I’ve invested in a number of syndications as a passive investor.
As someone with experience in real estate and investing, I feel like I have a good skillset to determine what constitutes a good investment versus a poor investment.
However, something I have learned through painful experience is that although some passive investments have been sound financially, the investor experience has not always been great. And nothing can be more frustrating (or scary?) than being in the dark, having unanswered questions, or being in a situation where communication is lacking, inconsistent, or at worst, non-existent.
I’ve dealt with this personally on at least 4 different investments and based on this experience, my vetting process for future passive investments now prioritizes (i) communication skills and (ii) sound sponsor processes, to make sure that I never have to deal with poor sponsor communication again.
Really, there should be no excuse for poor communication. As an operator, making sure that investors have a great experience investing with you helps to build long term relationships with those investors. It should be table-stakes and I feel so strongly about this, that when we set out to form Equity Yield Group, we positioned “an outstanding investor experience” as one of the founding principles of our company.
Always perform Sponsor due diligence
Prior to making an investment with a sponsor it is important to perform your own due diligence not only on the asset, but also the sponsor. You want to have a clear idea of what you can expect from the sponsorship team during the life of the investment. It is Ideal to connect with the sponsorship team prior to any investment offering and have the opportunity to learn more about the sponsor’s investment thesis, operating procedures, and investor communications.
It is a good Idea to ask the sponsor for a sample of their investor updates and inquire about how frequently you can expect these updates. More importantly you should know the best method of contacting the sponsor should any questions arise during the life of the investment.
How responsive and transparent a sponsor is before an investment offering can give you a good indication of how responsive and transparent they will be after you invest.
Remember, as a passive Investor you are a limited partner in the business, and as such you should be treated with the respect and transparency deserved, in any partnership. At Equity Yield Group we recognize that we could not accomplish success without the contributions of all our partners, and we value the important role our limited partners play. Which is why our team work diligently to provide the best possible investor experience.