How to Structure a Syndication Deal for Your Fund

Summary

This video discusses the fundamentals of syndication deals for first-time fund managers, emphasizing the benefits of syndications over funds due to their faster setup and fewer complexities. The speaker shares insights on managing investor expectations, including the responsibility of handling other people's money, especially accredited investors. They stress the importance of investing personal money alongside investors to demonstrate commitment. The video also highlights available resources, such as legal documents and expert support, to help managers structure and execute successful syndications while building their track record in real estate investment.

Takeaways

• 😀 Syndication deals are a great option for first-time fund managers to build a track record and gain experience.
• 😀 It's crucial to manage other people's money responsibly, but managing the money of credit investors (financially stable individuals) feels less stressful compared to managing the money of those who rely on it for living expenses.
• 😀 A strong commitment to the deal is shown by investing a significant portion of personal wealth, demonstrating 'skin in the game' to investors.
• 😀 Syndications can be set up quickly, often in a few days, and require minimal legal work compared to full-scale funds.
• 😀 Funds require more time to establish due to additional filings, legal work, and more complex structures.
• 😀 Syndication deals help first-time managers get started faster by simplifying the setup process and providing flexibility in deal structuring.
• 😀 The speaker believes that starting with syndications allows new fund managers to grow their track record and build credibility for larger future projects.
• 😀 It's important to consider the financial situation of investors, as the responsibility to manage their money varies depending on their financial position.
• 😀 The speaker uses personal investment alongside investors in syndications to maintain trust and prove their commitment to the deal.
• 😀 Legal resources, operating agreements, and mastermind programs are available to help first-time fund managers structure their deals and overcome challenges.
• 😀 The speaker's first 'fund' was actually a syndication deal, highlighting the potential of syndications as a starting point in the fund management journey.

Q & A

What is the primary difference between a syndication deal and a fund deal?

The primary difference is that syndications are typically easier and faster to set up compared to funds. Syndications require fewer resources, fewer legal filings, and can be established quickly, often within a few days, while funds take longer to set up due to more extensive legal work and filings.

How does the speaker manage the stress of being a fund or syndicate manager?

The speaker manages stress by ensuring they invest alongside accredited investors who are generally financially stable. They also mitigate stress by investing a significant portion of their personal wealth into the deals, which creates a sense of responsibility and commitment.

Why does the speaker feel less stressed when managing accredited investors’ money?

The speaker feels less stressed because accredited investors are typically financially secure and can handle potential losses, unlike other investors who may rely on the fund for their livelihood. This reduces the pressure on the manager to guarantee success.

What is the importance of 'skin in the game' for the speaker?

'Skin in the game' refers to the speaker personally investing a significant amount of their wealth into the deals. This is crucial because it demonstrates their commitment to the success of the deal and aligns their interests with those of the investors.

What advice does the speaker give about investing in syndication deals?

The speaker advises that syndication deals are a great way for first-time fund managers to get started. They recommend focusing on building a track record with syndications before venturing into larger funds.

How does the speaker view the role of operating agreements in syndication deals?

The speaker views operating agreements as an essential tool for structuring syndication deals. They mention that if you are part of their mastermind program, you have access to ready-made operating agreements and legal documents that can be used and customized for these deals.

What does the speaker say about the ease of setting up a syndication?

The speaker highlights that setting up a syndication is relatively easy and fast. It typically involves setting up an LLC and an operating agreement, which can be done in a couple of days, allowing the manager to start raising money and closing deals quickly.

What kind of investors does the speaker prefer to work with in syndications?

The speaker prefers to work with accredited investors because they are typically financially stable and can handle the risks associated with the investments. This reduces the emotional burden and stress for the fund or syndicate manager.

How does the speaker ensure accountability in their investment deals?

The speaker ensures accountability by investing their own money into the deals. This ensures that they are personally invested in the success of the deal and are less likely to walk away from it if challenges arise.

What is the benefit of launching a syndication for a first-time fund manager?

Launching a syndication is beneficial for a first-time fund manager because it allows them to gain experience and build a track record in the industry without the complexity and lengthy setup process of a full fund. This provides a quicker way to begin raising capital and executing deals.