If I had to boil down the syndication of a real estate development project into eight steps, what would those eight steps be? Let’s go through them.

My name is Tilden Moschetti. I am a real estate syndication attorney with the Moschetti Syndication Law Group. I’m also a real estate syndicator and developer myself. I thought it would be interesting to break down and distill into an eight-step model what a real estate development syndication project would look like from a very high level. Now, each of these probably has another 50 different steps. But I thought it would give a unique view of what the landscape looks like. So if you are looking to do a real estate syndication development project yourself, it might give you an idea of whether or not it’s something that intrigues you, or it’s something that you want to run from. I think it probably will intrigue you enough that you’ll want to keep working on it. But who knows?

So let’s go through what those eight steps would be:

  1. Find a suitable property and create a business plan. Obviously, if you’re going to develop something, you’ve got to have something to develop on. And you’ve got to know what you’re developing, right? For the piece on the business plan, I like to rely on the FIT (Founder Investment Theory). What you’re actually going to be building should have a compelling vision behind it, a reason for why an investor would want to invest in this. If you were going to invest in this completely bland thing that nobody would be very interested in at all, you’re going to have a really hard time finding an investor who’s going to help you do that. However, if you’re building a fancy resort, or beautiful luxury apartments with fountains and a lake, or if you’re building a retail center that features some new novel technology, that’s compelling. That’s got a story to it, and investors are going to want to invest.

Then you obviously need to find that property where you can do that. And you need to make sure all the numbers line up. So the business plan needs to be complete with exactly how you’re going to do it in terms of costs. You’ve got to have pretty early on what those costs roughly are going to look like, both the hard costs and the soft costs. That way you can start building a story for your investors that’s not just an emotionally compelling story, but also has a rational “this is what we’re going to do” component to it.

  1. Start assembling your team. You cannot do development alone. You’re not going to be out there swinging a hammer yourself, I don’t think so. Development is a big team effort. So you’ve got to start putting that team together. This team is also going to be important for your investors to know who they are because you’re using their resumes in addition to yours as reasons for them to invest. The more great people that you’ve got, the more interested investors are going to be to be involved. It’s great to give a helping hand to people who you know do great work but don’t have a resume to speak for itself. That’s great, but you’ve got to have some heavy hitters in there as well. And mostly, you need to make sure that it’s competent, that it’s a team of players that absolutely can deliver. You’ve got investors’ money here; you’ve got to deliver for them.

  2. Find investors. You should have been looking all along. You should always be looking for investors every day of the week, every week of the year. You should be growing your investor network. But this is the step now where you’re really finding investors and starting to let them know that you’ve got this project coming along and asking if they’re interested. You’ve got to get those soft commits. You’ve got to make sure that the business plan can go forward and that their money is part of it.

  3. Arrange for financing. You’re going to most likely be using not only investor money, and you’re not going to be paying all cash. Most developers use bank loans or hard money loans or some sort of other form of money in order to complete the project. So you need to start building those relationships with those financiers. Whether they’re hard money lenders or traditional bank lenders, wherever it’s coming from, start building those relationships so that you can get that financing in place. Start building that model of what it will look like from their point of view. What’s that interest rate? What are the terms? What is that going to look like?

  4. Put the syndication together. This is my favorite piece. This step really is putting those necessary documents together, getting that private placement memorandum done, the operating agreement for your entity, the subscription agreement for your investors, getting it ready for filing with the SEC as soon as you make a sale of the investment to an investor. Getting all those pieces together, this is an exciting time because now you’ve got really something to show for. Not only that, it’s not just the legal documents, but putting the marketing documents together. And once those are done, it’s getting investors in. So this is all part of that still putting that syndication together. It’s not just the framework of the documents and the marketing material, but it’s also getting the commits from your investors, getting them to sign, getting that pool of money.

  5. Get necessary approvals. Development takes approvals from everybody, as you probably know. And so you need to be doing that all along the way so that your project doesn’t stall just because the fire marshal hasn’t signed off on your deal and it’s now waiting for two years. That’s not a good situation.

  6. Manage the construction. Now you see it coming together. Now you’re managing the construction, you can watch it going up in front of your eyes. And it’s magical and it’s all happening. This is another very exciting part of the development project. Because here it is, all the while you’re communicating with your investors, and you’re getting them excited. Why are you getting them excited? Because you want them to invest in your next development project. So the more excited they are, the more they feel like they’re connected to the project, the better.

  7. Marketing and sales. I’m talking about marketing and sales for the future sale of the project. Now I’m assuming in this video that it’s just being a build to sell. If it’s a build to rent, then that’s another story; then you’re still marketing, getting that marketing ready for getting tenants in. If it’s marketing to sell, you’re getting that landscape ready in order to be able to sell this development that you put together. Once it’s there, then you’re now putting it out to market and you’re getting it all done and you pay off all of your investors and it’s a grand day and you’ve completed your first real estate development syndication from opening to closing.

And that is the basic process. So let’s go over those key eight steps one more time, just so that they’re there:

  1. Identify a suitable property and create a business plan.
  2. Assemble a team.
  3. Find investors.
  4. Arrange for financing.
  5. Put together the syndication.
  6. Obtain necessary approvals.
  7. Manage the construction.
  8. Marketing and sales of the underlying asset itself.

My name is Tilden Moschetti. I hope you found that helpful and a little bit enlightening, looking at the development process and syndication together from a high level about how it all comes together. If we can help you with your real estate syndication development or a real estate syndication or any kind of syndication or private equity fund you’re putting together, give us a call. We’d be happy to talk with you.