Multifamily syndication and investing is a team sport and for good reason. Large multifamily projects require a tremendous amount of work along with varied skill sets if they are to be successful. It is for this reason that sponsorship teams are typically comprised of multiple general partners. However, it is important to understand as a passive investor who is really controlling a multifamily project so you can ensure that you are comfortable with the individuals who are at the helm of the ship.
Voting rights on the general partnership team
The first thing to determine when reviewing who is controlling a multifamily deal is where the voting rights lie within the general partnership team. The general partners will have a separate operating agreement that will spell out who has voting rights and the percentage of those votes within the team. Often times, Co-General Partners may have little or even no voting rights on the team so the person whom you are investing with may not have a say should something go wrong. If they do not have voting rights (or their vote is minimal), then you will need to see who has the majority of the voting rights at which point you can determine if you trust that individually sufficiently to continue with your investment.
The other large piece of control within a general partnership team lies with the asset manager(s). The asset manager works directly with the property management company and is the person responsible for ensuring that the business plan is properly executed. This information can also be determined from the general partnership operating agreement. You should ask about the track record of the person doing the asset management and specifically check to see if they already asset manage other deals in that area (preferably with the same property manager) and also if they live in the area or at a minimum visit it regularly.
There are many important considerations when evaluating a multifamily deal and we make it our mission to careful vet each of these items. If you would like to learn more about passively investing in multifamily, please check out our free ebook "Achieving Financial Freedom Through Multifamily Investing."