Closed on a 48 Unit Multifamily - First Syndication

102 Replies

@John Cohen you mentioned that you found this deal through direct mailers.  Are there specific areas, or qualifications, you are looking for?

Clearly your investors are given a certain set of parameters prior to committing funds.

Also, since you don't have any skin in the game, what kind of structure have you set up?  I'm assuming you are getting a fee for putting the deal together, an asset management fee, and some sort of exit collar above a certain return?

John - does a private syndication like you did require Reg D filings?  or is it simply a private agreement(contract) among the investors and you?  

thanks

Fantastic deal. Congratulations! What other deals did you have on your track record that your investors could look back on?

awesome John!  Would you be willing to talk to me?  Your patience and leadership here is beautiful to see!  Congrats!

Congratulations John!!!

Congratulations! That's awesome.

To add to the syndication and financing questions - did you use a local bank? Was that bank already familiar with the property? Are your investors equity partners and is their share proportional to the amount of money put up?

Congratulation! It's very impressive.

What kind of renovations are you planning? Only for these 12 units in order to get them rented or for the entire building?

Do you plan on raising the existing rents? if yes, then how much do you plan on getting?

Thanks.

Originally posted by @Jay Hinrichs :

@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

 i second this.

Congratulations John Cohen, your accomplishments are commendable, and I look forward to the day when I can re-produce, in learning from the best. Thanks for sharing. 

Regards,

Vanessa Griffin-Clay

@John Cohen : Nice job and thanks for sharing. Very inspirational. How did you choose Columbus, Ohio? Is it an "emerging market?" What led you to start sending mailers to that area? I've been spending some time figuring out which markets to mail to, trying to find population and employment trends that are in a trough and expected to rise. It's tricky for me, so I'd like to know if any of this type of research played into your marketing and decision making.

Here is some good info I researched on Columbus for the first quarter of 2015. Did any of this factor into your decision? If so, how?

Thanks! 

Dave


Columbus, Ohio 1st Quarter 2015 (source: Berkadia):
  • Columbus businesses added 12,900 personnel, expanding payrolls 1.3% since last June, trailing the 2.3% U.S. rise. The education and health services sector led job creation with 7,000 positions, a year-over-year upswing of 4.6%. The trade, transportation and utilities industry added 4,200 jobs, a 2.1% improvement since June 2014.
  • Columbus unemployment was 4% in June, a decrease of 70 basis points from one year ago and 130 basis points lower than the 5.3% U.S. rate.
  • Totaling 49,000 annualized transactions in June, existing single-family home sales accelerated 7.5% from a year ago. Velocity rebounded from the 4.5% decrease in the preceding 12 months. Despite the pick up in single-family sales, annualized permitting activity receded 8.5% year over year to 3,560 homes.
  • Apartment demand improved 13% for first six months of 2015 compared to same period in the prior year. Renters occupied 2,640 apartments compared to 2,340 units absorbed in the first half of last year.
  • Builders completed 680 apartment units metrowide during the second quarter, a year-over-year increase of 43%. The majority of new inventory was divided among the three submarkets of Hilliard, University/Downtown and Upper Arlington/North Columbus with a combined 500 units.
  • With positive trends in employment and apartment demand, developers kept the planning pipeline full. So far this year, 1,800 multifamily permits were requested, a 9.8% annual upswing.
  • Metrowide vacancy was 4% at the end of the second quarter, a tightening of 10 basis points compared to one year prior. Submarkets with the greatest year-over-year compression in vacancy rates were Pickaway County, decreasing 300 basis points to 2%, Southeast, descending 170 basis points to 3.1%, and Licking County, narrowing 150 basis points to 2.8%.
  • The average asking rent advanced 2.2% annually to $828 per month in June. Rents were highest in the Bexley and University/Downtown submarkets, $1,109 and $1,100 per month, respectively. The Grove City area led rent growth, a 5.9% jump to $777 per month.
 

Congratulations John!  Next up 10M deal in the hopper!

See ya Thursday

That sounds like a great deal.   I'm not at the level most of you guys are but i'm learning a lot.  Thanks for explaining how these things work.  Again, i'm just starting and i'm trying to learn as much as i can so that by January 2016 i can start my first deal.

George A. Campbell

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

I am also asking for more explanation on this.

Hi John,

Can you explain:

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

Thanks,

Curtis

Congratulations on this deal, John. I would also like to hear more, in-depth, about how you structured this deal. 

Please reach out to me, when you have a moment, at [email protected] 

Well done John. I live un Columbus and although it was a great deal for you Im not there yet. You inspire me to see what the future holds for me. Im looking forward to being where you are right now. Im not understanding the water bill back part, that is unless you make tenant pay all utilites including water not sure. I like the pricing of the rents. Why did you use a six year term? I know you stated you were goung to fix and sell but why not over 10 years it gives you a cushion period. Also why 25 amortization is that a tax thing? I guess im needing more info to understand why you went the route you did. Perhaps advice from attorney who protects your interest. Well I too lived in New York for 20 years and got my bba with concentration on public accounting. I get the process in real estate but my issues comes from knowing how to structure the deal to be a win win for both parties. I get how to make a profit but how do I tweek the deal structure when running the numbers ti maximize my profit and still be a win win for all? Im learning and reading and podcast and youtube and any other source to get this info down quickly. I learn alot from BP as well and find them to be a valuable source for someone like me. Im looking for that person/persons to follow in si I can get to my goals faster. Im 53 and I know thats not old but time is definitely not on my side. So it is critical that I learn the structuring a deal to maximize my profits and be a win win for all. I do have the knowledge on how 1031 work and using retirement savings to help in achieving my goals. 

How did you raise the other 580000 you need for repairs and dp?

Hi @John Cohen , congratulations on your 48 unit property!

--Would you be able to explain what kind of agreement you used with the investors?

--Are there any books or resources that really helped you know how to do this type of deal?

If you ever need someone on the ground in the Eastern Iowa/Western Illinois area just let me know! I'm be happy to help where I can.


Thanks

Congratulation!! 

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.

 Congrats. Wow! As a tenderfood trying to get my first rental done this is awesome to see deals like this getting done. It shows possibilities-- great possibilities. There is so much to learn on this forum.

Did you have a lawyer draw up the syndication agreement? Can you briefly walk me through the legal paperwork steps and what did this paperwork cost , how much time does setting up the syndication take?

Congratulations @John Cohen !!  Looking forward to seeing this project unfold in a positive direction for you and I know it will be a success!!  As you know, my company here in Columbus does mostly residential projects right now, but the commercial arena is definitely the place we want to be as well, so its great to see you out there making it happen!  

Nice work! My hat is always off to those who go beyond their comfort zone. Sounds like this was a logical next step for you. 

Congrats John, I'm excited for you. Where did you learn how to syndicate your apartment deals? My name is Leon Moody Sr. Let's join forces!!

I imagine the syndicated rate was 80%/20% then there was a hurdle rate of 10% that bumped his yield to 60%/40% once the hurdle rate was achieved. 

Sounds exciting.  I'm expanding from owning my own rentals and participating in spec builds to investing in larger deals managed by others.  I'm new to this, so I'm interested to better understand the possible return to the investor.  I appreciate your patience if some of my questions are basic.

If you raised $580k, it's fair to assume that ~280k went to down at 75% LTV. $300k to reno, closing, misc. That puts you in for ~$1.4M.

you mentioned "I did a 80/20 split with a performance bump at 10% to 60/40".  At a $1.4M cost, does that mean the performance bump is triggered at a net sales price of $1.54M?  For example, at $1.8M what would be the payout to an investor that put up $100k.

Also, if I'm reading this correctly, the cash flow is through the roof.  What are you doing with the cash - periodic payouts to investors, pay down loan, part of reno?

Thanks,

Rob

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here