The operator is the keystone to success in passive investing, according to syndication veteran Steve Suh. If you’re new to passive investing or you just want to learn more about investing in private real estate syndications, listen in as Steve talks about the blog he wrote called “13 Lessons Learned From 13 years of Private Syndication Investing”. He gives out valuable tips and best practices for conducting due diligence, vetting sponsors and operators, and avoiding common pitfalls. He also emphasizes the importance of vetting not just sponsors but also the operators who actually manage the properties and assets.

Here are some power takeaways from today’s conversation:

• Learning from people’s mistakes
• The importance of networking
• The operator is the keystone of every syndication.

Episode Highlights:

[05:50] Network, Network, Network

Steve's insights emphasize the importance of networking in money management and investing. Through virtual networking sessions and forums, he has gained valuable knowledge from others, allowing him to connect with like-minded individuals and explore diverse investment opportunities. Steve highlights the value of private forums, where he can interact with fellow investors and access a wealth of information, enabling informed decision-making and reducing the need for trial and error. Networking is especially crucial in passive investing, helping investors distinguish between good and bad syndicators. Steve's positive experience at the 2022 Meetup in the Left Field further highlights the energy and collaborative environment that networking creates. In summary, Steve's insights underscore how networking empowers individuals to learn, access valuable information, and connect with professionals in the field, ultimately enhancing their chances of success in passive investing.

[11:12] The Operator is a Keystone of Every Syndication

Steve compares the operator to a central principle or part on which all else depends, similar to a keystone in an archway. The operator is the one who runs the show in terms of the asset, such as the placement and management of ATMs. While there may be capital raisers and syndicators involved, it is the operator who handles the day-to-day operations. Steve emphasizes the importance of thoroughly vetting not only the sponsor but also the property management team. Understanding who is actually running the show and speaking directly with the operator or property manager ensures that investors are not deceived by just the sponsor or syndicator's claims. By delving into the granular details and gathering feedback from other sponsors, investors can make informed decisions about the operator's capabilities and performance.

[14:30] Pay Attention to the Capital Stack and the Debt Structure

Steve acknowledges the challenges faced by syndicators due to rising interest rates, particularly with bridge debt. Many syndicators got caught up in value-add deals with variable rate loans, leading to capital calls and foreclosed apartment complexes. This is usually due to complacency and not fully considering the potential impact of rising interest rates. Therefore, Steve emphasizes the need to carefully assess the debt structure and its potential vulnerability to interest rate fluctuations to mitigate risks in future investments.

Resources Mentioned:

Tribevest

https://www.leftfieldinvestors.com/13-lessons-learned-from-13-years-of-private-syndication-investing/