When embarking on your first syndication investment, the most critical factor to consider isn’t necessarily the asset itself, but rather who is managing it. This is often referred to as knowing “who the jockey is.” The operator of the syndicate, or the jockey, can make or break your investment. This blog post explores the spectrum of syndication operators and helps you understand how to choose the right one for your investment needs.

The Spectrum of Syndication Operators

Syndication operators can broadly be categorized into two distinct types, each sitting at opposite ends of a spectrum. Understanding these types can help you make a more informed investment decision.

Institutional Operators: Experience and Stability

On one end of the spectrum, you have institutional operators. These entities manage billions of dollars in assets and bring a wealth of experience and professionalism to the table. Choosing to invest with an institutional operator might mean higher fees and less favorable profit splits. However, what you typically sacrifice in potential returns, you often gain in reliability and stability.

Institutional operators are typically well-versed in managing complex investments and have robust systems and teams in place to handle the myriad challenges that can arise. For investors with substantial net worth, this type of operator generally offers a less risky path to steady, though potentially slower, investment growth. You may not see your investment double in five years, but a ten-year horizon with a reliable operator could prove potentially lucrative with historically lower risk.

‘Fake It Till You Make It’ Operators: Higher Risk, Potentially Higher Reward

At the other end are the less experienced operators, often dubbed as ‘Fake It Till You Make It’ operators. These are usually newer to the market, possibly still balancing their primary careers with their investment ventures. They tend to offer lower fees and more attractive profit-sharing schemes to lure investors.

The appeal here is obvious: higher potential returns and more favorable terms. However, the risks are correspondingly higher. These operators may not have proven systems in place or the depth of experience required to navigate downturns or complex issues. The risk of operational missteps is higher, which can directly impact the potential profitability and even the principal security of your investment.

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By Andrew Keel

Finding the Sweet Spot

Through personal investment experience, many find that the best opportunities lie in the middle of this spectrum. These are operators who may not manage the sheer volume of assets that institutional giants do but have substantial experience and a track record of reliability and fair dealings.

Operators in this middle ground often offer a balance of reasonable fees, fair profit splits, and a level of personal engagement you might not find with larger institutions. They typically have enough experience to manage assets effectively and securely but are still motivated to grow and prove their capabilities, often working harder with the aim of ensuring your investment performs well.

Key Considerations for Choosing a Syndication Operator

When selecting a syndication operator, consider the following key aspects:

1. Track Record and Credibility

• Look into the past performance of the operator. A proven track record of successful investments is a good indicator of their capability and reliability.

2. Fee Structure and Profit Splits

• Understand all fees involved upfront. Assess how these will impact your overall returns and ensure they are competitive but also realistic.

3. Communication and Transparency

• Effective communication is crucial. Ensure that the operator is transparent about their strategies, risks, and ongoing management practices.

4. Alignment of Interests

• Choose an operator whose interests align with yours. Operators who invest their own capital alongside investors often demonstrate confidence in their projects and ensure that their interests align with those of their investors.

Conclusion: The Importance of the Jockey

In syndication investing, the operator you choose generally plays a pivotal role in the potential success of your investment. Whether you opt for the stability of an institutional operator or the potential high returns of a newer, more aggressive player, or someone in between – understanding the strengths and weaknesses across the spectrum is crucial.

Remember, every investor starts somewhere, and every operator was once new to the field. By carefully evaluating where they stand today, you can make a strategic decision that aligns with your investment goals and risk tolerance, helping ensure that you place your trust, and your capital, in the hands of someone who can potentially make it grow.

With a proven track record of managing over 45 mobile home parks across more than 10 different states, Keel Team has successfully returned all investor capital, and some on 30 full cycle deals! Get in touch using the contact form below to learn more!

Disclaimer:

The information provided is for informational purposes only and is not investment advice or a guarantee of any kind. We do not guarantee profitability. Make investment decisions based on your own research and consult registered financial and legal professionals. We are not registered financial or legal professionals and do not provide personalized investment recommendations.