3 Key Elements Passive Investors Should Look for when Choosing an Operator to Invest With
1. Rock Solid Team This is a major factor when deciding to go with one operator vs. another. It is crucial to make sure that you, the passive investor, know the competency of the team that will be managing the asset in which you have your hard-earned money invested in. I had the chance to speak with a passive investor and they mentioned to me that they don’t mind if a team member doesn’t have a track record, since they may be new to real estate, but what does matter is that the less experienced member is intelligent and has an experienced team around him or her. What does an experienced team look like? Ideally a champion team has members that have experience in syndications and bring a wide range of strengths to the table. A diverse, experienced, and diligent team is key to finding success when investing in real-estate syndications. 2. Effective Communication A passive investor who has money invested into a syndication deserves to know how the property is performing and have direct access to the operators with any questions. People need to realize that a real-estate syndication is essentially a long-term relationship and, as we all know, communication is an integral part to maintaining a successful relationship. Therefore, you should always ask the operator(s) how they plan to communicate. Do they provide quarterly or monthly updates? Do they provide their personal cell phone numbers to call or text with any questions? Will they update you with bad news? This is such an important area to be fully confident in so make sure to do your homework, and only invest with transparent operators who communicate effectively. 3. Operators Who Also Invest in the Deal I don’t know about you, but if I were to invest my money with someone, I would want to know that he or she truly believes in the deal. There is no better way to prove that than by seeing the operator invest their hard-earned money into the deal too. This is something that you should always ask the operators when discussing an investment opportunity. It also helps create peace of mind knowing that everyone has skin in the game. Now, I want to mention that there are times when the operators will not have any of their own money in the deal. Why? This is because there may be other passive investors wanting to get in on the deal. Since the operator is not investing their own money this would then allow more passive investors to benefit from the investment. In the end, I would advise always asking if the operators plan on investing in the deal. It is good to know where they sit on the topic.