214: What to Know About “Capital Calls” As Multifamily Syndications Get “Squeezed” w/Brian Burke and Mauricio Rauld

Multifamily syndications are getting squeezed. With short-term financing coming due and mortgage rates at multi-decade highs, syndicators are calling on their original investors to raise more money so they don’t lose the deal. The problem? If you’re an investor, how do you know if your additional investment will ever be returned? Could a syndication simply burn through your money without making any promising changes to the investment? What should you know BEFORE you put up the cash for a capital call? We brought two syndication experts, Brian Burke and Mauricio Rauld, on to share their tips for navigating capital calls.

Before we start, let’s clarify this isn’t exclusively a syndication or multifamily problem. Much of the commercial real estate market is facing financing problems as loans come due and mortgage rates stay high. However, this problem has become a lot more common for syndication investors since rates started rising. In this episode, we’ll break down what a capital call is, why syndications do them, whether or not you’re obligated to invest more, and what investors MUST look for before putting up cash.

If a capital call comes your way, we have the exact questions you should ask the syndicator to ensure your money is being used correctly. Plus, if you’re a syndicator or plan on being one in the future, we share the steps to pull off a capital call the right way and make your investors whole. Making the wrong move could cost not only your investor’s money but also your money and lead to serious legal consequences. Don’t get stuck in that spot; stick around!

In This Episode We Cover:

Capital calls explained, why they happen, and why they’re becoming common in multifamily

Syndications 101 and the reason they’ve become popular among passive investors

Commercial lending problems and the bridge loans that are squeezing multifamily investors

What investors MUST look for when a capital call comes their way and the questions to ask

The right way to execute a capital call and the steps every syndicator should follow

And So Much More!

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Recent Episodes with Brian:

On the Market 71 - The Multifamily “Bomb” is About to Blow, Here’s What You Need to Know

On the Market 147 - Top Multifamily Investors’ Advice for Buyers in 2023? DON’T Do It!

Real Estate Podcast 900 - The Truth About Real Estate Investing in 2024 (What Investors NEED to Know)

BiggerPockets Money 219 - Syndications: Everything You Need to Know BEFORE You Invest

Connect with Brian:

Brian's BiggerPockets Profile

Connect with Mauricio:

Mauricio's BiggerPockets Profile

Book Mentioned in the Show:

The Hands-Off Investor by Brian Burke

Jump to topic:

(00:00) Intro

(03:24) What’s a Syndication?

(08:05) Multifamily is Getting “Squeezed” 

(12:57) Why “Capital Calls” Happen?

(16:20) What Investors MUST Look For

(22:25) Sponsor Loans and Raising More Money

(28:26) Ask THESE Questions

(37:56) The Right Way to Capital Call

Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/on-the-market-214

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