Every brochure issued pertaining to a real estate syndicate contains estimates or projections of distributions and of income which shall be used to make such distributions. Are those projections fair and realistic, or are they starry eyed hopes of the man trying to sell you a unit?

If you have a building which has been in existence for a number of years and if the projections are stated to be based on past earnings, you are probably on solid ground.

However, many times you will receive brochures about buildings which are not in existence yet - or have not yet been fully rented. You will see beautiful illustrations, called "architect's rendering." That means it is the drawing of a building yet to be built and portrayed as beautifully as a skilled artist can draw it. The income is estimated on what the syndicator hopes will be available, when as and if he rents it all and gets the mortgage financing which he needs.

At other times, you may receive a brochure concerning an existing building. When you look at the past rent roll, you may find that it is insufficient to pay the promised distributions. The syndicator tells you of his intention to improve the building by altering or modernizing it and of the additional income which the alteration and modernization will produce, if his hopes come true.

We have no quarrel with builders, nor with energetic and imaginative real estate operators whose imaginative planning and good management are able to increase the yield of property. Deals which are still under construction or are projected may have a very bright future once their full potential is realized.

But they differ from existing and proven ventures in that they must be considered somewhat more speculative. We believe, therefore, that on a deal which is only on paper or not fully realized, you should get a somewhat higher return than on a deal which involves existing properties with proven investment value. This is an additional element for you to consider.

Syndicator's Background and Reputation

The property which the syndicate will acquire is the key to its success. You must not forget one important element, the human one.

Who is the syndicator? If someone else is going to manage or operate the property, who is he? Even though the property and the projected income appear satisfactory, you should know something about the people to whom you entrust your funds. Their personal integrity and ability are just as important to the success of the venture as the potential of the property. The real estate which the syndicate buys may have been in existence for some time and may be an investment which has proven its value. But the new managers have to show what they can do with it.

We cannot conceive of a brochure which does not contain some information about the syndicators. In many states, such information is required by law. For instance, under New York laws, the brochure must state the "names, addresses, and business background of the principals involved." That information is sometimes very sketchy. You may have never heard of these people. Yet they may be well known in the field. Someone in real estate circles will know who they are. We suggest that you try to get some information about them through your bank or other connections.

Research the area thoroughly and you will no doubt find a very good investment. Good luck!