How To Avoid Syndication Mistakes

In this podcast, Gino Barbaro, co-founder of Jake and Gino, shares two mistakes that passive investors and sponsors make.

The first mistake passive investors make is not having a return of capital clause in the deal or having one that doesn’t return all of their money. This means that the passive investor may not get all of their money back before the general partners take any profit.

The second mistake passive investors make is not asking about fees. Gino suggests that a reasonable acquisition fee is 3% of the purchase price. He also recommends that passive investors push back on any fees that seem high.

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The first mistake sponsors make is not having a well-defined business plan. The business plan should explain what the sponsor plans to do with the property and how they will achieve their goals.

The second mistake sponsors make is not having a team with experience in running real estate. The team should include people with experience in property management, asset management, and legal matters. Gino recommends that passive investors ask for a list of the team members and their experience.

In conclusion, Gino recommends that passive investors be careful about the deals they invest in and that they do their homework on the sponsors. He also suggests that sponsors should have a well-defined business plan and a team with experience in running real estate.