How growth can be a problem in a Real Estate Syndication...
In a Syndication, Structure > Deal Volume
If you’re a real estate syndicator, odds are you won’t slow down due to lack of capital. But you will grind to a halt if your structure can’t support growth.
Capital is rarely the constraint. Poor infrastructure usually is.
The insidious part is that there’s no fanfare as to when this happens. Bad structure shows up quietly at first. It starts to appear in:
- Financials that don’t reconcile across entities
- Cash that looks healthy at the deal level but strained at the enterprise level
- Distributions that become harder to manage with each new property
- Decisions that still require the GP’s involvement at every level
More capital doesn’t fix any of that. It actually magnifies it…
Weak structure appears in the following ways:
- Complexity increases risk
- Growth compounds chaos
- Small issues become system-wide problems
That’s why many operators stall after a few successful raises. Not because investors disappeared, not because they don’t have the chops to pull off a successful project…but because the backend couldn’t keep up with their success. It's a strange phenomenon when success becomes the problem...
The secret is that scalable syndicators build structure first.
How:
- Enterprise-level financial visibility
- Clear separation between deals and the platform
- Repeatable processes for reporting, cash flow, and decision making
An operation with systems that allow the business to grow without breaking
Capital follows clarity. Period.
If your business struggles with growth, the answer isn't another raise. It's better structure.
- Mike Henninger, EA, MSCTA, Syndication fCFO
