April 15, 2022
John Casmon, Casmon Capital Group

The Chicken or Egg of Syndication

I speak with newer apartment investors frequently. Many of them are looking to get traction in their business and wonder where they should focus their time. This is understandable given the number of steps involved in the process. They ask if they should prioritize talking to brokers, analyzing deals, talking to investors, or finding partners? They simply can’t excel at all of these tasks simultaneously, particularly as new investors. Their best bet is to pick something that they both enjoy and have the skills to be successful.

During these conversations, inevitably I get asked a common question. It’s the chicken or egg of syndication.


Which comes first, the deal or the money?

Some believe that if you find a good deal, the money will come. I’ve heard this repeated over and over, despite a huge flaw in the logic. First is the subjective qualifier of good. What may be a good deal to you may not be a good deal to someone else. And if you operate assuming that when you find a good deal the money will magically appear, you set yourself up for potential stress and failure.

Based on this, finding the money first feels like the clear answer. However, without a deal, you may just end up with anxious and frustrated investors. It’s akin to having a store that only sells one product and that product is on backorder for months. Eventually, those customers are likely to look elsewhere for the solution they are seeking. People never need a specific product, they need a problem solved and without a deal, you can’t solve their problem.

With these two dilemmas, you might understand why people ask which comes first.


So, Which Comes First and Why?

While some may jockey back and forth, I will say definitively that finding the capital comes first. However, that doesn’t mean you should run out and ask for investor commitments. Similar to any other business, you would want to understand market demand before rolling out a new product or service. You would want to conduct market research to learn about customer needs, cost and pricing, distribution channels, and key messaging. You want a clear sense of what it will take to make the right offer to the right person at the right time.

Similar to these other businesses, you should take the time to learn more about your potential investors, their investing goals, their return expectations, and what you need to share with them when you have an opportunity. This research will uncover potential obstacles that you may need to overcome and may even help you refine your investment approach or audience. Doing this work should allow you to be more successful when your offering is available.

As you identify potential investors, know that three things must be true for someone to feel comfortable investing in a real estate syndication. First, they must believe that real estate investing can help them achieve their financial goals. Second, they must believe in the person presenting them with the opportunity. Last is belief in the actual deal.

Just like buying a product, people want to see some social proof, testimonials, or other supporting facts to help them believe in you and the offer. In marketing terms, we call these RTBs or reasons to believe. You have to establish yourself as a trusted, credible investor before you can expect people to just hand over their hard-earned money.

When working with these prospects, first they need to believe that real estate investing can help them achieve their financial goals. Then you need to position yourself as a reliable solution. Finally, you can find a deal that matches their needs and expectations. It’s much easier to ask someone what they want and then bring it to them than to bring them something and hope they want it.

This is why I disagree with the people who say, “If you find a good deal, the money will come.” It implies that all you have to do is find the deal and wait. It ignores the market research, branding, and communication necessary to ensure success. It dismisses the fact that investors have to actually know, like, and trust you first. The truth is the money will only come if they believe in you and the opportunity. Investors will determine whether or not a deal is good for them, so it makes sense to start with investors, not the deal.

We may never know if the chicken or egg came first. However, if you don’t want to stress and fumble with equity for your next real estate project, you should find the money first and then find a deal that delivers on the needs and expectations of those investors.


About the Author:

John Casmon has helped families invest passively in over $90 million worth of apartments. He is also the host of the #1 rated multifamily podcast, Target Market Insights: Multifamily + Marketing. Prior to multifamily, John was a marketing executive overseeing campaigns for Buick, Nike, Coors Light, and Mtn Dew: casmoncapital.com

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