Having worked at an Enterprise level in IT for over 25+ years, one critical skills I learned from my many mentors was the "KISS" principal: Keep It Super Simple.
As I began my journey into passive commercial real estate investment in early 2020, my business partner, Rob, gave me a quick "brain dump" of his experiences and process however being an IT engineer and systems architect by trade, what I really needed was a process flow diagram! Searching on Google for "Easy Steps for Syndication Investment" yielded limited results.
I learned very quickly that in order to invest in offerings that were of interest to me, it was imperative that my systems were in place and ready to execute because when investing opportunities arrived there was very limited time from invitation to review to investment. If I did not react quickly, those opportunities quickly were fully committed by other investors that were waiting and ready. Now this is to be expected when you first start out. And over time, your ability to react and respond will organically improve but it is frustrating to realize that a deal you were excited to invest in is not available to you because you were not ready.
So, after some trial and error, I came up with the following sequence that allowed me to quickly react and invest when opportunities became available.
10 EASY STEPS:
DRY POWDER - I call this dry-powder and this is critical. If you have to move money around at the last minute, you WILL lose out on opportunities because moving funds between different banks, CDs, selling securities, digging out from the backyard ALL TAKE TIME. Have your allocated investment funds ready (dry powder) in a bank account that has WIRE IN/OUT capability. Some bank accounts charge WIRE OUT fees, others do NOT. Do your homework. Why are you paying for WIRE OUT fees if you can avoid them? I use an account at FIDELITY INVESTMENTS for my own DRY POWDER reserves because my WIRE OUT fee is FREE ($0.00).
DISTRIBUTION/DISPOSITION ACCOUNT - Syndication investing comes in many forms. Some provide quarterly/annual distributions on your principal investment and at the point of disposition there may be a return of investment as well as capital gain. In order to track passive investment returns, set up a separate account to receive these funds and not co-mingle them with other personal checking/savings accounts which are used for other purposes. You DON'T have to do this...its a personal choice, but I find it is easier to compartmentalize investments and transactions. I don't use the FIDELITY account in step 1...that is only for outbound wires. I use CHASE because they have really useful online services such as ZELLE for business accounts. (fyi they charge a fee for WIRE OUT).
EMAIL FILTERS - If your like me, you get 100s of emails a day. Setting up custom email filters is a time saving technique that lets me focus on what needs my attention. This allows me to quickly review new offerings, schedule investor webinars and soft commit to deals that meet our investment profile.
JOIN WEBINARS - Investing is NOT throwing darts and seeing what sticks...that is Vulture Capital. When an offering is received, often a webinar invitation will be provided that can be scheduled. This webinar is usually live, if you miss it, you will still receive a pre-recorded link, and is a great opportunity to listen to the syndicator and sponsors about the details of the offering. A lot of details are provided followed by a Q&A session. I highly recommend you join these or listen to the recording afterwards.
SOFT COMMIT - A hard lesson I learned is that some syndicators have a loyal following of investors and the moment they send out their NEW OFFERING emails with a soft commit link, they are fully funded within an hour. Let me emphasize...THIS IS THE EXCEPTION!!! Generally, even with syndicators that have great, consistent, successful track records, raising funds takes several weeks. There is a difference between a soft commit and hard commit. Soft commit means you have expressed an interest to invest and now have reserved a slot with a timeframe in which to submit your funds. If you do not submit the funds, you lose your slot and someone on the wait list will now have the same opportunity. I do NOT recommend soft committing and always backing out as it will flag you and remove you from future opportunities.
WIRE OUT FUNDS - Understand how to set up and wire out funds to a syndicator. If you are new to WIRE OUT this can seem daunting but it really is easy depending on where you are wiring the funds from. In Chicago, several banks are common: 53rd bank (FIFTH THIRD), CHASE, PNC and BOA. I am not advocating which bank you should use, but ease of use is imperative. My 53rd banker requires Face 2 Face interaction for a WIRE OUT. Chase permits online WIRE OUT services for a fee. This is why I use FIDELITY...they permit online WIRE OUT for FREE. I LIKE FREE...do YOU? It is also very easy to set up the account profiles in advance on Fidelity.
FEDERAL REFERENCE # - I have been sending Wires out for over 25 years but it wasn't until I started to invest in syndication deals that anyone asked me for this. When initiating a WIRE OUT a confirmation # will be provided for that transaction from the bank. This is NOT the Federal Reference #. When the recipient of the WIRE OUT receives the funds, it will include the name and account details of the sender (YOU). They will use this information to match the sender details to the funded account but if the sender is NOT the exactly the same this can lead to confusion. In this situations they will ask for the FEDERAL REFERENCE #. You will NOT know this information, it is NOT provided to you when you initiate the WIRE OUT. You will need to call your bank and request to speak to the WIRE TEAM. Provide them details of the WIRE OUT transaction (confirmation #, amount, account details) and they will then provide this FR#. When this FR# is provided to the beneficiary they will then be able to match your funds to your account and confirm your investment.
RELATIONSHIP BUILDING - Maybe it just me, but I like to know the person I just investment 50 or 100k with. I find comfort in knowing that I can call, email, or text him/her and expect a response within a reasonable amount of time. I dont expect to have personal conversations or small talk about sports, the weather, or what they did over the weekend...I assume they are busy professionals actively involved in ensuring investments are being wisely managed. But I do want they assurance that they know me on a first name basis and value my involvement from a passive nature.
ORGANIZED - Syndication investments have a significant amount of documents: marketing material, PPMs, offering docs, surveys, contracts, riders, etc. Much of this information is always available on the syndication portal but technology changes and it could be difficult to find on a moments notice. Take comfort in keeping a copy of any/all documents that are available on investors portals on a personal GOOGLE DOCS folders. You can use any cloud or offline storage service you prefer.
NETWORKING - There are many like minded folks and many are excited and open to sharing their experiences and opinions. Each day I meet new investors and operators and teach me something. This has broadened our focus beyond MultiFamily investments to other alternatives such as: Self storage, industrial storage, cold storage, hotels, vacation rentals, apartment, commercial office, mobile home parks, etc. Always keep your options open.
I hope this is as helpful for you as it was for me, though my journey was longer and more complicated!
We look forward to partnering with you on future investment opportunities.
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