The following is adapted from Syndicating Is a B*tch.
Some aspects of syndication are difficult to delegate. Networking is a great example. Your investors want to see your face and they need to know they have a contact they can trust. Other aspects of the business can and should be delegated. If you decide to start playing the syndication game, stress and unexpected scenarios sure won’t be in short supply. Property management usually falls into this category.
Learning to delegate successfully is key to developing scale, and that’s key to multiplying your income. If you’re constantly focused on minutiae, you won’t have the energy to tackle the big stuff.
Choosing Who to Delegate to
Let’s use property management as an example, to examine how to delegate successfully. The very first time I closed a deal, I kept the existing management company on board after we closed. While I did interview them to make sure there wasn’t anything overtly weird going on, I didn’t interview anyone else. They were running the property well and I didn’t want to deal with finding another company on top of everything else I was doing to close my first deal.
What happens if the transition isn’t so easy for you and you need to seek out a new management company? Look for holistic, character-based things. Do they share your values? Do they understand that you are not a slumlord? Are they going to be responsive to the residents? Of course, they can tell you anything they want in an interview, so it’s good to go see the properties they run.
If you can, “secret shop” them: look at the way the properties are maintained. Pay attention to the way the staff treats you and anyone else who comes in. Are you greeted when you walk in the door? If you say you’re looking for an apartment, do they show you one? Do they show off the amenities? If not, or if they act annoyed by you being there, this might not be the management group for you.
A similar principle applies to anyone else you hire. You want to work with people of good character, whom you trust to do a good job and communicate effectively. If you can, get a personal recommendation. Failing that, adapt the criteria above.
Let Them Do Their Job
I’m going to assume you’ve found the right people to work with. Great; now you need to support them so they can do their job. In the case of the property management company, if they aren’t managing the property already, they’ll need time to staff it before closing. They’ll also need to set up contracts for service providers, like pool service, trash pickup, landscaping, utilities, and more. Make sure they have plenty of time to get everything in place.
They will have their own bookkeeping for all of the day-to-day operations for the property. They’ll keep records and generate reports for leases, evictions, work orders, deposits, etc., and they should be getting reports to you monthly, or they need to connect directly with your bookkeeper with this information.
Whomever you’re hiring, remember that you want them to do a job, so don’t undermine them. Let property managers run the property. Communicate with them if you see something being mismanaged, like someone not at the office when you dropped by or an amenity in disrepair. Check-in with them and find out what’s going on and what needs to happen to fix it—but only within the right hierarchy.
Focus on the Big Stuff
The point of delegation is to prevent you from getting bogged down in small issues that don’t deliver a good return on your time. For example, you may choose to run your own property management company. If so, you’ll still need to delegate the vast majority of the day-to-day business, although it will probably look more like a startup at first. In time, it will become an asset in its own right.
Assuming you choose to hire a third-party management company for your first few deals, you’ll be the asset manager. That means keeping an eye on the financials, keeping in touch with the investors, and getting out in front of potential issues. You’ll need to review the monthly and quarterly financial reports that come in from the management company. Your bookkeeper will keep the numbers—it’s your job to review them to spot any problems before they reach critical mass.
You can outsource practically any aspect of syndication. The question is which parts of the game need your contribution the most. In my view, you’ll need to network and fundraise for every single deal. This is a role that people tend to want to outsource, but think about how much of the pie you’re going to lose if you do that. For my money, it’s better to hang on to that responsibility yourself if you can and delegate the parts of the machine that other people can do better.
Delegation Takes a Load Off
On my first deals, signing the contract meant my work was really about to start. Now that I have some scale, I have staff members do a lot of this for me. They schedule the feasibility inspections, figure out the contracts, manage invoices from each contractor and professional we work with, and perform a good deal of the legwork that happens from contract to close. My role is to be the go-between for my company and the broker.
The first time or two out can be overwhelming. The more you do, the more you’ll learn, until it’s like muscle memory. Eight years down the road from that first deal, I have a corporate organization that I’m able to support financially while they do most of the leg work for me. I don’t spend nearly as much time on the day-to-day business as I did at the beginning. My job now is more on the networking and deal-finding part of the business.
Syndication is about scale, reliability, and a direct reward for your willingness to take on risk and coordinate moving parts. The more you can delegate, the more you can keep your attention high-level, handling problems when they arise and delegating to people who specialize in the relevant area.
For more advice on delegation, you can find Syndicating Is a B*tch on Amazon.
Known in the real estate world as the Apt-Guy℠, Bruce Petersen is a serial syndicator who started with a 48-unit building and has now syndicated over 1,100 units. As the founder and CEO of Bluebonnet Asset Manager LLC and Bluebonnet Commercial Management, Bruce has received local and national recognition for his syndication efforts. He was the recipient of the Austin Apartment Association’s Independent Rental Owner of the Year for 2016 and the National Apartment Association’s Independent Rental Owner of the Year for 2017. In addition to being a TV personality and public speaker, Bruce also mentors people on how to invest in apartment complexes.