There are typically 6 roles that must be fulfilled on your GP team (not necessarily by 6 people but all need to be addressed). Additionally, there is often crossover.
For example typically everyone raises but some are more connected to be able to raise more and better at managing those relationships. Everyone underwrites to determine if the deal is worth doing but usually someone is particularly gifted at it. Here are the 6 roles:
The Dealmaker
Do you live in or near your target market and are great at building new relationships? If so, being the “boots on the ground” might be a good fit for you. You can help with sourcing deals, and this largely comes from building relationships with brokers in the area. Live across the country but think this still sounds like a good fit? No problem. As long as you have the time and resources to travel frequently.
Building these relationships takes time. Brokers are the gatekeepers of most deals and it is highly unlikely they will give you the time of day if you don’t make an effort for face-to-face interaction. When you are just getting started, we actually recommend finding a deal in a market you are not interested in and calling the broker. That way your first time talking to a broker isn’t with one in a market that you care about anyway. Good way to practice (just don’t waste too much of their time!). Live in the area but not much of a people person? That’s ok too. Maybe underwriting is better for you.
The Underwriter
Are you analytical? Can you stare at a screen for hours on end? Do you love numbers and spreadsheets and crunching data? Well, you might be a great underwriter! This is an incredibly important piece of the puzzle, as it is where all the projections come from, and ultimately directs what you can offer on a property based on your target returns. Even if you are not the primary underwriter, all team members should have familiarity with this and be able to give an independent review.
The Investor Relations Manager
How big is your investor database? Do you know people who are willing to invest with you? All sponsors should participate in capital raising. However, if you have a network of potential investors ready to deploy their capital, you can bring value to one of the more difficult aspects of syndication.
One thing we want to caution is that there are strict SEC rules against being compensated solely for being a capital raiser without a broker dealer’s license, so make sure you also have other clearly defined and substantive duties on the team throughout the hold of the property. Being able to raise $1-2mm with ease is a good start. In other words, never call yourself “Capital Raiser” as that cannot be your sole job unless you have a broker dealers license.
The Experience
Do you have an impressive real estate resume? Experience is the one piece you can’t learn from a module or in a book. One common theme you’ll find in the group is people who joined around the same time gravitate to one another and try to find deals together.
This is great as they can learn and grow together as they find who they click with for future partnerships. The only issue is typically none of them have the resume piece of the puzzle required to land these large deals. So just be sure that as you are networking you are also spending time getting to know veterans who can join you on deals you find, or who will bring you in on their deals until you yourself are experienced.
The Baller
In order to qualify for a loan on these large apartments, a significant amount of net worth and liquidity is required. One way you can add value is by bringing an impressive Personal Financial Statement to the team. This will help limit the amount of GP’s needed in the deal, which in turn increases GP returns as they are split between less people. You can also get a start on your resume by being a Key Principle, which basically means you bring your net worth and liquidity to sign on the loan without being a GP.
Sometimes KP’s are compensated for their role in securing the loan, other times they are willing to be a KP without compensation just to have a large commercial loan on their resume. Whatever the case, being open about your financial strength with others in the group as you network could find you in a deal faster than you’d think.
The Asset Manager
This last one provides a nice bookend to the first, as this is typically done by someone who lives within driving distance of the property. While living nearby is not a requirement to be a good Asset Manager, it will help investors have confidence in your team if the Asset Manager is able to check in on the property at a moment’s notice, especially when new. The Asset Manager is there to ensure the property management company is keeping things on track and that planned renovations are going as scheduled. They hold weekly calls with the Property Manager where they review Key Performance Indicators (KPI’s) such as delinquencies, vacancies, new leases, etc.
The Asset Manager ideally has experience in running a business or has a background in business or construction management. Ultimately the performance of the property hinges on the ability of the Asset Manager to execute the business plan, which is why there is usually an Asset Management Fee (typically 1-3%) for their ongoing duties. The more experienced they are with a proven track record, the higher the fee they command. You may not be the Asset Manager on your first or second deal, but don’t miss the opportunity to learn from whoever does have this valuable role and be willing to provide support as a junior asset manager!
Granted permission by SmartSyndicator.com to re-post article.
If you’re interested in learning more about this topic, click here.
If you are interested in future investment opportunities, click here.
Kelsie Mans-Ray
KMR Multifamily Acquisitions / Syndicator
NOTE: This information is of a general, educational nature and may not be construed as tax, financial, or legal advice pertaining to your specific offering, exemption or situation.
