Behind the syndicator machine targeting new investors for multifamily feeder funds

Doctors, engineers, pilots and like-minded groups are prime targets to bankroll projects

(Illustration by Paul Dilakian/The Real Deal)
(Illustration by Paul Dilakian/The Real Deal)

In March, three doctors were prepping for their latest operation.

Success would be measured not by patient outcome, but by the physicians’ salesmanship for their real estate venture.

That is, could Peter Kim, Pranay Parikh and Mithulan Jegapragasan, the three doctors behind investment firm Ascent Equity, rake in enough $100,000 checks to cobble together the $22 million needed to buy a Phoenix-area multifamily property?

By design, they had an in with their target audience. They were pitching themselves, leveraging their credibility to collect money from other doctors to buy apartment complexes, also known as syndication.  

“PASSIVE INVESTING THAT DOCTORS CAN TRUST,” is how Ascent shouts its branding online. The firm, founded in 2020, connects other physicians with “low-risk, high-growth” multifamily deals in which it is already a partner.

Ascent is one of a rash of firms that mushroomed in the years after the 2012 JOBS Act passed and subsequently drove the multifamily syndication boom.

Syndication, or pooling equity from investors to buy property, hit a fever pitch in 2020 and 2021. Multifamily investors, fueled by record-low interest rates and rising rents across the Sun Belt, bet big on the asset class. Their game plan: renovate, raise rents, disseminate returns and exit at a profit. 

Syndicators drew investors by dangling the carrots of less time at the 9-to-5, tax benefits and returns that put the stock market to shame.

But firms like Ascent have a leg up: They have their prospective investors’ trust. They all took the MCATs, endured sleepless nights during residency and now share the physician’s grind — weeks that can top 80 hours and leave little time for life.

It’s not just doctors. Anyone in a higher income bracket is up for grabs: engineers, particularly those in tech, plus pilots, sales executives, even attorneys.

“It’s those that make $500,000 to $1 million a year and generally don’t know what to do with their money,” said Aleksey Chernobelskiy, who advises limited partners.

A similar trend has cropped up among tight-knit immigrant communities and church groups. Multifamily syndicators find fresh blood among those they know best.

“It’s anywhere there’s a small community where people really trust each other,” Ian Ippolito, a crowdfunding investor and commentator said.

Jay Gajavelli, both an industrial engineer and an Indian immigrant, appealed to his communities to raise for Applesway Investment Group.

“You just say, ‘I want to target someone that has browsed a real estate site in the last 30 days and is likely to make this amount of income.’ It’s really easy to reach a lot of people.”
Ian Ippolito, a crowdfunding investor and commentator

But investing carries risk and trust can cloud judgment. Syndicators that produced stellar returns when rates were low have watched deals struggle or fail over the past year. Interest payments on floating-rate loans have soared, rent growth plateaued and value-add plans stalled. 

While a critical mass of MDs or MBAs may have helped syndicators grow, they do not appear to have shielded syndicators from the downturn.

Some have already weathered the fallout, like limited partners in Applesway, who lost millions after the group lost a Houston portfolio to foreclosure.

Others have yet to see the other shoe drop.

What a way to make a living

For physicians, the pipeline to real estate is often greased by what surgeon Vasu Kakarlapudi calls “the volume game.” That is, physicians tire of being paid by the number of procedures they perform rather than the quality of their care. 

“I was becoming Joe Sixpack on a hamster wheel,” Kakarlapudi said. “I wanted to try to not be that as quickly as possible; that’s how I got involved in real estate.”

After Kakarlapudi recognized that he could supplement his income with returns and cut back his hours, he spread the word to colleagues and friends, and ultimately started Apta Investment Group to appeal to surgeons. 

“Apta being the Sanskrit word for trust,” Kakarlapudi said.

The tax breaks associated with real estate investing also fit into the “work smarter, not harder” mantra.

“The thought is, as you start making enough passive income, maybe you can decrease the time you’re putting into your W-2 job and not work quite as hard,” said Tom Burns, a former doctor who’s now principal of multifamily firm Carbon Real Estate Investment. 

But taxes owed on salaries cannot be offset by writing a check for a syndication, experts say. The tax benefits generally come from deductions for depreciation and mortgage interest. Losses on “passive” income are also deductible. 

Easy access

Physicians’ interest in real estate isn’t new. Doctors have always had money and have often looked to diversify their investments. 

“But it was typically more of like, ‘Hey, look in my local town and maybe I might cooperate with a couple other doctors that I know and buy an office building,” Ippolito said. 

The JOBS Act changed how the game is played.

The 2012 legislation, which loosened the regulations governing crowdfunding, allowed investors to solicit strangers to invest in deals, so long as the investors were accredited according to SEC standards. 

The policy change coincided with social media’s rise to ubiquity, and by the end of last decade, sponsors had unfettered access to the colleagues in their networks and far beyond. 

As algorithms for Facebook, Instagram and then TikTok improved, general partners in deals could fine-tune that approach.

“You just say, ‘I want to target someone that has browsed a real estate site in the last 30 days and is likely to make this amount of income’,” Ippolito said. “It’s really easy to reach a lot of people.”

Feeding frenzy

Ascent’s marketing materials for the Phoenix deal detailed that the doctor-backed firm wouldn’t actually be owning the so-called Sunrise in Chandler.

Multifamily firm Sunrise Multifamily would.

Ascent is “not an operator of real estate,” a disclosure reads in investor documents. It’s a feeder fund — a group that pools equity, in this case from doctors, and feeds it to a real estate sponsor. 

Some of the largest and most prominent syndicators, including Tides Equities and GVA, tap feeder funds. Tides used AMC Investments; GVA, Overwatch and Trinity Real Estate Investments. 

But players tracking the space say they’ve seen more pop up targeting specific professions.

“[I’ve] been seeing more and more of them out there,” said one investment firm principal. 

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“It’s pretty weird, as it’s basically syndicators giving money to syndicators, further hurting investors,” the principal added. 

Feeder funds generally charge an acquisition fee for finding the deal and layer it on top of the acquisition or asset management fees that sponsors demand.

“I don’t understand why an investor would invest in a feeder fund, because you’re paying double fees,” said another principal of a multifamily investment firm. “But maybe people don’t have access or don’t think they have access to the sponsor.” 

While most tracking the syndicator space agree that funds targeting doctors are the most common, funds are increasingly cropping up to appeal to high earners of all stripes.

There’s Engineered Capital for — unsurprisingly — engineers. Turbine Capital, which touts that it has invested $900 million of investor funds, targets pilots. Active Duty Passive Income aims for veterans. The Presidents Club is a fund for “top producing sales professionals.”


Individual sponsors — the folks or firms that find and finance a deal — tap the same strategy as feeder funds.

“A friend of mine is a dentist, and other dentists give him money left and right,” Colby Bowers, an Air Force veteran, said. Bowers founded Veteran Pride Investment Group and did his first deal with another veteran. 

“That look-alike is key,” he added. “And can you develop that trust?” 

For sponsors, it’s about building a brand that other investors can relate to, a show-and-tell of where limited partners can start and what they might become.

YouTube is riddled with tell-all interviews with subjects such as Tony Azar, a former computer engineer who built Capstone MultiFamily Group,  and videos like “From Airline Pilot to Multifamily Syndicator ft. Satch Bernhardt.” The success stories often appear on industry-favorite podcasts, such as Joe Fairless’ “Best Ever CRE,” the self-proclaimed longest-running daily real estate podcast, or Rod Khleif’s “Lifetime Cash Flow Through Real Estate,” which boasts 22,000 subscribers on YouTube.

Jorge Abreu, who runs syndicator Elevate, talked about ditching a humdrum career as an electrical engineer, “leaving the W-2 and doing real estate investing full-time,” on a 2021 episode of “The Cashflow Project” podcast titled “Electrical Engineer Turned Multifamily Master.”

In September, an investor told The Real Deal he was expecting to see nothing on $100,000 he put into two of the syndicator’s deals in Houston: the Selena and the Sophia. He has not received any distributions from his investment, he said.  

“Some people do it right, but more than half don’t. Then one person is clueless about real estate investing, and they’re being led by another person clueless about real estate investing.”
Aleksey Chernobelskiy, limited partners adviser

The limited partner, who requested anonymity, is an engineer who stumbled on Elevate online. 

“Elevate, and other groups, they just post on social media and make everything look glamorous and easy and fun,” he said. “It looks good on social media, but I’ve just found that’s not always the case.”

The Selena narrowly avoided foreclosure this year, while the floating-rate loan backed by the Sophia was less than 30 days delinquent in March, Morningstar shows. 

Abreu denied that any investors had lost money, given they had not lost any properties to foreclosure, adding that the loan backing The Sophia was in the “middle of a refinance” and “100 percent current.”

Another investor, formerly in sales, said he saw a 6 percent return in two years on an Elevate deal.

When asked why he was drawn to invest with Elevate, the investor said “it was really the online presence.”

Investing based on that common ground or online image offers little insight into a sponsor’s track record. 

“Some people do it right, but more than half don’t,” Chernobelskiy said. “Then one person is clueless about real estate investing, and they’re being led by another person clueless about real estate investing.”

The American nightmare

Among the overtly public physician funds or social media marketing to high earners, the implosion of Applesway points to a third group targeted by multifamily syndication: immigrants.

After Applesway lost a $229 million multifamily portfolio to foreclosure, 123 investors in another deal alleged that Gajavelli, an Indian immigrant, had lost $12.3 million of their “hard earned money and retirement savings.”

Gajavelli had shuffled the funds into another apartment complex in Spring Bank, Texas, that he subsequently defaulted on, they claimed.

The suit lists the names of the deal’s limited partners; most are of Indian origin. All had committed at least $50,000, signaling that they were accredited.

“This was an Indian family,” Christopher Della Fave, another investor in the deal who had hoped to tack on to the class action, said of the plaintiffs.

“They didn’t want to add me to the suit for whatever reason,” he added. 

Many sponsors have their sights set on members of their own community. And being allowed to raise from nonaccredited, less wealthy people, helps. 

“It could be Indians targeting other Indians or Jewish people targeting other Jewish people,” said Ian Ippolito, a crowdfunding investor and commentator. “They’ll also market to church groups — anywhere there’s a small community where people really trust each other.” 

The immigrant story has been central to the marketing of Swapnil Agarwal’s Nitya Capital and Elisa Zhang’s Amplitude Equity. Agarwal immigrated from Agra, India, at 15; Zhang grew up in China. 

It’s unclear how much the story of self-made success that they tell on podcasts, social media, their sites and, in Agarwal’s case, an interview in Forbes has driven those from similar backgrounds to invest in their deals. Zhang is also a computer engineer, which appeals to another demographic; Agarwal comes from finance. 

But those observing the space say the shared experience of immigration, particularly for those in tighter communities, can be a big driver of investment activity.

“If I’m in one of these small, closely knit communities where people really trust each other, it’s easier to get that traction,” Ippolito said.

“Owning property is a prestigious thing, it gives people that psychological need of significance,” Apta’s Kakarlapudi, who grew up in an immigrant household, said of immigrants’ attraction to property ownership. 

But should any of those deals go awry, those tracking the market note, some investors drawn in by community affiliations, not online marketing, could be harder hit by losses.

Another facet of the 2012 JOBS Act allows sponsors to raise funds from nonaccredited investors, those who make any amount less than the $200,000 a year the accredited standing requires.

The catch is that sponsors cannot solicit funds from nonaccredited investors they don’t know, so online marketing is off the table. But if the sponsor is pitching people with whom they have a “preexisting and substantial relationship,” it’s legal. And because the SEC’s regulation of the syndication space is quite lax, attorneys and investors say, that definition can be used loosely.

That is, members of a tight-knit community could count.

Gajavelli raised money from at least six nonaccredited investors on Heights at Post Oak, one of the properties Arbor foreclosed on, according to SEC documents. 

Chernobelskiy, the adviser to limited partners, stressed that investors can lose 100 percent of their investment, after which they have little to no recourse. 

“The losses can be pretty massive,” he said. “It’s very easy, as a limited partner, to lose your entire investment.”