The Syndication Situation

During my short time as a budding real estate investor, one of the best avenues that has helped me learn and progress my experience is by going to different meetup groups. This week, I ventured out to the New Jersey Multifamily Investment Club (NJMIC), based out of Westfield, NJ. This group meets monthly, and is all about investing in multifamily properties both in and out-of-state, with a preference for deals of 100+ units. The meetup is held in the local Keller Williams office, and is the perfect setting for impressive speakers and valuable information provided.

This month’s edition was all about syndication. If you do enough research and go to a few real estate events, this is definitely a term that gets thrown around often. But what is it? In its simplest form, syndication is simply the pooling together of resources from multiple parties in order to acquire a deal. However, many factors (i.e. the amount of money you want to raise, years of investing experience, net worth of your potential partners, etc) contribute to the complexity and in turn, the different legal considerations needed when organizing one.

During the meetup, the group took an in-depth look at Regulation D. According to Investopedia, Regulation D is an SEC regulation that governs private placement exemptions, allowing for smaller companies to raise capital through debt or equity securities without registering with the SEC. While this regulation is advantageous to small companies or individuals, there are strict guidelines on how fund managers can solicit capital and what disclosures must be made about the manager’s investing history.

In addition to the great information about the laws of syndication, the group was treated with a special presentation from Gabe Da Silva, serial entrepreneur and real estate mogul. Gabe owns four real estate companies based in New Jersey — an investment company specializing in “add-a-level” fix and flips in Union County, the construction company to rehab the properties, a building supply company that wholesales raw and finished materials, and an education company that allows investors to engage in joint ventures as they “learn and earn.” Gabe also appeared on BiggerPockets podcast #258 where he gave listeners an in-depth look into his massive flipping business.

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Gabe gave us an inside look at something very important to him and any real estate entrepreneur looking to really scale their business — effective systems and processes.  With all the moving parts that are required for one deal, just imagine a business that is doing hundreds per year! With that much complexity, it is important to have proper systems in place for quality control to make sure that no detail is overlooked when growing your business. Of all the systems he uses, Gabe mentioned that the most important is his bid and labor tracker. He explained that this helps the organization keep a record on how much they are bidding on different contracts and more accurately reconcile their books every quarter. Finally, Gabe gave an example of just how important have a replicable process for doing business is so important. Unfortunately, one day his lead project manager decided to leave the company on short notice. Gabe himself had to immediately step into this role and expressed that while there was a short period of initial chaos, he was able to effectively manage and keep the business afloat because they had taken the time to establish these processed which made his life much easier trying to juggle multiple hats within the business.

 

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