Launching Real Estate Syndications - Ep 19 - Voting On Major Decisions

syndicators don't. And I think that's a mistake, because it brings that decision making process to the investor at exactly the right time, when they're going to be thinking about what they are going to do with the money that you're about to give them in that final distribution. Now, maybe they'll decide to do another syndication with you, maybe the next one that you're working on, it makes a difference between being a one hit wonder, and being a serial syndicator doing deal after deal

making everyone money. But in either case, you may very well need to take a vote, maybe in selling maybe in something else. And in this module, I'll show you just how to do it. Alright, so voting, we're gonna walk through the process here about what I do in my communications, when I think a vote needs to be taken. Now, most of the time in your operating agreement, a member or a body of members can call a vote, the manager almost always has that right to do. And a lot

of times members have that right as well. So the first thing you need to do is first determine if a vote is needed. And if it is needed, that's one thing, if it's not needed, it doesn't mean you can't actually ask for a vote. If it's a power that the manager has, then you can decide what those rules are still, and still ask for the vote, but still make the determination at the end of the day. Just know that if everybody votes a different way than you were gonna go, that's gonna bite you.

So determine if a vote is needed. Now, the next thing you want to do is look through your operating agreement and determine if votes are based on a per investor basis, or a pro rata by ownership basis. Most of the time, there'll be pro rata, but occasionally I will see it as per investor. You also want to know, like, what percentage is needed? In order to be successful? Sometimes it'll be a majority. Sometimes it'll be a

supermajority. And what's that definition of supermajority? I haven't seen it be unanimous, but it could be unanimous as well. You'll also want to look at things like well, what is do they have the proxy? I mean, in other words, if somebody doesn't vote, do you get to vote for them? Most of the time, that is the way that I set it up, that you'll want to know what constitutes a quorum, if you are the only person voting and no one else shows up, does that still count? Is there a quorum

that is needed? So you just want to know those things, because those are the formalities that you want to make sure that you hit. They're in your operating agreement. And so you want to make sure that you do it, right. So because at the end of the day, you don't want an investor coming back saying you did something you weren't supposed to do it says in the operating agreement, you can't do it that way, then you're in trouble. So

let's go through exactly how I know I now know how to vote. And I now know what percentages I need and who votes and all that. So how do I actually ask for that vote. So I send it note, typically in an email, and I want to make sure that people get it. And so I normally will ask them at some point to to at least respond to me in some manner. Or if I have some sort of mail tracking, I'll do that just to make sure that they got it. Because I don't I want everyone to have an opportunity

to get to vote. So first thing I do is I thank them, I thank them for being an investor with me, thank them for trusting me with their money. And give them hopefully the good news about where things are at. I then summarize exactly where we're at. So I like to start at the beginning. You know what assumptions we made going into this property, how long we thought the hold period would be? What our projections were based on how much money we thought we'd make everybody. I

like to kind of reiterate that in a nice summary fashion. Then I like to go through the situation of where we're at today. You know, where are we at in the market? Where are we at? Exactly what what are these properties like this generally trading for right now? It's important in this summary section to be Very, very objective, this is not persuasive writing section, you do not want to do that you want to be seen as being very, very objective. These are facts, this

isn't the time to be persuading. So once I'm done with the summary section, I go to the financial impact sector. In financial impact, I'm talking about if, if we sell now, what do we project like sales price will do and things like that. But also, what's that effect on their investment as a whole?

What's the IRR impact? What's the ROI? What is that going to look like, on the performance if we do this now, so that way, they can compare based on what they thought the investment would do, versus what they think it may do, if they hold on to it, it gives them sort of the real numbers in order for them to think about. Now, the next section is your recommendation. Now, this is the place to be persuasive, I wouldn't be overly persuasive, I wouldn't say anybody is an idiot if they

don't vote for this. But it is a place to be persuasive. Let them know why you think it's such a good time to sell right now, there is an inherent conflict of interest, a lot of times for the syndicator to sell at any specific point, shorter term holds they will generally make is when they will make most amount of money in their pocket. And so there is this kind of conflict that's there. So you do want to be persuasive. But don't be so persuasive that it suddenly calls into question of

why does this person care that much? Doesn't it sound like hyperbole? Okay, so now the next section is we call the vote. And how do we do that? So I like to start out with some thing like subject to paragraph 10.2 of the operating agreement. The manager is entitled to call the vote, call a vote on questions on liquidation of assets, or something like that, just I like to give the the actual basis in the operating agreement for why I can call the vote, then I like to say what percentage of the

vote is needed. So there, I might say it's subject to paragraph 10.7 of the operating agreement, the we would need a a majority vote in order to liquidate assets, then I like to put a very, very clear. So this is in a separate section that says, you know, you could title it whatever you want. But

something like vote in favor of this means. So it's clear if they vote in favor of it, it means we are going to put this property on the market and hopefully sell it within the next whatever, then you want to put a what does this vote opposed to this mean? A vote opposed to this means that we will not put the property on the market, we will continue to hold it for an indefinite period of time, until such time as another call for a vote on the issue of liquidating the asset that's

been has been put forward. That way that's very clear about this is what you mean if you say yes, this is what you've been, if you say no. Lastly, you tell them how to vote. So send me an email, give me a call, whatever it is, if you have an online form, swell, what whatever it is, just let them know how to vote. And once you've done that, it's really tallying the votes. Now I don't let I don't communicate exactly who's voting in which way or how a vote is necessarily looking. Because you

may get those questions as things go on. Certainly, if you call people to remind them to vote that you haven't received their vote yet, they may very well ask you how the vote is going. I try to keep that kind of quiet because I value the confidentiality of, of my investors. And I just don't think it's appropriate that that everybody know how things are going. If it's not going my way, that's fine. If it is going my

way, that's fine. I don't I try not to tip it off either way, and i i on when I'm having those conversations, I really don't try and be persuasive there either. I don't want to be seen as like influencing the vote too much. So I have this section in my email where I've called the vote. That's my opportunity to be persuasive. And that's the only time I act persuasively about whether or not it's time to sell now, if they say, Yeah, I think it's really great time to sell to then, you know, sure

have that conversation. So yeah, I mean, I That's why I wrote that in the in the section on what my recommendation is. So That is how we do a vote specifically how we do a vote to sell now as attached in your module is also a spreadsheet. It's just the spreadsheet that I use that calculates basically how I count the votes. So that way you can see you know the way

I do it and it may be useful for you. So in the next module, we are going to show you how to make that final distribution once you do sell it.