The effort and struggle are real for real estate investors who are vigorously buying real estate. There are several real estate steps like finding the right property, negotiating at the correct price, and managing all the funding. Above all, there is one more step of real estate that we cannot ignore, and that is finding the right investor to make the agreement actually work.

There are right parts of real estate, but you cannot neglect the challenges to find the property. You also need to find the potential for your investors. It is thrilling and terrifying as well. You do not only get to utilize your real estate and economic knowledge, but you also manage to channelize your vision and creativity. You perform all these steps to relocate or renovate a property, which later on helps in bringing in additional cash flow.

You put so much hard work on for real estate deals, which is why you deserve fees and commissions. However, there are challenges that syndicators face, but there are also ways to overcome them. 

Therefore, let’s take a look at the challenges and how to beat them.

Challenge 01: Finding Right Deals

We all know that the multifamily market is reaching the sky. Buyers are overbidding to get a hold of a multifamily property. However, this makes it more challenging and trickier for syndicators to find the right deals. The best prospects for syndicators are in Class-B and Class-C properties. These properties are value-addition ones that can raise the rents and will give the desired cash flow. 

  • How to beat this challenge? 

There are creative ways to find the right deals. The best option is to target off-market deals as they are at a reasonable price. Many tools help find the owner’s information, which is again a way to find the right deal. It is essential to stick to your investment criteria. Another trick is to avoid involving in a bidding war. As A Substitute, you can make sure that the deal you plan to go for has an appropriate IRR return. If the deal you are interested in does not hit the minimum returns of syndicators, don’t buy, except there is a perfect reason to do so.

Challenge 02: Upfront Costs of Property

The most critical challenge for syndicators is to deal with the upfront costs. Raising capital for repair is one thing that also includes the loan downpayment. However, there are also significant expenses until you raise that money. 

Some of the costs are:

Hiring a team of acquisition professionals.

  • LLC Formation.
  • The PPM, or Private Placement Memorandum.
  • Subscription Agreement.
  • Operating Agreement (OA).

Other costs like property appraisal, a property survey, per-unit costs lease audit, property condition assessment, phase 1 environments, and earnest deposit are also the upfront cost for syndicators.

As you can see, all the costs mentioned above add up pretty quickly, and it also represents a possible financial barrier to first-time syndicators.

  • How to beat the challenge? 

There are ways to avoid upfront costs. First, you can borrow the money, but you need to pay 7% or the higher interest rates on that money. The second option is to pay for upfront costs by merely using a chunk of the property’s equity.  The third option is to find a partner who can share the burden.

Challenge #3: Separating Yourself from Others 

It is not a doubt that Syndicators find properties, and then they negotiate prices. The next step they follow is to find the right investors, and lastly, they put the funding together to make it happen. Yes. The majority of the syndicators indeed work in similar markets, and often they go after similar deals. The challenge remains there to find a particular position for yourself as a unique and creative syndicator and, above all, different from everyone else.

  • How to beat the challenge? 

Only creative and innovative thinking can help you gain a competitive advantage. The unique professional background is always intriguing to investors. Your unique skill set can help you attract investors. The other option is to aim for those investors that other syndicators often pass on. 

Challenge 04: Lack of Experience

If you are a new syndicator or are just starting out, it is a challenge to stay in the real estate market. Investors and sellers’ first preference is to have an experienced syndicator.

It is their right to be cautious about working or investing with someone who has zero experience. In simple words, it is similar to the chicken and the egg problem. Without any real estate business experience, you, as a syndicator, cannot buy deals and raise capital. However, without any deals and capital, it is impossible to gain experience, isn’t it? 

  • How to beat the challenge? 

Before entering the market, try gaining some experience by working with a syndicator. It will help you learn to evaluate properties, to establish the reasonable purchase price of the property. The other option is to find the right partner with a  successful track record.

After you gain the knowledge and required experience by working with a partner, you are prepared to handle the syndication deals on your own. 


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