I am looking to start syndicating deals to my personal network of friends as LPs and have myself as the GP. I'll be sourcing, vetting, compiling all market research/comps and providing financial projections.
My question is, what loan structure is best for an LLC with multiple partners? What are my loan product options, and what are the typical down payment/term/cash to close for a deal like this? For argument's sake let's say a $500k 4 unit rental. Myself as the GP and 3 other LPs kicking in cash.
Lender · GA · Member since 2022 · 16 posts · 3 votes
4y
all those are great questions, as a loan broker before I share such things as down payment costs and interest rates, is acquiring more information regarding your experience how many flips or rentals have you done in the last 36 months, Your FIco, and cash reserves. once answered then I can tailor your specific lenders to meet your needs.
Thanks Jose. Let's assume this is my first investment property. 4 unit rental for $600k. annual rental income is $84,000. 780+ FICO score with over $100,000 in reserves.
Thanks Jose. Let's assume this is my first investment property. 4 unit rental for $600k. annual rental income is $84,000. 780+ FICO score with over $100,000 in reserves.
Alex - at what point does it switch from a JV to syndicating deals? I want to start with a small group of people but after a few value-add flips, I want to start continually source deals for a list of 50+ that can invest. I've been told in the past that this is considered syndication with "sophisticated" investors as opposed to a fund with accredited investors.
Real Estate Syndicator · Milwaukee, WI · Member since 2018 · 1k+ posts · 907 votes
4y
The loan structures for a syndication deal will be the same as an ordinary deal..generally. In a traditional syndication, the LP's do not sign their name on the loan. So, you'll want to make sure that you'll satisfy all the lender requirements as a sole guarantor. Sometimes banks will try and get the LP's to sign on the loan but that might not go over well with your LP's.
Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
4y
@Josh Sullivan, a JV has active partners, and syndication has passive partners, generally. The level of activity your partners must maintain can vary, and I would consult with a business formation attorney or real estate attorney that is familiar with these structures to opine to how much involvement the investors must have to be a JV. The number of investors is irrelevant. You can have a single investor and still be a "syndication", if that one investor is a passive investor.
From a formation standpoint, a syndication is a little more complex because you are issuing securities, and there will be some additional filings, i.e. Form D with SEC. Any decent securities attorney will knock this out as part of the whole formation work.
As for the loans you are asking about. These will be typical commercial loans. You will likely be going to a local lender, given the small size of the properties. Your national lending groups normally don't start jumping into the loan balance is at least $1mm.
You can expect to sign a personal guarantee on these loans, and they will be looking at the asset, the manager's history and your finances to secure the loan. Call some local lenders, they will quote you rates and terms. It is common to be 70%ish LTV, 20-25yr am, and higher interest rates than personal mortgages.