds in terms of prior work experience. Hell some of them don’t even have real estate experience prior to starting their syndicators. I get that most of them aren’t targeting institutional capital and are more so focused on retail investors but how the fuck did these guys raise billions of dollars. Is it as simple as low rates pre Covid that led to good returns and gimmicky marketing to investors or am I missing something?
I think you're on point in all comments except the one about good returns.
Ah, the curious case of the multifamily (MF) syndicators with seemingly modest backgrounds – it's like a jungle out there, and yet some of the monkeys climb to the top of the trees without having swung through the traditional vines of real estate experience. Let's peel this banana and see what's inside:
Timing and Market Conditions: Sometimes, it's all about being in the right place at the right time. Low-interest rates pre-Covid indeed created a favorable environment for real estate investments. Good returns during such periods can make investors overlook a lack of traditional experience.
Marketing and Networking: Never underestimate the power of a good story and solid relationships. Some syndicators may have excelled at marketing themselves and their vision to potential investors. They might have also built a strong network of retail investors willing to take a chance on them.
Track Record of the Firm: Even if the founders themselves didn't have extensive backgrounds in real estate, they might have been part of teams that executed successful deals. This can lend credibility and attract investors.
Niche Focus: Some syndicators find a niche that's underserved and become experts in that area. This can sometimes compensate for a lack of broader real estate experience.
Investor Appetite: There's a segment of investors who are always on the lookout for higher yields and may be willing to bet on less conventional players if they believe in the potential returns.
Entrepreneurial Grit: The real estate jungle is tough, but some individuals have the entrepreneurial spirit that allows them to hustle and convince others to invest in their vision.
Remember, while some syndicators may not have the typical pedigree, they might possess other qualities or strategies that enable them to raise significant capital. It's a mix of skill, luck, and sometimes just the audacity to leap into the fray.
Sources: Do you need to be a market genius to start a hedge fund?, What is your compensation in Real Estate Finance?, Who is buying this stuff? Brokers and PE analyst/associates, Q&A: Real Estate Syndication, Hiring Junior Partners / Deal Guys -- Good Value
Ah, the curious case of the multifamily (MF) syndicators with the Midas touch, right? It's a jungle out there, and sometimes the vines of success aren't always hanging from the tree of experience. Let's swing into this:
The Art of Persuasion: Some of these syndicators might not have a traditional real estate background, but they've got the gift of gab. They can sell ice to Eskimos and sand to the desert. Convincing investors is about storytelling and confidence. If you can paint a picture of success, some will follow you into the jungle without checking if you've ever swung a machete.
Market Timing: You've hit the nail on the head with the low rates pre-Covid. When the jungle is lush and the fruit is ripe, even the inexperienced can find a feast. Good market conditions can make geniuses out of the average Joe.
Retail Investor Appeal: Institutional investors are like the big gorillas of the investing world; they're picky about their bananas. Retail investors, on the other hand, might be swayed by less conventional backgrounds if the story and the potential returns are compelling enough.
Gimmicky Marketing: Never underestimate the power of a good marketing campaign. Some of these syndicators could sell a ketchup popsicle to a woman in white gloves. They know how to make their offerings look attractive, even if they're not the fanciest bananas in the bunch.
Networking and Relationships: Sometimes, it's not what you know, but who you know. A strong network can compensate for a lack of experience. If you can connect with the right people, they might just take a chance on you.
Performance: At the end of the day, if these syndicators have shown good returns, that's the banana that everyone wants. Past performance, even if not indicative of future results, can be a powerful magnet for capital.
So, while it might seem bananas that these syndicators without a strong background have raised billions, it's a mix of skill, timing, marketing, and sometimes just plain old good luck. Remember, in the jungle of real estate syndication, sometimes the rules of the wild don't always apply.
Sources: Do you need to be a market genius to start a hedge fund?, Who is buying this stuff? Brokers and PE analyst/associates, What is your compensation in Real Estate Finance?, Hiring Junior Partners / Deal Guys -- Good Value, Q&A: Real Estate Syndication
As long as you keep in mind that these guys are con artists, not real estate investors, the whole set up makes a whole lot more sense. The goal isn't to make money buying real estate, the goal is to take investors' money through a huge fee load, with real estate being the excuse. The business is the skim they take off the top, not the asset into which they're nominally investing.
Once you understand that, the entire "industry" suddenly makes a ton of sense.
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