CREI Partners

Real Estate Investments

Building Passive Income

Episode 19: Red Flags in Syndication Deals – What to Avoid Before You Invest

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Building Passive Income
Building Passive Income
Episode 19: Red Flags in Syndication Deals - What to Avoid Before You Invest
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Welcome to Building Passive Income with CREI Collin

Not all syndication deals are created equal. In this solo episode, CREI Collin teaches you how to spot red flags before you invest—from sponsor warning signs to deal structure pitfalls to documentation issues. Learn what to watch out for, what questions to ask, and when to walk away. Your job as a passive investor is to protect your capital, and this episode gives you the tools to do it.

What You’ll Learn:

  • Why due diligence on sponsors is your #1 job as a passive investor
  • Sponsor red flags: Lack of track record, poor communication, misaligned incentives
  • Deal structure red flags: No preferred return, excessive fees, over-leverage
  • Market red flags: Declining fundamentals, oversupply, landlord-unfriendly laws
  • Documentation red flags: Missing PPM, vague financials, no cost segregation study
  • Behavioral red flags: Pressure tactics, unrealistic projections, lack of transparency
  • How to trust your gut (and when to walk away)
  • What questions to ask sponsors during due diligence
  • How to balance caution with opportunity

Important Timestamps:

  • [0:00] Introduction: Why red flags matter (and why most investors ignore them)
  • [1:30] Category 1: Sponsor Red Flags
  • [3:00] Lack of track record or verifiable experience
  • [4:00] Poor or inconsistent communication
  • [5:00] Misaligned incentives (low GP investment, back-loaded promote)
  • [6:30] Category 2: Deal Structure Red Flags
  • [7:00] No preferred return (or non-cumulative pref)
  • [8:00] Excessive fees and sponsor compensation
  • [9:00] Over-leverage (75-80%+ LTV is a caution flag)
  • [10:30] Category 3: Market Red Flags
  • [11:00] Declining population or job growth
  • [12:00] Oversupply in the market
  • [13:00] Landlord-unfriendly laws or rent control
  • [14:00] Category 4: Documentation Red Flags
  • [15:00] Missing or incomplete PPM
  • [16:00] Vague financials or underwriting assumptions
  • [17:00] No cost segregation study or depreciation schedule
  • [18:00] Category 5: Behavioral Red Flags
  • [19:00] Pressure tactics or “limited time” urgency
  • [20:00] Unrealistic return projections
  • [21:00] Lack of transparency or evasive answers
  • [22:00] How to Trust Your Gut (and when to walk away)
  • [23:30] Recap and Action Steps

Key Takeaways: ✅ Sponsor due diligence is your #1 priority—track record, communication, alignment

✅ A cumulative preferred return (typically 8%) is non-negotiable

✅ Excessive fees, over-leverage (75-80%+ LTV), and misaligned incentives are caution flags

✅ Declining market fundamentals and oversupply are warning signs

✅ Missing or vague documentation (PPM, financials) is a deal-breaker

✅ Pressure tactics, unrealistic projections, and evasive answers = walk away

✅ Trust your gut—if something feels off, don’t invest

Resources Mentioned:

Disclaimer: This podcast is for educational purposes only and does not constitute investment advice. Always conduct your own due diligence and consult with your financial advisor before making any investment decisions.

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Ready to Build a Portfolio of Vetted, High-Quality Deals? Let’s walk through our due diligence process together. Schedule your free 30-minute consultation: Let’s Talk