What is the best way of doing due-diligence on a Syndication deal?

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What is a Syndication? Go here.

 

What is the best way of doing due-diligence? First of most LP investors are not able to underwrite a deal. In fact, it is very rare that a pitch deck has even an ounce of raw data (rent rolls, profit and loss statements from the last 1-3 years, or rent comps). Secondly, even if someone were to plop the data in your lap what would you do with it without a working model (spreadsheet). It took me a couple years of analyzing a couple hundred deals with full financials to get the hang of it.

 

Alright… so how do I do it?  The way I do it again is 50% the numbers and 50% the person/operator. If you don’t have the numbers side then focus on what you have the ability to control. So that is the people side where you work with people with good integrity and track record. The difficulty is that verifying the track record is very difficult to accurately verify because of the nature of private placements since it is private after all. So how do you do it? I call it “Investor Proxy” where you never invest in anything without having a good referral from another peer LP investor who is not getting paid a referral or marketing fee and is putting in their own money. That means you need to build your network with other high net worth investors which are not found at the local REIA club or free internet forums because that is where broke people hang out that are not private equity investors. This is why I am shamelessly plugging my Passive Investor Accelerator & Mastermind where the members have found me through my podcast, hung out with me in Hawaii, and I have curated the right personalities in this potent group. The only way you are going to build your database of deals and operators is to start with a network of other passive investors… the only way to build that network of other passive investors is to build organic relationships… not one beer/cocktail/phone call relationships. You need to go deep and grow real relationships. Real estate is a people business and part of the Hui Deal Pipeline Club foundation where we don’t work with anyone we don’t know like and trust.

 

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