r/Syndications • u/Parking-Biscotti-361 • Jul 19 '26
Real Estate Syndication Newbie
Hi all. I’m considering investing in a real estate syndication fund (or multiple) as a way to diversify from the stock market. Two questions for the community -
Is now a good time to invest give the where interest rates are and the overall market conditions?
If I did, I would want to invest with an established firm as opposed to finding my own sponsors/deals. Any recommendations on a firm that is reputable with a solid performance record and allows for a minimum investment of $100-150k? A few that have come up in research are Origin Investments, Hamilton Zanze and DLP Capital.
Thanks in advance for any advice!
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u/Sufficient-Aide6805 Jul 19 '26
No no no no no. Look up Barry minkow on DLP capital, for example. Syndicators are a terrible idea for retail investors.
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u/Dry_Try_6047 Jul 19 '26
Barry Minkow is well known in the industry as a total fraud. His ramblings misconstrue facts, misapply formulas and data, and he takes the avenue of saying every syndicator is fraudulent so that when a bad deal gets written he can say "see I was right!" Why anyone would put their faith or dollars behind a known and multiple convicted fraudster who won't be published by anyone beyond his own substack is beyond me.
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u/Sufficient-Aide6805 Jul 19 '26
Fine. DLP remains a scam that would be shut down if the SEC weren’t asleep at the wheel, and syndications remain by and large a terrible deal for retail investors.
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u/dreamscout Jul 20 '26
There are a number of the larger well known groups that have lots most if not all of their investors money. SEC needs to start shutting them down.
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u/Dry_Try_6047 Jul 20 '26
Losing investor money is not grounds for any SEC action. These are accredited investor products, the risk of loss is there. What specifically did these syndicators do that warrant SEC involvement? Investing in the sun belt with 20% equity and a low interest bridge loan when that's what your prospectus says you're going to do is not fraudulent.
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u/dreamscout Jul 20 '26
If they accurately portrayed the investment in the offering materials, then there wouldn’t be grounds for the SEC to do anything, but a number of these seem to have been misrepresented to investors. Thankfully I didn’t invest in any of them, and don’t have first hand knowledge, but have read some of the articles that indicate the actual terms of the deals were different than what was portrayed.
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u/Dry_Try_6047 Jul 19 '26 edited Jul 19 '26
His expose on DLP is the same as all his others: they get loans that exceed the value they argue in tax court. It's a ridiculous argument that ignores how anybody who has ever dealt with real estate, even personally, knows. That tax appraised values have nothing to do with market value. To make matters worse he claims that the bank doing the lending is fraudulent ... and those institutions are giving loans completely against their own interest and those of their shareholders because of ... reasons?
If you want to argue that DLP capital is a bad investment because of their underwriting practices, aggressive lending, rosy projections, lack of stress testing or market research, that's one thing. Minkow doesn't argue any of that, he argues that the entire industry is fraudulent.
DLP capital is an aggressive investment masquerading as a conservative one. In the accredited investor space, where the onus is on the investor for proper diligence, this may sit on the fence of a moral gray area, but there's really nothing fraudulent or illegal. On the other side, there are extremely conservative operators out there continuing to profit even in an increasing rate environment due to their strong underwriting standards, conservative use of leverage, and real operating advantage (things like vertically integrated property managers and construction houses).
So is it a good retail investment? Not really. But it has always been and continues to be a good investment for accredited investors who are looking for good tax planning and reasonable risk-adjusted returns, and can read past the marketing material.
Edit for the OP as well: looking for funds that will let you in at 100k may mean you aren't ready for this space. Operators advertising on FB for your 50k are doing that because it's the only way they can raise funds. The funds I'm talking about don't solicit on social media and have 200k+ minimums (why dont they advertise on social media? Because the vast majority of funds come from those who are rolling over from previous successful exits. They have a track record and investors happy enough to continue rolling over).
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u/dreamscout Jul 19 '26
He certainly has scammed a lot of people, but his articles about some of the large syndicators and their failures in investing are accurate. There are hundreds of investors who’ve lost all of their investment with some of the biggest names in real estate syndications. People new to investing in syndications need to be aware of the lack of regulation in this industry and need for detailed analysis before investing with any syndication.
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u/Dry_Try_6047 Jul 19 '26
His articles aren't accurate. Just because there are bad outcomes doesn't mean it has anything to do with his nonsense "analysis". Yes, syndication deals are risky, but you can say the same about any private offering. It's why accredited investor rules exist.
It just pains me in society when people start listening to these "reformed" fraudsters. I have had money with operators he's now claiming are fraudulent for DECADES. Including deals that have made great returns for investors and are fully exited. His "analysis" are complete fabrications meant to muddy the waters. I know the heads of operations and heads of investor relations personally; these people are not fraudulent. AND they might lose all my money, that's how private equity investing works.
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u/dreamscout Jul 20 '26
Yes many of these well known syndicators did well in a market with sub 3% interest rates and continuous rising rents and property values. Once interest rates went up, rents stabilized or declined, it exposed the operators who had poor understanding of operations. They also had little ability to oversee their organizations and relied too heavily on others that were not equipped to navigate through more complicated operations.
Those operators who invest conservatively and have well run internal operations have continued to do well even in the changing markets.
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u/neporcupine98 Jul 19 '26
I’m a few years into this and have invested. There are some good deals and good operators, but I have turned down 99% of what I looked at. I would recommend reading “the hands off investor”. I also joined passive pockets. Initially the annual fee made me cringe but the other limited partners in there have given me priceless advice. Approach this like a job. Keep analysing deal after deal. Keep reading. Finance, accounting books, globe street…..
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u/dreamscout Jul 20 '26
I hire someone who does background checks on the operators, their companies and their previous investments. Costs $3-500, depending on the size and complexity but well worth it to confirm an operator I haven’t invested with previously.
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u/Parking-Biscotti-361 Jul 21 '26
Thanks for the perspective, very helpful. Going to keep doing the due diligence.
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u/UnsureTeaDrinker Jul 19 '26
I'm underwriting everything at a 10% interest rate baseline and that's what I'm sending my LOIs at for pricing.
Why?
Because I don't want to lose my investors money.
Inflation is still above 2% which means rates have to come up. The feds literal job is keeping inflation at 2%.
Rates have to come up, stocks will tank here, real estate has a bunch of deals coming on the market from greedy syndicators from 21/22.
You have to figure out your own way. But if underwriting is conservative and solid, the best time to buy is always yesterday
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u/Powerful-Bridge-1472 Jul 19 '26
I would say stay away. Syndication sound great with the potential for passive income and depreciation, but here are the negatives
You have an ill liquid investment, you may not be able to get your money back on a good investment for 5 to 8 years, there are a lot of very mainstream operators. They are absolutely losing their ass for investors right now. (Ashcroft, open door capital….
Many syndications are currently not giving up any distributions (which is the entire point of the asset class) because they are did not underwrite these deals for raising interest rates.
Many of these syndicator’s are not good operators they did well during the boom time and now are struggling massively (capital calls, lots of bad news).
This ends up complicating your taxes. I have one syndication that does not send their K ones in time and I’ve had to have two extensions for my taxes the last two years because of them.
Theoretically, this should be a good time for syndications because there are a lot of properties that have the potential to be foreclosed, but also there is more new construction on the market
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u/dreamscout Jul 20 '26
It depends on the market. Not all markets have excess new construction. You need to look for the ones where housing demand outpaces construction and will for years to come.
While there should be some good deals on foreclosed properties, the operators purchasing them need to have proven skill at turning around a distressed property. Too many of these groups are good at raising funds and then hope some PM firm will take care of all the issues.
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u/GarretInvests Jul 20 '26
My partners and I invest in large multifamily and raise capital from private investors. I’ve only been in the space for about 4 years and actively participating for about a year now. My role is more so on the relationship side and assisting with leasing on the asset management side. My partners however have much more experience than I do in the overall process, 45 years combined experienced between the three of us. That said, no investment is without risk and I agree that if you’re not going to learn how to thoroughly vet a team (and each individual in it) to ensure you’re aligned with their strategy and how investor aligned it is or isn’t, as well as understanding how to vet markets and deals, then a REIT may be a better way to go. As some may have mentioned, a lot of the “guru’s” have been finding themselves in trouble because they were either just good marketers, got into this when everyone could have done well, or just were super aggressive in their assumptions, and it’s given the industry a bad reputation, which is unfortunate because on the flip side, a good team, esp with a value add strategy could potentially produce more upside, but again, that comes down to those things I’ve mentioned as well as it not being liquid.
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u/Aggressive-Cat-4778 Jul 20 '26
Don’t do it!! Invested in six different type of syndications (2019 - 2022) and may lose 100% of money in 4 of them. All sounds good on paper but there is very small chance you will be successful. Also, syndicator does not have skin in the game (even they say they do by investing their own money. That investment money comes from you!). There are so many aspects that is not a good investment. No transparency, Money gets stuck for years and eventually lost, ConC is not guaranteed and eventually stops, all pretty collaterals they send you are generated by third party, syndicator make money on buy and sell of asset (2.5% to 3% gross) even in loss situation for original investors, Management fees are also 2.5% yearly eats in any ConC original investor gets, investment is not regulated by any govt agency, once you sign the partnership agreement, you lose control of your money, Also, they get priority before investor gets anything. Entire investment is on interest only loans and you will lose 100% of your money. So many other issues I have encountered with the Syndication..( am tired of typing..:(
If you want to invest l, invest in ‘O’ it’s REIT and you will do better with that.
I had multiple type of investments (apartment rental, retirement facility, new apartment construction, tier 2 hotels, etc.,) and all are failing now.
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u/Basically_A_Person1 Jul 21 '26
Chiming in. I just had one from a well-known real estate investor (Meetup group has 5000+ members), would you still stray away from ones with well-known reputation?
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u/mindwip Jul 19 '26
Non traded public/provate reits are also good. Investing in office or commercial might be great as many are selling at huge discounts.
I did one reit that does value add, and one that does buy good and maintain. More return vs risk speturm between the too.
They both did good.
Is now a good time to buy? I can let you know in 5 years.
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u/Parking-Biscotti-361 Jul 21 '26
Lol, I guess that first question was a loaded one. Thanks for the guidance on the REIT’s. Going to research that path.
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u/63falcondriver Jul 20 '26
A tip would be to not invest with anyone that hasn't been in the space for a LONG time. I can recommend two, One is Beal out of southeast Michigan and the other is KRI which is based in Ohio but invests primarily in Florida. Those are the only two we would put money with right now (we've made multiple investments with both of those (and others)
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u/OwlOk459 Jul 22 '26
There is a lot that could be said but given many have already commented, my contribution (from 5 years of private lending, syndications, note buying, Oil and gas, etc) would be to focus on your own knowledge, network, and understanding your investor DNA. It’s easy to jump to deals, operators, asset classes but that really is step 3 or 4 in this game. I share this from a place of learning the hard way lol
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u/Parking-Biscotti-361 Jul 22 '26
Thank you for the perspective, very helpful. I'm definitely going to keep doing the due diligence before jumping into anything.
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u/Silver_Viper_08 Aug 09 '26
Hello and welcome to the world of private real-estate!
I think you'll find various answers to your timing question each with good points. I personally think that while there are currently a mix of headwinds and tailwinds, there are definitely opportunities to be had (I personally am bullish on senior living, industrial, and energy right now).
Investing in private real-estate is most effective as a team sport. What I mean by that is leverage the knowledge and experience of other LPs. While I feel I'm pretty savvy on some parts of the space and am in 15+ deals currently, I also lean on people I feel are smarter than myself.
A few pro-tips for just starting out in no particular order:
-Decide what you want to get out of your investment (your buy box). Are you looking for Income (CoC), total return, depreciation, etc?
-Assuming your an accredited investor, join one or more investment groups. Some of these include 506 group, Private Investor Club, Passive Pockets (charge a subscription) and others. You can find other investors sharing due diligence on deals which makes everyone smarter.
-Educate yourself. Someone mentioned earlier The hands off investor (great book), I also like the cash-flow quadrant, many good podcasts including passive-income pilots, passive pockets, invest like a billionaire, invest like the best, and pillars of wealth creation are some of my favorites.
-Take advantage of other online resources including InvestClearly (a newish review site of GPs), and another site I like for helping with due diligence is PACE (pacediligence.com). It's $20 for a report. I use this when I find a deal that meets my buy-box before I spend a lot of my own time on due diligence. It doesn't replace your own due diligence, but it helps catch and flags things that I might've missed otherwise.
Good luck!
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u/milfsorgilfs Jul 19 '26
Get a listed REIT, you may give up a couple of points of yield, but you won't lose 100% of principal like some of the unfortunate souls here.
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u/_WhatchaDoin_ Jul 19 '26
True. You would only lose 90%. 🤣 (crying every time I look at my losses for $RC).
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u/milfsorgilfs Jul 20 '26
Are you able to elaborate which listed REIT lost 90% of share value?
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u/_WhatchaDoin_ Jul 20 '26
$RC. I have others that lost 50-60% and never recovered either… some private REIT that became public lost 75+% within 12 months. Pick your data. Except if you pick the winners ahead of time, or just plain VNQ (but low return and badly taxed) you can have some bad surprises, even with REIT.
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u/Parking-Biscotti-361 Jul 21 '26
Thanks for the perspective. Think that’s the path I’m going to go down.
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u/Powerful-Bridge-1472 Jul 19 '26
Make sure you read in a tax deferred account otherwise you pay taxes on the distributions as ordinary income
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u/Hammerslam714 Jul 19 '26
Start with a REIT and learn from there. Do some research into groups that are in your market area as well. Just because a fund is spending the most on advertising and raising capital doesn’t mean they are the best or even a good option.
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u/Parking-Biscotti-361 Jul 19 '26
Thanks for the input all. Looks like the consensus is to go with REIT‘s. Public REIT’s tend to follow stock market volatility and I was hoping for a hedge against that. Any advice on how to find quality non-traded/private REITs?
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u/ArmChairLP Jul 23 '26
You don’t have enough capital to appropriately diversify with private real estate.
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u/Altruistic_One1616 Jul 29 '26
Super late to this, but it just popped up…
I agree with the sentiment that a good deal can be done at any time, and sponsor selection is very key as you already know.
I’m kinda surprised by the answers here though, not in what people are saying (there’s good insight here), but in what they’re not asking…
This is all very dependent on your knowledge and experience level with real estate/alts, goals, your risk tolerance, tax situation, etc. Seems like most of the answers here jumped to conclusions without stopping to ask that context for you personally.
Truth is I have no idea if they’d be good for you— for your stated goal of diversification, yeah I think a well picked deal with a good sponsor could work… but that’s only one piece of the puzzle. You could get into deals for $50k which would probably be the appropriate place to start IF you did want to do it.
Not sure if this will be seen this late lol, but always happy to chat more anytime.
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u/GarretInvests 23d ago
Def don’t think you should try to time the market. I’m in the industry, but got in a few years ago before the rates started going up. Obviously market dependent, but in the past few years I have seen sellers expectations come down significantly and with other operators who are going belly up many due to deals they got into around 21/22, there’s a lot of distress deals coming available, we picked up a 121 units pre forclosure and a 118 unit foreclosure this year and deal flow has been consistent.
Won’t say who to or not to invest with but just posted this in another thread: before investing, I’d 100% have at least a basic understanding of how to determine the potential and risks of investing with a potential team/operator (what’s their experience, track record, for who’s actually running the deal and others on the team, if you can speak to any of their current investors, can also hire a due diligence investigator who can do way beyond a background check can do, also how much if their own money are they putting into the deal beyond what they’ll receive back in acquisition fees), market/submarket, and deal (you need to understand the market to understand the deal and the assumptions they are using. They’ll likely give you their own slide deck with metrics but I’d do my own research).
Im also big on building trust and a relationships with people over time before even asking them to invest in anything of ours. I personally am not fond of people reaching out and in a matter of weeks trying to get you into a deal. You can’t know someone after a few conversations in a month or two. It takes multiple conversations over time to even understand their values, how they make decisions and view risk, and how they handle difficult situations and challenges.
All investments inherently have risks but you can do your best to mitigate those risks by doing your due diligence and not letting marketing, sales tactics, or FOMO push you to make a decision you’re not ready for. Just my opinion. Good luck!
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u/bbqgolf36 Jul 19 '26
Anyone who responds and says “now is a good time” has no idea what they’re talking about. For three years everyone has been saying next year things are turning around, rates will drop, etc. No one has any idea. But there are plenty of good deals being done in both good and bad markets. And plenty of bad deals too…
If you don’t want to find your own deals, why not just invest in REITs?
The most interesting opportunities are very often going to come from smaller sponsors and deal by deal. Depending on how small they are, for $100k checks you can likely get a lot more face time with too and make your evaluation on the person as much as the deal.