Mini Syndication - the story so far
After going back from the Syndication event. I am confident enough to pull the 1st trigger on a mini syndication deal with close friend and family. After months of searching and negotiation we were able to secured 3 townhouses next to each other
Financing
The way i structure the deal is pretty simple. each of us would put in an email amount of money for the 25% down payment (yes, i put my own money into the deal as well) the the rest i financing it out through a Commercial bank that I has a relationship with. Because of the relationship that i have, he was able to finance the renovation amount as well which boost the leverage ratio and hence increase the return of the investment.
The mini syndication
what do i charge my passive investors? NOTHING! NOTHING so far. I am thinking of taking out the company 100$ a month and maybe some fee when we sell the property to pay for the time that i have to suffer. but other than this. I am not thinking of anything else at the moment of writing this article. I can almost guarantee you that no syndicator on earth will do this kind of deal - But i am the exeption.
What's more important than money? It's my reputation and the trust that people have in me. I put my investors return as the top priority.
As of right now everything is divided equally from expense to income. a dollar come in, we split it by 4, a dollar goes out, we split it by 4 (there are 4 of us in the deal)
There is surely better way to structure this deal. I'm open to all suggestion as i am working on finding the next deal to syndicate, and it won't be a mini anymore
Renovation and managing the property
Anybody can go buy properties. But the key is to managing it successfully and this is where most people lose their shirt
Long story short, we slowly removing non performing tenant and move in good tenants. you can read about it here and here
Some pictures that i haven't post before: I admit that i did a bad job on estimating the rehab on this deal and ended up asking for all the help i could get from family and my..passive investors. (Yes, I made them come out, clean the kitchen, and replace the laminate)
The Result for far
It has been almost a year and where are able to charge market rent of 2 out of 3 of the property already. The tenants at the 3rd property do not give me any issue so far and the rent is close to market so i will let them stay for now. If thing is going well then i am expecting 17% ROI this year instead of 0% compared to last year. This is just pure ROI on rent btw. I have not even including any Appreciation and tax benefit. So far a pretty sweet deal.
Rent38200mortgage-13327estimate repair-3820insurance-2400estimate Property Taxes-4940HOA-1350net12363.04Down payment72000ROI17.17089Lesson learned
Need to find a good backup contractor. My contractor was out of the country and then sick after he came back. This resulting in me looking for a contractor in a hurry and it ended up in a nightmare.
Do what you do best and delegate the thing you don't want to do. Since the contractor I hired was bad. I attempted to do some of the remodeling by myself and...fell from the ladder with a bucket of paint on my head. As the result: 7 stitches under the chin and a whooping $2000 in medical bill. This is just plain stupid from my part and this is the lesson i will remember for the rest of my life
Estimating the rehab correctly: If you follow my blog you will notice that i am pretty much a big picture guy and lean toward mindset rather than actually technical detail and application. I have a vision. i can see myself wealthy in the future but i don't know the detail of getting there. As the result. I estimate the rehab incorrectly and end up have to buffer my own money into the company when it go negative.
If you are a detail guy or gal. Good for you. If not, then when you go estimate for the rehab, bring your contractor or a partner who look for stuff in detail to cover your weakness
What's your story on the 1st syndication deal? Did it go smoothly or you are like me, dig myself a grave then eventually fight my way out of it. Are you a guy that must get all the duck in the row before you do something or are you a guy like me that just commit to do first then figure it out how to actually do it later?
I would love to hear your story
Thanks!
Huy
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