Closed on a 48 Unit Multifamily - First Syndication

102 Replies

Hey BP!

Just wanted to tell everyone about the first syndication I closed. Yesterday July 31st, I closed on a 48 unit multifamily in Columbus, OH. 

Purchase Price: $1,115,000

Occupancy: 75%

Down Units: 6 

Light Turns: 6

6 - 1 Beds, 34 - 2 Beds, 8 - 3 Bed

Getting $500 for 1's and 600 for 2's (with a $30 dollar water bill back) and $700 for 3's (with a $40 water bill back)

Renovation is going to start on Tuesday and I am excited for the project. It was an off market deal, and worked very closely with the seller to get the deal done. It was a long closing period for many reasons. Some hiccups along the way were, after contract was signed the seller did not send any diligence documents for 21 days. Seller required us use his title company (HUGE MISTAKE) and they were horrible, at the last minute the bank was so frustrated with them they changed the title company. The lender keep throwing last minute requirements at us and my insurance guy flaked out last minute. Thanks to BiggerPockets I was able to find an insurance guy really quick. 

My financing on the property was 5.25%, 6 year term, 25 year amortization, and 75% LTV. I needed to raise about $580,000 for purchase price and renovation. I can say this was a fun process and I look forward to the 2 new projects I have under contract right now.

Congrats! How are you managing rental and renovation ?

Congrats to you,as we used to say,way to go.

Congrats!! Good job👍

Well done! Good luck with it. 

@John Cohen  The post mentions syndication, but there's nothing about that mentioned in the post. I know there are others curious about how to do that, maybe you can give some details. 

Originally posted by @John Cohen :

Hey BP!

Just wanted to tell everyone about the first syndication I closed. Yesterday July 31st, I closed on a 48 unit multifamily in Columbus, OH. 

Purchase Price: $1,115,000

Occupancy: 75%

Down Units: 6 

Light Turns: 6

6 - 1 Beds, 34 - 2 Beds, 8 - 3 Bed

Getting $500 for 1's and 600 for 2's (with a $30 dollar water bill back) and $700 for 3's (with a $40 water bill back)

Renovation is going to start on Tuesday and I am excited for the project. It was an off market deal, and worked very closely with the seller to get the deal done. It was a long closing period for many reasons. Some hiccups along the way were, after contract was signed the seller did not send any diligence documents for 21 days. Seller required us use his title company (HUGE MISTAKE) and they were horrible, at the last minute the bank was so frustrated with them they changed the title company. The lender keep throwing last minute requirements at us and my insurance guy flaked out last minute. Thanks to BiggerPockets I was able to find an insurance guy really quick. 

My financing on the property was 5.25%, 6 year term, 25 year amortization, and 75% LTV. I needed to raise about $580,000 for purchase price and renovation. I can say this was a fun process and I look forward to the 2 new projects I have under contract right now.

 Looks good. How long do you think it will take to renovate? Also what is the exit strategy? Refinance in a couple of years? Sell?

One more thing, you said it was your first syndication. Did you contribute any of your own money to the project? 

@John Cohen heck yeah!!! CONGRATS!!!! I'm really curious about your syndicated structure and this deal: 

1. How did you find the deal? 

2. How did you structure the deal with your investors? 

3. How many investors do you have in on the deal and did any of them have to do a personal guarantee for the lender? 

Congratulations, great work!

Eager to see answers to the questions posed by others in the thread too!

@Karen Margrave A syndication is when investors come together and raise a pool money. I was the lead, I found the deal and raised the capital to get the deal done. Does that help answer you questions? If not please send me a message I would love to explain it a little more.

@Anthony Gayden  Renovations should take about 1 month, having a meeting tomorrow with contractor and management to get it on a timeline. I do have a waiting list for the building, with potential move-in's on September 1st. Exit strategy is to stabilize it and sell, 14-18 months. I would refinance if I can't get my projected sale price.

This is the first deal I have done with no money out of my pocket. I have done some other syndications but always have put money into the deal. I normally would recommend putting some of your money into a deal, but time frame on this deal I just didn't need it.

@Joe Fairless I found the deal through Direct Mail and relationship with my property manager. 

I did a 80/20 split with a performance bump at 10% to 60/40.

I have 12 investors in this deal and no investors had to give a personal guarentee. 

Congrats

very nice!  congrats

congrats!  would you mind elaborating on the fee structure?  Are you charging any additional acquisition/disposition/management fees?

I did a 80/20 split with a performance bump at 10% to 60/40.

@John Cohen  I'm sorry, I didn't make my post clear. I understand what a syndication is, however; I just thought maybe you could give a little more specifics on the number of people that went in on the deal with you, amount each invested, etc., how you found your investors, etc.

I know there are many people on BP trying to find ways to finance their deals, and it's always nice when someone that uses something out of the box elaborates to give them an idea of the entire process, etc. 

Also, even though I know what a syndication is, I personally have never participated in one, and would like to see how it's structured. We can do notes in California that are fractionalized, so just curious. Thanks! 

Congrats on your deal

Congrats @John Cohen !  What an incredible accomplishment.  Was it difficult to recruit investors to invest without you investing personally?  I currently invest solely, but have thought about utilizing accredited investors in the next 5 years.

Congrats Just wanted to ask if you can explain how you was able to complete this deal without any personal guarantee? Thank you and much more success to you.

@Karen Margrave I have 12 investors in this deal, with investments ranging from $5,000-$100,000. I found my investors through past relationships and people who have invested in past deals. The syndication model is great if people want to engage their network and get some funds together to put into real estate. As the leader you get paid for the work you do upfront, throughout the deal, and on the back end. I have also raised debt from investors as well, this is basically a note to an investor giving them an interest rate (similar to a fractionalized note like you were talking about).

@Jim Herbst  I appreciate the compliment. Getting investors was not as difficult given my track record, but I generally put in about 10-15% of the equity to have some "skin in the game". The timeframe on this deal, my money was tied up and the investors I went to understood that. I would build interest in the potential investors because when it comes time to raise you want a lot of people you can go to.

@Mohabub Miah It is non-recourse debt, you guarantee the loan but only if you are delinquent or do something wrong.

I hope this answers your questions in more detail!! 

Winner, Winner, chicken dinner (frozen or thawed?)...

@John Cohen :

@Joe Fairless I found the deal through Direct Mail and relationship with my property manager. 

I did a 80/20 split with a performance bump at 10% to 60/40.

I have 12 investors in this deal and no investors had to give a personal guarentee. 

John, thanks for the post and details....Congrats on the deal!

I'm a complete greenhorn to syndication, so reading this thread with interest.  Could you elaborate on the 80/20 split?   I'm using an assumption on my end - I'm guessing 80% of profits to investors, you'd get 20 --- and performance bump??     What figure are you basing the performance bump on?   

And you mentioned being paid on the front end/during and after sale....?    If you are not wanting to post specifics I understand, just trying to wrap my head around the structure of such a deal.   If anyone else has a search topic I should use or a post to point to I'd be grateful for the info.

Regards from KS

@John Cohen

  I think what @Karen Margrave

  is asking and others are asking is what structure did you use to raise these funds.. IE did you do a 506 offering  and the one with letter that lets you use non accred's or did you use only accredited investors.

Or did you simply create an LLC with you as manager and the investors as members and their interest is prorated to their invested dollars.

Syndication to me means the 506 route. But I have talked to others who just use LLC

Awesome John. Great motivation 

Sounds like a sweet deal, congratulations!

How did you find the 12 investors for the capital?

Who secured the bank financing?

What is the spilt for the 12 investors?

wow that is awesome congrats. Wishing you many more I wad scare to get out there and do something like that but after hearing how you did it and enjoy it it im going to give it a shot thank you for sharing

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