We’ve been doing a lot of outreach to new investors lately at Big Spring Capital.
Which means I’ve had several conversations with folks who have never invested in a syndication before. Smart people. Successful people. People who are plenty experienced with traditional investing.
But there’s one question that comes up in almost every single conversation with new investors, either directly or dancing around the edges:
”Aside from the stated minimums, how much should I actually put into my first deal?”
It’s a great question. And one that matters way more than most people realize.
Because I’ve watched what happens when investors get this wrong. I saw it during this last real estate cycle when interest rates shot up and deals started going sideways.
People who overextended themselves didn’t just lose money – they lost their appetite for the entire strategy. Some have even sworn off syndication investing altogether.
So today, I want to share how I personally approach this. It’s battle-tested, born from real-world distress, and applies whether it’s your first deal or your fiftieth.
The Core Principle
In general, you should never invest more than you can afford to lose in any single deal.
I know that sounds super obvious. But you’d be shocked how many people violate this rule, especially when they’re new and excited.
Now, you shouldn’t take this approach because you expect to lose your investment. But because things happen.
Markets shift. Black swan events occur. Even good sponsors just make mistakes. And as a limited partner, you have zero control over any of it.
Your first deal is partly an investment, yes. But it’s also tuition.
You’re learning how to evaluate sponsors. You’re getting a feel for how these deals actually work. You’re testing your own due diligence process.
So if your first deal doesn’t perform as expected, it shouldn’t derail your financial life. And it definitely shouldn't make you so gun-shy that you never invest in another syndication again.
The 10% Rule
“Never invest more than you can afford to lose” is a good general rule. But here’s a more specific framework we recommend to most investors:
Don’t put more than 10% of your net worth into any single deal.
To be even more conservative, use 10% of your investable assets instead.
Quick example: You have a $2M net worth. That’s a max of $200K per deal. But if only $1M of that is investable assets (after backing out things like your house), then you’re looking at a $100K max per deal.
Why do this? To limit the blast radius if something goes wrong.
In more technical terms, this is called position sizing. And it’s one of the best ways to protect yourself, whether you’re investing in real estate, stocks, or really anything.
Solid position sizing means no single deal can crater your financial life.
What If the Minimum Is Higher Than My 10%?
You have a few options:
Ask the sponsor if they’ll take less. Many will, especially if they want to build a relationship with you. Now, if the minimum is $100K, they might not take $10K…but they’ll likely take $75K or even $50K.
Wait and keep stacking cash. Build more capital until you can comfortably hit minimums on a future deal.
Look at other sponsors and deals with lower minimums.
Accept a bit more risk. If you feel strongly about the deal, go above 10%. But you need to recognize (and be okay with) the additional risk you’re exposing yourself to.
A Final Word of Warning
Don’t chase shiny objects.
I’ve seen investors stretch way beyond their means because a deal had eye-popping projected returns, or because it promised massive tax benefits (or both).
During the last cycle, I watched people get absolutely obliterated chasing deals with huge tax advantages. Some deals just didn’t perform. Others turned out to be outright Ponzi schemes.
The investment quality always comes first. Extras like tax benefits are the cherry on top, not the sundae itself.
Staying in the Game
Remember: syndications are illiquid. Your money is locked up for years with no easy exit.
Which is exactly why you can’t afford to over-concentrate on any particular deal or sponsor.
One mistake, whether it’s an honest error by the sponsor, a market event no one saw coming, or something you missed in your own due diligence, shouldn’t wipe out 30% (or more) of your net worth.
If it’s 5-10%? That still sucks. But most people can absorb that, learn from it, and move forward.
The goal is to stay in the game long enough to get good at this. Long enough to benefit from compounding. Long enough to build real wealth through syndications.
And you can’t do any of that if you blow yourself up on your first deal.