Congratulations @John Cohen . Keep us posted as your renovations progress.
@John Cohen Ok, total newbie question:
What are "Light Turns" and "Down Units"?
@Gary Swift I appreciate it! Stick to your plan and execute, the deals are out there to make happen!
@Kim Handelman "light turn" refers to the amount of work needed for the vacant unit. "Down unit" is a unit that needs a complete rehab. Does that help?
@Meghan Reed absolutely!! I will update after renovation and how everything went.
@Rob Withers basically spot on with breakdown of costs. The all in was a touch under 1.4. The 80/20 split is on every dollar out, cash flow, sale price, etc. the performance bump occurred at an annualized return of 10%. 580k, investors get 58k then split goes to 60/40. Cash flow is going to be paid out to investors as distributions on a semi annual basis starting after year 1. Hope that can help you.
@Brandon Schlichter spot on!!
@Leon Moody Sr I had a great mentor, also loved the hedge fund model to real estate. Let's connect!
@Kenneth LaVoie I tell people all the time if your comfortable your not pushing yourself hard enough or not working as hard as you can!
@Dustin Faeth appreciate it! This guy for everyone reading is a GREAT contact in Columbus. He hooked me up with my contractor and has great resources.
This is super @John Cohen . Thank you for sharing. how much does it cost you in term of the attorney fee to setup the syndication?
Thanks for the details and congratulations on the deal.
Thanks Josh. I know in this deal you didn't put in equity yourself, but if you did, I would assume the payout would be the same for the investor portion, but you'd keep 100% of the profit for your portion. Let me know if I have this correct.
Awesome! Thanks for sharing. Looking forward to learning more about larger unit complexes.
@Michele Rok Tenants pay all electric and I am responsible for Water/Sewer, but in OH you can bill a portion back to tenats. I could sub-meter, but I would still be responsible if tenants didn't pay, so I'm not going to waste money on sub-metering. I didn't use a 6 year term, that is what the bank gave me. The market is strong now, and this building fits my model for a flip. If it wasn't a syndication, I would probably hold for longer for a personal portfolio deal. 25 year amortization is how the bank amortizes the loan. 1031 exchange is a huge part of the business. I raised the money through investors and people I know. Hope this can help!!
@Andrew Anderson Thank You! I used a operation agreement, private placement and subscription agreement. I like to read a lot of real estate books, but nothing specific. I do read a lot of books mentioned in the BiggerPocket Podcasts (@Brandon Turner & @Joshua Dorkin .) I will take you up on that offer!!
John, the 1031 like kind exchange you are only taxed on gains. So trading it up for a big and better profitable deal. Is that right?
@Shane H. the 80/20 split, basically means every dollar out of the property the inventor gets 80%, I get 20% of there investment. The performance bump is based on cash flow and net sale proceeds. For structure I get an acquisition fee, asset management fee, percentage of cash flow, and percentage of net sale proceeds. Hope this helps.
@Jay Hinrichs a syndication can mean 504, 505, or 506 not just 506. This deal happen to fit the forming a single purpose LLC with me as the managing member.
@Ameer Alexander The 12 investors where people I know. I use a mortgage broker to get financing. The split is 80/20 with a performance bump. The split is based on how much you invested and total dollars needed.
@Brent Thurn Specifically I try to find properties built 1970 or newer, 50 units or more, out of state owners, free and clear properties or mortgages coming due. Investors are cultivated everyday and when I sign contracts I get financial commitments. You right, I get an asset management, acquisition fee, cash flow, and net sale proceeds.
@John Buchanan this deal was an LLC because of the relationship with the investors
@Bob Mason I was a multifamily broker for Marcus & Millichap team sold over 30 properties 2 years ago, purchased over 20 tax deeds, a couple wholesales, and a 44 units in Atlanta.
@Leonid Sapronov The bank was actually out of Florida. Bank was not familiar with the property. Investors are majority owner and they are all proportionate to their investments
Thanks John... I get mixed messages from Securities attorneys that multiple member LLC's are circumventing the reg D filings and if something went wrong you would potentially get wrung up for the dreaded selling an unregistered security...
But either way nice job...
the LLC is a much easier and cost effective route than the PPM route... not to mention you don't really need any disclosures just approach your warm market. I am working on a small fund now.. and will again address this with my Securities attorney..
@Liz Bogdanova Thank You! Renovations are going to be basic, change carpet to vinyl, get down units to rent ready, two tone paint, minor kitchen fixes, and LANDSCAPING. As turns take place continue the theme throughout. I want to raise rents to market, which are those number s of $500 (1 Bed), $600 (2 Bed), and $700 (3 Bed).
@Dave Hall Thanks!
@Josh E. Eitingon Thanks! 10 Million dollar deal, got contracts back today. Have contracts executed on a 96 unit, doing due diligence now. Q&A with my man Thursday HOTEL VIANA in Westbury, NY at 6:30pm.
@George Adophius Campbell KEEP GRINDING
@Brian Fowler I will shoot you an email!
@Huy N. Private Placements vary on cost based on which type you do. I would say low end $7,500 to $25,000
@Rob Withers your spot on!! Your investment gets treated like any other investor.
@Jonathan Krompegal lets connect!
@Michele Rok a 1031 allows you to defer taxes and roll the complete amount into the next deal tax free. There are time frames you must go by, but you don;t have to pay taxes until you sell and don't do a 1031. I would reach out to a accountant or 1031 specialist, let me know if you need one.
Great job @John Cohen , Thank you for being so open about your experience. Recently joined BP and it is an awesome community. I look forward to getting into syndication myself and you sharing your project has gotten me turbo charged to get it going. I am catching up on the old BP podcasts (on #22) so not sure if you are on one but I think you should be!! Best of luck with your other projects, I hope to hear more about your adventures in the future.
Nicely done @John Cohen !!
- Did you keep track of how many touches on your mailers? 1st, 4th drip etc.?
- Are you starting with a Letter of Intent, or going straight in with a Purchase & Sale Agreement?
- Curious how aggressive your terms were too - short due diligence?
- Did you ask the owners about carrying back?
Very exciting. I am new to BP and real estate investing. Reading this is great because it shows that if you put in the work and learn that you can be successful and create great deals.
@John Cohen Congrats on your deal! I met you a few months ago at a meetup in NYC and you was telling me about this very one. So happy for you that it closed. Looking forward to updates. Learned a lot from this posts. Thanks!!!
Way to go! I am betting (hoping?) that when you first started out, as I am, that you didn't imagine you'd be putting together a million dollar multi-family deal like this one day. I guess it's true what they say, your thermostat of wealth gets bigger with every great real estate investment. I look forward to see the progress and the ultimate resale! Congratulations to you !
@Sean Katona I track all the direct mailers I send out. This lead was the 3rd touch. This deal was LOI to Contract to Close. I did ask the seller to finance, he didn't want to but it was in the contract for a fall back. The terms on the deal were:
- 21 Day Due Dilliegnece
- 45 Close
- No financing contingency (I had in contract seller said he would finance if I didn't get financing)
@Tim Puffer Its all about hard work and working hard
@Eduardo Demming I appreciate it! I do remember that, this deal had some bumps in the roll, but we took it to close. Will absolutely keep you updated, maybe a coffee soon.
@Kelly Ford I always wanted to get to this point and don't want to stop here. I do have a 5.15 million dollar 96 unit in contract now and a 121 unit 9.05 million dollar contract out. It can happen to anyone just have to put in the work and get the education
You found the deal through direct mailers correct? How many mailers did you need to send out? What kind of criteria do you look for?
Great job, John! I am also looking to syndicate a multifamily deal in Columbus, and have just started to get the ball rolling. I'd love to jump on a call with you sometime.
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