Certain situations when syndicating a multifamily real estate investment create challenges to obtaining funding, and a Key Principal, or KP, can help on those fronts.  Ethan Gao shares a few scenarios where a KP can help multifamily real estate syndicators:

1. For a lot of multifamily syndicators looking to get an agency loan or even a bridge loan, the sponsorship group must show net worth that exceeds the loan amount that is being incurred. In situations where the sponsorship group does not have that net worth, they will need to bring on someone with additional net worth just to get qualified for the loan.
2. Sometimes the sponsorship group does have the net worth. However, the lender requires 10% of that net worth to be liquid and provable, such as a brokerage account, savings account, checking account - something that shows easily accessible and provable funds.
3. The third situation that can potentially happen, is a sponsorship group could have the net worth and liquidity but they don't have the liquidity for earnest money for the specific deal. So that's where a Key Principal could provide that as well.

This interview by Ron of Ronald Rhode Law of Ethan Gao is full of great takeaways regarding the role of a KP in multifamily investing.  Watch the entire video here: