WS179: Understanding Blind Syndication with Chad Gallagher

RES 179 | Blind Syndication

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It is vital for a syndication property management company to establish its track record and credibility to be able to earn the trust of potential investors. Chad Gallagher, co-founder and Chief Investment Officer of SlateHouse Group, shares how they were able to raise $2 million through blind syndication. Chad describes blind syndication as investing without actually having the assets identified. Luckily, they have a bunch of friends and family who wanted to invest even without fully understanding the nature of the real estate business, and there lies the value of trust. Chad also incorporated a system using technology for smoother operations. In the end, it is important to anyone doing syndication to find a great asset and to have a system in place for daily activities.

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Understanding Blind Syndication with Chad Gallagher

Our guest on this episode is Chad Gallagher. Thanks for being on the show, Chad.

It’s awesome to be here. Thanks for having me.

Chad owns 200 units of mixed residential, commercial and multifamily, half of which were purchased through syndication. He also owns SlateHouse, which is a property management and realty company that manages over 3,500 units across Pennsylvania, Maryland and New Jersey. It helps investors acquire investment properties. He’s also the host of the Real Estate Hackers podcast. Chad, thanks again for being on the show. Give our audience a little more about your background and what you’re focused on.

My background actually started in technology. I have an engineering degree and went into digital advertising, which is a bit different obviously than real estate. I did that for a while and then started to invest myself in real estate. As we grew our portfolio, we really felt like we wanted a property management company that was heavy on the tech side that could scale with systems. That’s when we built our own property management company which is now where we spend all our focus is on the property management side. Helping both folks who may have a couple units, all the way to folks who syndicate that may have 200, 300, 400 units that they need to be managed across the mid-Atlantic. We cover Maryland, New Jersey and Pennsylvania.

I want to come back to the scaling with tech and talk about how you all utilize technology so well. Also, one neat thing about you is that you all have done syndication while also you’re managing many properties for other syndicators. It’s odd to find management companies who are also syndicating their own deals and have knowledge of that side of the business. Tell us about a syndication that you all did.

Ours was actually a little unique in that what we did was it was a blind syndication. In a sense of we raised the $2 million without having the assets identified. What we did was basically tell the investors, “We’ve been investing over the last few years and it built up a track record. We knew what we were doing.” We thought there was a big opportunity to go after three to fifteen-unit buildings. Essentially the theory was that the one to two-unit building has a lot of demand by both residential homeowners as well as that person who’s just getting to real estate. The building with over twenty units have a lot of demand from folks who are doing big syndications and raising big money. We were trying to split the two and said, “Let’s go raise $2 million, build out a portfolio of $7 million to $8 million in real estate, but let’s do that across a bunch of different properties across our property management footprint.” The theory that played out was that we could get better deals because the demand isn’t as high for those buildings that don’t fit in either bucket.

[bctt tweet=”People don’t ask enough about technology, but they are quick to ask about rates and experiences.” username=””]

You started raising money and you call it blind syndication. I don’t think I’ve ever heard anyone call it that. You all were able to raise money and you leverage your experience to be able to do that. Is that what you’re talking about?

Yeah, we did. Raising money, as anyone who’s done it, until you’ve done it, you don’t quite know what it’s going to be like. Sitting in front of someone asking for him to write you a check for $100,000, I don’t care how long you’ve been in real estate, but it’s a new experience. I was lucky. We basically have bunch of friends and family that had money they wanted to invest. They didn’t understand real estate but they wanted to diversify. I’m sure that’s a story that a lot of syndicators have gone through. It was amazing to me how many folks really wanted an outlet into real estate and they didn’t want to know the details. They wanted their money to be invested safely. That was important to them. Somebody they knew they could trust, who’s not going to run off with their money. We’ve just gone on to front of the family. They also love that we’re an operator. Anyone who’s been doing syndication knows that finding the asset is great, but how you’re going to operate the day-to-day is important. For us, the story was that basically, we’re going to find these three to fifteen-unit buildings and then our property management company is going actually to manage it. That was a story that people could connect with.

The operation is almost more important than the deal itself. You can have a fabulous deal but if you can’t operate it or if you can’t manage it well, then why does it matter?

When we were doing the blind syndication, a lot of people said that it’s going to be harder to raise money because normally people like to raise money against an asset that they know is coming like this fifteen-unit building in Roanoke or whatever. I’m a numbers guy and I wanted to go show them, “Here’s what we’re going to aim for.” At the end of the day, what I got back was, “Chad, we trust you. We trust what you’re doing and we like your operations and your systems.” They almost didn’t want to get into the details. They just said, “Use your best judgment.” A lot of people who are really in real estate gets so into the Excel pro forma and don’t realize that for the average investor, they want a safe place to put their money. The nitty-gritty of a real estate pro forma is honestly more than they probably need.

What types of properties did you end up syndicating?

We did a mixture and that was part of the story that by buying different kinds of assets, not just one, the syndication would be a little bit less risky. We bought everything from three to four-unit buildings. We did buy a fifteen-unit building and then we also bought an office building, which was not even part of the play. What happened was our property management company was looking for new headquarters that we could actually own and found a building that we were able to buy for way under value because we were able to offer essentially buy it in cash using the syndication money then get a bank loan. Essentially now we’re three-quarters of the way through that project. About two-thirds are already leased up. We will finish leasing it up. We will turn it into a co-working space where probably the property management company will be one of the tenants of the building. Other companies that we work with are also joining us in there then essentially refinance the entire building all owned by the syndication. The syndicators are going to own a wide variety of assets from an office building, co-working space to a fifteen-unit building, but also to some three to four-unit buildings that are in different cities.

RES 179 | Blind Syndication
Blind Syndication: Anyone who’s been doing syndication knows that finding the asset is great, but how you’re going to operate a day to day is just as important.

It sounds like you all created a fund.

We raised $2 million and when it’s all said and done, it will loan about $7 million in real estate. We’re excited.

What’s the long-term plan for that fund and those properties? Are you going to keep buying more or do they all have hold periods?

We told these investors that we were planning on holding for fifteen to twenty years, which is also really unique. It’s not like we told them that they’d get out in five. This is money that they have set aside for long-term retirement. It’s not a short-term play. The play is to literally hold these things for ten to twenty years. A couple we may sell if we bought it in a couple of years and we realized it wasn’t the right asset for us. It’s not performing like we wanted or something bad. It wasn’t quite our model. In general, we’re going to hold these properties for ten to twenty years and over time just let it pay down the mortgages. We had an interesting decision where we could either sell the properties or since these investors are really in it for the long haul, we could potentially even refinance them and pay back the cash but actually let the fund continue to own the asset, if it makes sense. Potentially give these investors some assets to pass on if they want. It’s interesting the way we did this. There are a bunch of things that are a little unique. This was what our investors wanted. They wanted a long-term play. They didn’t want short-term money. They were up there making a long-term bet on real estate.

That’s very unique. I like that though. That’s something I haven’t heard before. Planning to hold on that long and maybe even refi and hold them a lot longer.

We started going through the math of it, we actually made that sale between the taxes you’re going to pay on it and the closing costs. If you compare that to a refinance, it’s hard to argue you should sell the property. In fact, I can make a compelling argument that by refinancing, after taxes the investors are getting the same amount of money you would as if you were to sell it. If you have the right investors who are willing to put money aside and have at it for twenty-plus years with no other terms attached to it, it gives you an opportunity to potentially make a long-term bet that after taxes hopefully will pay off really well for everybody.

[bctt tweet=”There’s an opportunity to syndicate smaller deals.” username=””]

I like that you are a syndicator. You’ve owned lots of real estates. I was coming to you and talking to you about managing properties that I was looking at in your area. When I come into a property management company’s office, I’ll usually have four or five pages of questions. I want to understand how you all do business. I want to understand how you operate before I’m going to hand over this 100, 200-unit building and say, “I am going to trust you.” What does that normally look like for you? Maybe you could give some corners to the audience who are trying to find that management company for their new syndication business.

With SlateHouse it’s interesting because we’ve been doing this long enough. I know what to expect on the questions. I spend ten minutes explaining our company, which cuts to answering a lot of their questions, how we do things and how we charge. I talk a lot about the technology we utilize. If there’s one point of that I would have, I think people don’t ask enough about technology. They’re very quick to ask about rates, they’re very quick to ask about experience and all of that is great. They want to see a contract. They want to start to try to whittle down the fees. I try to explain to them that, “We fundamentally believe that the future of real estate like every other industry is going to be backed in tech. If you’re a good property management company, you utilize the best technology, number one, and have a plan for what the next three, five years look like to adopt more technology and/or build your own.” That’s important to us, but I would just say to other folks out there, people don’t dig enough on the technology front to understand what property management companies are using.

I wouldn’t always know what to ask about technology and that’s where I want you to help us also. I’m going to ask what software that you use. Obviously, I’m familiar with numerous different brands of software for management companies. However, there are going to be other parts of the tech side that I wouldn’t even know what to ask for. Help us know what we should ask. Let’s go down the tech side as much as we can.

Here are some things that come to mind for me. One is if you think about property management, a lot of it is workflow oriented. How does one of your property managers, your maintenance team, how do they know what to do next so they don’t forget to do that task? We spent a lot of time thinking about workflow. We have both a maintenance workflow technology where we’re putting in work orders. We also have a broader ticket system where if an investor has a very specific task like, “Increase the rent at this unit. Send me a lease.” What I find is that a lot of that communication sits in texts, emails and phone calls, which is super un-optimal because it relies on someone to actually remember to do a task. All of our incoming requests either get put into a work order or a ticket and that includes voicemails.

I would ask a lot about how does workflow work. I would bring up some very specific examples. If my tenant has a question about their lease and they ask the question, “How does that work? If I have something I need you to do, how does that work? Who am I talking to and how is that person going to remember to do it?” Even the littlest things like you ask someone to winterize an apartment because it’s vacant to make sure the pipes don’t freeze. That could be a $2,000 problem if someone just forgets to do that small little task. Every day our company is getting thousands of tasks, some are important and urgent, some are much less important. A lot about workflow and a lot about tenant experience. From a tenant point of view, everything from how is the tenant finding the apartment, how are they booking a showing time? Our tenants actually book showing times online. Once they move in, how do they request something? Do they have a tenant ledger? In the eyes of a tenant, how am I interacting with this property management company? What kind of tech are you using to enable that?

What do you suggest for workflow? Is it Trello and Asana and things like that? Is there some task management system that you recommend?

RES 179 | Blind Syndication
Blind Syndication: In this day and age, if you’re using one tech, you’re just cutting things short when there’s probably a lot more you can do.

We use a tech called Freshdesk. It’s a super flexible ticketing system. I don’t know if one is so much better than the other. We looked at a whole bunch and I think they’re somewhat interchangeable. The trick is adoption of the technology. We use AppFolio as our backend database to manage properties then we also use Freshdesk. We use about twelve different technology stats. A lot of times you ask financial companies, “What tech do you use?” They’ll say whatever is there one database. That could be a red flag for me a little bit because in this day and age, if you’re using one tech, you’re probably cutting things short. There’s probably a lot more you can do.

We use Freshdesk as our way of ticketing system and that even touched our customer service. If someone calls in and our receptionist answers the phone, before they transfer the call to the property manager, they’ll create a ticket. It’s another way to make sure that things don’t get lost. The property manager, if they answered the phone, they now have a second backup as a reminder. Imagine you’re a property manager, you’re on the road driving around in and you are in the middle of a showing and you’ve got a phone call and the phone call is, “Don’t forget to make sure the heat is turned on so the pipes don’t freeze.” You’d like to think that the property manager is going to go 100 for 100 to turn that into a request. We’ve found there’s some leakage until we tried to do is make it a ticket so that there’s that second barrier to make sure things aren’t forgotten.

If you’re managing my properties and I send you an email and ask you to make sure the heat is turned on or whatever, what can we do about raise rents? You’re going to create a task so it’s made sure that it’s followed up on.

What we actually ask our owners should do one better is if they’re up for it, just create a task out of the get-go. They don’t even have to email us. They could literally create a task, which is great because if the property manager’s on vacation or anyone’s gone, you right away turn it into a task and then our team assigns it to the right person because the person who does the task might not be your property manager. I found that the old school way of doing property management is the property manager does everything. The property manager does accounting and does billing. The property manager answers the phone, attends to the question, do the leasing and they’re scheduling maintenance. Our approach is yes, you still have a property manager, but we have other folks who specialize in accounting. The accounting people should be answering you accounting questions probably not your property manager. What it’s great is when you have a task, it can be assigned very quickly to whoever should answer it.

As an owner-operator, I would have an account like in Freshdesk where I could log in and create a task for you or something, right?


[bctt tweet=”We’re never going to shoot a 100% and we’re going to make mistakes along the way, but we’re just going to shoot a lot.” username=””]

That’s a great tool out there. It takes out the middleman too. It takes out that email process or the text and all that stuff.

I’ll give you one more example. This is something that we’re working on a bit more in-house. We also feel that even like the eviction process is something where tech and systems can improve things. We’ve been working at the state level to try to improve the ability to both file easier. Right now, filing evictions is this clunky old school process. All the way then to managing that task, whether that’s through Excel or some homegrown technology you build. We find it’s important to not just rely on a property manager to hopefully remember to file an eviction and follow up on an eviction. Everything else has to have a process.

For syndicators, the one thing I’m a big believer in is the process and using tech to nail that process down. If you own two units, you don’t need process. You can go out and see the property every month if you wanted to. You can check in on the tenants, you could collect rent by hand. If you’re going to try to syndicate and potentially build a portfolio of 300, 400 units, you can’t be going door-to-door collecting rent. You’re going to have to run a team. I find that if you can work with folks who have nailed the process and systems, it’s much easier to be able to rely on returns being more expected because you have a system in place.

Is there any other type of tech that you would recommend that we make sure our management company has in place?

We use one that is important and that is our tenants can book showing times online, which I find a lot of people don’t utilize that. I’ll meet with owners and they’ll say, “My tenants won’t do that.” If you’re looking for an apartment, we look at the data, 78% of people are looking for units on their phone. It’s not even on a laptop, it’s actually on their phone. If it’s a Sunday at 4:00, we find people do not want to have to call. It sounds ridiculous, but they’d rather book it right there. We’re a big believer in being on a book showing times online, sync with a property managers’ calendar so you can see when he’s available. It works really well.

I like that a lot. Most people, if they’re young at all these days, they don’t want to make eye contact with you much less talk to you. Obviously, they’re looking at it on their phone and where they could just hit the button. That’s awesome. It takes out all that time that you have to answer the phone and tell them about the apartment and figuring out your calendar and their calendar.

RES 179 | Blind Syndication
Blind Syndication: Even if you have a good property management company, the syndicators still should check in on each property.

This is why it’s so important. The reality is the person’s probably not calling you at 11:00 on a Monday because they’re working at 11:00 on a Monday. They’re looking at 2:00 on Sunday when honestly your property manager is not working and maybe even your call center is not up. To be able to book that showing time as opposed to if you call and leave a voicemail, then the property management company calls back at 11:00 on Monday when the persons at work, then at 6:00 at night, the person’s off work and they call, then you’re closed. It’s a really bad back and forth as opposed to just, “Here’s when we’re available, book a time and you’re off and running.”

Chad, going back to the syndication business a little bit, what’s been the hardest part of the syndication process for you?

I’m going to give you two. The first was honestly the first meeting I ever had where I ask someone to invest money, I just remember being so nervous and thinking, “There’s no way this person’s going to trust me with their money.” I think to get over that first meeting of looking someone in the eye and saying, “This is a safe investment for you and you should trust me.” That’s hard. I would imagine most people who did that would agree. It gets much easier as you work through those conversations, you feel more confident. You realize that you are providing a service that they probably need. The first meeting I ever did was unbelievably nervous. This is unique to how we did it. Probably the only thing that makes me somewhat second guess if we made the right decision is in terms of operating a syndication, we bought 80 units or so. If you were to buy 80 units in one building, it’s a lot easier to handle everything from accounting. If you’re closing on one deal or as we closed on like fifteen to twenty deals to make up our syndication and I remember saying, “We’ve got systems in place and we’ll be able to handle this.”

We did have systems in place, but it’s still been taxing from an operator perspective of managing that many assets inside the syndication. That’s probably one of those things that everyone says that makes a lot of sense. Clearly, there is a lot of value to being able to go in and secure one asset and put a lot of money at work at once from both the deal closing, but even on the ongoing process, everything from doing taxes to checking in on the assets. Even if you have a good property management company, the syndicators still have an obligation to really check in on each property. That’s harder if you have a bunch as opposed to just one.

As far as that first call, that first meeting you’re talking about, no matter how many times people tell you, you’ll have to realize that you’re providing an opportunity to them instead of asking for money. You’re still going to be nervous, but you just got to get in there and do it and get it over with. After so many times, it’s not a big deal anymore.

I have sweaty hands when I’m nervous. It was one of my friends and his wife. They could tell I was nervous. That’s one of the things is that you’re probably talking to people you actually know. I tried to be myself and not try to be this perfect investor who knows all the answers. The other thing was at first, I was trying to have all the answers and realized that I know so much more about real estate investing than 98% of people out there and for sure the people I was talking to. You don’t have to know all the answers. They’re happy if you know most of the answers and have well-thought-out answers. I basically told them that some of these things I don’t know. They said, “How many properties are you going to buy?” In my case, I didn’t know how many, but I had a plan and some logic of what we’re going to do. I found that was what they were looking for.

[bctt tweet=”Not every investor can predict a city’s value in the future. What you can control is how many times you’re trying to close.” username=””]

What’s something that other people can do to improve their syndication business that you would recommend?

One thing is not to feel the need to have to just syndicate 50 to 100-unit complexes. I find a lot of people who want to syndicate 50 to 100-unit complexes. I think there’s an opportunity to syndicate smaller deals. There’s still a play there to go out and get safe assets. We bought a fifteen-unit building and we bought it for $550,000 and that thing is probably worth $900,000 or so. That’s great syndication. That’s not bad syndication. There are a lot more of those than there are 100-unit deals, especially right now because it’s so popular. There’s so much money with low-interest rates flying in here. Yet there are still a lot of people, in particular older folks, who have owned ten to twenty-unit buildings for a long period of time, built in the ‘70 and ‘80s that make for a great syndication place. That’s one thing is not feeling like you have to do this 50 to 100-unit complex. There may actually be a really nice play there. It might be a little bit smaller but a single or a double along the way isn’t the worst thing either.

What’s the number one thing that’s contributed to your success?

I use a basketball analogy that we take a lot of shots. I’ve said this before on our own podcast. I think it’s true is that we always felt like we’re never going to shoot a 100% and we’re going to make mistakes along the way, but we’re just going to shoot a lot. When I say shoot a lot, that’s in everything. That means we’re going to go to a lot of Meetups because I don’t know which Meetup is the one where I meet the person who is going to help me. It means we’re going to put in a lot of offers because we don’t quite know which one’s going to stick and which one is not going to stick.

On the property management side, we’re going to talk to a lot of owners and begin a lot of conversations. We realize that a lot of the conversations are a waste of time, but we want to take a lot of shots. It sounds so cliché if I say, “Be willing to fail out.” I want to take that a step further. It’s not just being willing to fail, it’s trying a lot. That you can control, but you can’t control if every offer you put in is going to be accepted or not. If you put in 50, you can control that number. As the law, big numbers go. You talk to enough investors, you talk to enough homeowners or whatever you’re trying to do, you don’t have to be as accurate.

You can actually convert on less if you increase your volume like any salesperson would probably tell you. That’s been something that’s helped us. The reason I point to that so often is that any investor could do that. Not every investor can go out and find that city that’s going to take off and double in value over the next five years. That’s hard. It’s really hard to coach. What you can control is how many times you are repeating and trying to close or do whatever you’re trying to do. I think that’s something that investors have to take to heart.

RES 179 | Blind Syndication
Blind Syndication: There’s something about a free meet-up that lowers the bar that says anyone and anywhere in life at any age is welcome to learn.

How do you give back? People like to donate to certain things, give back or mentor or anything like that.

We do a couple of different things. One thing we do is run free Meetups. We run seven or eight different free Meetups. That sounds like a weird give back. I ended up talking to a lot of people in those Meetups that are just getting started. Those are conversations where I feel like I was there a few years ago. I didn’t know what I was doing and I was the one sitting at the back row of the meetup. Luckily, it was free because if they had charged me $100 to get in, I’m not sure I would have come. I know a lot of people charge for Meetups, but I think there’s something to a free Meetup that really lowers the bar that says anyone anywhere in life at any age is welcome to come learn. We have people that come to our meetups who are literally seventeen years old. They’re still in high school and they can learn.

We had an 80-year-old grandmother who’s still investing. To me, that’s awesome. There couldn’t be a more equal opportunity wherever you are. We don’t ask you how much money you have coming in, what have you done before? It’s totally free. It’s not a money-making play for us. I love connecting people and helping people out. Maybe that person who hasn’t had someone up until now who can educate them and sit down with them. Now, we can in a way that could literally change their life. That’s pretty impactful.

Chad, you’ve been a great guest. I appreciate your time being on the show and just laying it out. You raised $2 million for your syndication and I thought it was really neat. It’s blind syndication at that. That’s very interesting that you did that and how you leveraged your experience in being an operator of your management company. Also, how you went through technology and things that we need to be thinking about when we’re interviewing management companies and how technology is changing things. Tell the audience how they can learn more about you, your business and your podcast. If they’re local, maybe they can come to a Meetup.

Our company is called SlateHouse Group. The website is I’ll even give you my email, [email protected]. If you go there, you’ll see a list of our meetups, as well as more info on our property management company. Our podcast is called Real Estate Hackers. Essentially the idea of the podcast gets back to my tech roots. It is highlighting people’s stories of how they built real estate from nothing. We talked to people not so much about how they went from 300 units to 500 units, which often make great stories but more of these people who’ve been really successful. I want to know like, “How did you get started? How did you get off the ground? What was maybe your best hack?” I love those stories. They force people to be creative and people can learn a lot. Check us out. It’s and the podcast is Real Estate Hackers.

Thanks so much, Chad. I appreciate your time and I appreciate the audience being with us. I hope you all will also go to and connect with me and go to The Real Estate Syndication Show Facebook group so we can all learn from experts like Chad and other guests and grow our businesses together. Thanks again, Chad and we’ll talk to you soon.

Thanks so much. This was great.

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About Chad Gallagher

RES 179 | Blind SyndicationChad Gallagher is the co-founder and co-owner of SlateHouse Group. SlateHouse, founded in 2014, manages over 3,500 units across NJ, MD, and PA for investment owners, with over 100 employees. SlateHouse owns 200 units — a mix of single-family homes, office buildings, and multi-unit buildings. Chad raised $2M as part of the SlateHouse syndication — used to acquire $8M in real estate. SlateHouse also has a brokerage division in both NJ and PA with 20 real estate agents that focus on working with investors to buy and sell real estate.

Chad owns The Hive, a co-working office space network with 3 office locations at launch including in Trenton at 354 Broad St. Chad was one of the founding members of Red Rabbit Insurance: an insurance company designed by real estate investors, for real estate investors. Chad created and hosts “Real Estate Hackers” Podcast

Chad is a writer for, the leading real estate investor website. Previous to real estate, Chad led the mobile network which had $100M in revenue and was acquired by Verizon as part of a larger acquisition. Chad graduated in 2006 from the University of Virginia with a degree in Systems Engineering and a minor in Business.

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