5 Things Every New Investor Should Do Before Investing In Their First Real Estate Syndication

17April, 2020

5 Things Every New Investor Should Do Before Investing In Their First Real Estate Syndication

By Shirley Xu

When you invest in your first syndication, it can sometimes feel like you’re doing so in a vacuum. You’re trying to learn all the lingo, review deal packages, and make the leap of faith in committing a huge chunk of money into a property you’ve likely never seen in person.

When I first started investing in syndications, I certainly felt this way. I knew, logically, that there were plenty of other investors investing in the project with me, but it still felt like I was walking the path alone, and there were many fears and unknowns along that path.

I knew that, unlike investing in stocks with my online brokerage account, once I wired my money into a syndication, I wouldn’t be able to log in anywhere and “see” it, which was a terrifying proposition at the time. What if that money just disappeared into thin air? Where would I even begin to try to get my money back?

All these questions swirled around in my head, but I forged on. Over the weeks and months when I was starting out, I did a ton of research and talked to a ton of people. Every article I read and every conversation I had gave me a bit more peace of mind, until I was able to tip the scales and feel confident and ready to take the plunge.

If you’re in that same boat of considering investing in your first syndication, I’d like to share a few recommendations for getting through those initial fears and uncertainties:

Do Your Research
Ask Questions
Connect with Other Investors
Review Previous Deals
Take Your Time

#1 – Do Your Research

Education is the best way to fight back against the fear of the unknown. Investing $50,000 or more can be absolutely daunting, and you don’t want to spend the next several months or years with sleepless nights, worrying about your investment.

The best way to build your investing confidence is to do your research. Listen to podcasts, read books, and search through online articles and forums to gain different perspectives, so you can build a 360-degree view of the whole process.

Here are a few great places to start:

Rich Dad, Poor Dad – one of the best books ever written on financial freedom, the investing mindset, and the power of investing in real estate

BiggerPockets – massive online community of real estate investors. #rabbithole

Real Wealth Network – great source for info about some growing markets around the country

Podcasts

BiggerPockets Podcast (this is the podcast that originally got me hooked on real estate investing)
Best Real Estate Investing Advice Ever with Joe Fairless
The Real Wealth Show with Kathy Fettke
Lifetime Cash Flow Through Real Estate with Rod Khleif
Apartment Building Investing with Michael Blank

The Golden Bridge Investment Blog

In particular, these posts are a great place to start:

#2 – Ask Questions

This one requires you to get out from behind your screen and actually talk to people, but trust me, it’s completely worth it, and it can save you tons of time in the long run.

This is where forums like BiggerPockets can be extremely helpful, because you can see the questions that others are asking, which may be questions you didn’t even know to ask.

When you’re preparing to invest in your first real estate syndication, there are no dumb questions. We always love when our investors ask us questions, because it tells us that they’re thinking critically about the situation, taking it seriously, and doing their own due diligence. Those are exactly the types of investors we want to partner with, and those are the investors who will invest confidently and remain confident throughout the life of the project.

#3 – Connect with Other Investors

A syndication, by its mere definition, is a group investment. That means that there are others out there like you, who are in your same shoes or have walked in them before you.

You can find other investors through online forums like BiggerPockets, through local networking events, or by asking sponsors if they’ll put you in touch with some of their current investors.

#4 – Review Previous Deals

This is one that we highly, highly recommend to all our investors.

When you’re shopping for a new couch, it’s unlikely you’ll buy the first one you come across. The more couches you look at, measure, and sit on, the more you’ll know exactly what you want, and don’t want.

The same goes for real estate syndications. The first time you look through an investment summary, you might be completely overwhelmed by all the financial projections, data, and lingo.

However, the more investment summaries you review, the more you’ll start to understand the flow of the deal packages, how each sponsor communicates, and exactly what strikes your fancy.

#5 – Take Your Time

When we open up a new investment opportunity, it typically fills up within a few days. This leads new investors to panic, thinking that they’re missing the boat and that they should hurry up and learn everything so they can get a spot in a deal.

I’m here to tell you, there’s no need to rush. There will always be more great deals.

What’s important is for you to take the time you need to truly feel comfortable with your investment.

Allow yourself the time to do the research, talk to people, and consider alternatives, so that if and when you finally do invest in that first real estate syndication, you are confident and excited about every step of the process.

Recap

If you take away nothing else from this article, I hope you’ll remember this. Investing in a real estate syndication is a big deal. And it’s completely normal to feel scared, confused, skeptical, anxious, and maybe a bit timid.

Every successful investor started out in your shoes.

What separates those who successfully invest and build passive income, from those who give up and return to their old ways, is action. Plain and simple. In the face of uncertainty, those who take action will find success.

Enjoy the learning process. Enjoy being a newbie. Enjoy the adventure ahead.