When passively investing in real estate, a big question that an investor asks is, “How do I vet a syndication deal?” Upfront, an investor must look at investment structure and returns, the market, and the risks. But beyond the numbers on paper, it is foremost to know if your money is in good hands. So, vetting the sponsor is also a critical step as you will be entrusting them with your investment as a limited partner (LP). But, how do you know if you can trust the sponsor who’s leading the deal?
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Dr. Samuel Giordano, a practicing gastroenterologist, author, real estate investor, and co-founder of passiveadvantage.com, walks us through some processes in evaluating syndication deals and sponsors in this episode. Hear the questions that investors should be asking of sponsors, the important metrics to consider, and educational materials that will help prepare for the initial investment. Sponsors, too, could glean lessons on handling decisive dialogues with potential investors.
All these and other great insights in our conversation with Dr. Samuel Giordano!
Key Points From This Episode:
- Dr. Sam tells why and how he was led into real estate investment.
- Why did Dr. Sam focus on passive investing in syndication?
- How did Dr. Sam educate himself to prepare for his initial passive investment?
- Dr. Sam recommends learning materials and platforms for passive investors.
- Dr. Sam offers pieces of advice for investors on how to vet a sponsor or an operator.
- What is the most important thing to consider when evaluating a sponsor?
- Dr. Sam offers tips for sponsors on how to handle that crucial initial conversation with potential investors.
- Specific questions that investors should ask sponsors to learn how they manage risks and downturns.
- Dr. Sam’s forecasts on the real estate market industry for the next 12 months.
- Dr. Sam studies and mitigates market risks using analysis tools he developed.
- Dr. Sam recommends diversifying real estate investment portfolio as a strategy to reduce exposure to market risks.
“In all conversations, it’s always harder to be a listener. But I look for people (sponsors) who are good listeners because I think that generally shows confidence and comfort in what they’re doing.” [0:16:24]
“One classic question that I ask an operator is, “What makes you different?” I find that it gets to the heart of what they identify with, what their business plan is, or why they have a competitive advantage.” [0:24:28]
“I look for operators or teams that have at least five full-cycle deals from an experience standpoint. I’m just not looking for home runs. I’m not looking to take excessive risks. I’m looking at the long game as a passive investor, and I want people who have done this before.” [0:22:07]
“The biggest thing is the “feel” you get (when talking with a sponsor). I can’t emphasize that enough because it’s important. You have to trust your intuition. Whether it’s in this field or any field, oftentimes your intuition is correct. It’s just a matter of supporting that feeling with the objective information and that’s kind of how I feel about the operator as well. The biggest thing is intuition.” [0:21:47]
“I don’t think we’re going to see what we saw several years ago (2007-2008 financial crisis). I think there will be growth going forward, in my opinion, at least for the next year or so. So, I’m still looking to actively get into deals because you have two options: you either stay on the sidelines or you invest. And the way that I mitigate that risk is I try to use analysis tools to see if there are any obvious red flags in those deals.” [0:27:17]
Links Mentioned in Today’s Episode:
About Samuel Giordano, M.D.
Samuel Giordano, M.D., is a proud husband and father of three, a practicing gastroenterologist at a large academic medical center in the northeast US, author, real estate investor, and co-founder of passiveadvantage.com, a website designed to help physicians and other high-income professionals at vetting passive real estate syndication deals.
As a physician, he has had consecutive designations as a “Top Doctor” in his geographic region, and he has also published multiple manuscripts in peer-reviewed journals. He has an avid interest in personal finance and financial education and has formed a personal finance teaching curriculum for residents and fellows at his hospital. He began exploring real estate investing in 2017 and has now invested passively in 10+ syndication deals during that time as a limited partner.
He initially developed a syndication vetting tool for himself but now he is focused on his passion for helping other investors and bringing it to the masses. He and his partner have designed tools specifically geared toward passive limited partner investors in helping to objectify and bring to light the risk points of various real estate syndication deals prior to choosing to invest. They designed a first-of-its-kind LP Deal Analyzer Tool, which is a multi-use one-stop-shop tool for passive investors used to vet deals, assess alignment with the general partner, track investments performance vs. projections, and gauge one’s progress toward financial independence. His ultimate goal for himself and others is financial freedom and to be able to live the life of one’s choosing on one’s own terms.
More information and resources can be found at passiveadvantage.com.
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