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Commercial Real Estate Pro Network

Commercial Real Estate Professionals who work with Investors, Buyers and Sellers of Commercial Real Estate. We discuss todays opportunities, problems & solutions in Commercial Real Estate.
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Now displaying: Page 1
Jun 20, 2019

Q: Is there an area of risk or uncertainty, not necessarily with an insurance answer, but is there anything that you you feel is a risk that you are constantly aware of that you're that you work, to deal with?

 

A: I would say, the risk in the syndication world is the SEC.  

 

SEC rules and regulations require that you have a transparent operation. That is the key.  Making sure that we do the legal paperwork right. We have the investors; accredited, non-accredited or sophisticated investors to fill out the paper correctly.

 

The other thing is to have pre-existing relationship, that's huge!  A lot of people are advertising without keeping in mind what can it do if, people looked into their operation. So I would say it's better to really be on a cautious side and make sure that when you're doing 506B that you have pre-existing relationships with the investors and making sure that they are not spending every dime they own into your investment because there are a lot of restrictions in that.  A lot of people somehow, you know oversee that.

 

The other thing I would like to say is that you want to have the interest of the investors money foremost.  Even if I lose my portion and we have done it by the way in and some properties if the quarter did not go well, we wipe out our management fee or we don't take our portion of the cash flow.  

 

We want to give the investors their portion. So those things are very very important.

 

The risks can also be that I'm on the loan on non-recourse and recourse debt.  But the investors are never on the loan. So in a syndication, the most an investor can lose in an LLC is their investment in that one LLC.  I don't believe in series LLC. I don't believe in land contracts. I only like limited liability corporations. So that one property does not. Hurt the other property.

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