2nd mini syndication /partnership deal

21 Replies

Recently inspired by John Cohen and his recent success story post on Syndication deal. I decided to post one of my own that i closed last week. It's a mini version!

This is a triplex found on the MLS but it looks like a single family house attached to one another. Original Listing price is 270k but i successfully negotiated the price down to 190k. The property need about 50k of work but since i have great relationship with the bank. They are willing to finance 75% both renovation cost and the purchase price as well.

I wanted to go solo on this deal but I remember Rich Dad saying that investing is a teamsport and you have to help other people get rich with you. Also if i go solo i will be exhausting almost if not all my reserve cash so if some thing come up in another rental or if something happen to my day time job, i would be screwed :(

So i asked my gf if she have 18k to chime in, she said yes, I called up another buddy to see if he wants to chime in, he said yes. I call up another friend who i know is financially stable to see if she has the money, she also said yes. and yes, I do have a strong track record with all my current rentals in order to do this!

They way i structure this deal is very simple (aka I have no idea on how to do the compliate one yet). we opened an LLC with all 4 members. each of us put in 18k to fund the purchase price and the rehab. I thought about charging them an up front acquisition fee and all kind of fee i can come up with to compensate for my time and expertise but i decided to drop it. An experience investor once told me "Let your investors win" and also "Don't do syndication because of the fee. You do syndication because you want to share the wealth and even if you go solo on the deal, you still make your investment objective" I decided to practice that very strictly and charge each member...only $25 bucks each month.

And that's it, after going through all the drama. we closed the deal and the renovation on the outside already started. one other cool thing about this deal is that there are already tenants occupied in all 3 houses. I can do the outside work and they still paying rent (hopefully)

Happy Investing!

Updated over 2 years ago

I forgot i never linked my 1st partnership deal in the post. Here it is http://www.biggerpockets.com/forums/223/topics/118576-1st-syndication-deal---no-money-down

Nice job Huy!!! 

Can you post the rest of the numbers? (rents, profit splits, plans to refi and buy out partners?)

Thanks,

Lucas

@Lucas Housos 

Every dollar coming in and out of the deal is split by 4. After rehab rent are going for $1200 on each property.  I haven't thought of a plan to refi or buy out yet since the loan i get is below 5% already. it's a 5 year fix rate with 20 year amortization period. 

Depending on how the market does. If i can sell for a good price after 5 year, i might just sell it. 

Despite the rain we had in Houston recently, I managed to get the exterior repair completed. It cost me $1600 to repair all the siding and roof. paint job was another $4800.

Now it's time to move into the inside and work with the inherited tenants....One of them decided not to pay me rent already. Let's see

@Joel Owens

You are right Joel. I might think about the fee more as i move into larger deal. for now it's still family and friend deal. I don't feel like charging my girlfriend..yet haha

@Chris Bounds

Thanks man! sorry my day job, plus this keep me too busy from coming to the networking event. I will see you around for sure.

@Huy N. , each deal gets you closer to being able to quit your day job, right?  Keep it up!

Great work! When you make money for your partners they will want to do more deals with you. I agree 100%: spread the wealth. This will lead to bigger and more profitable deals.

John Thedford, Real Estate Agent in FL (#BK3098153)
239-200-5600

This is crazy. I remember looking at this exact property. I passed because there was just so much work that needed to be done. I'm glad it's working for you!

Originally posted by @Lucas S. :

This is crazy. I remember looking at this exact property. I passed because there was just so much work that needed to be done. I'm glad it's working for you!

 Man, I got story to tell you on this. It took endless effort to eventually work everything out. I gave up my commission to make thing happen. yes i got like gazillions problem wait for me inside but hey i'm here to solve problem!

@Huy N. said, it is important to include a fee; but you'll learn that over time. Being altruistic eats money and time at your expense. That is something that was taught to me as well after my 4th syndication. Before then, I also thought I would just do it for "free" as well. But when you see the costs and risks you endure, it is certainly worth some $$ to everyone. Once again, good luck with your progress on this venture.

@Huy N. congrats, i like hows simple you kept it. I imagine when i get to a syndication type deal it will be of this sort. My questions are pertaining to the maintenance you eluded to on the inside? Just curious also that negotiation from 270k.. how did that go? All fixed up and preforming what do you think the ARV is ?

hey @Ceasar Blackman thanks for commenting!

After repair and everything i think the houses with 2 bedrooms will worth at least 100k. these houses are located in a good school district area. the one in the middle with 3 beds i would think the ARV will be around 120k at least. Negotiation is tough, i'm no expert but i gave it my very best.

One of the tenants unexpectedly moved out. He paid the highest rent and lived in the nicest house out of the 3. I originally plan to keep him in as long as i can but thing didn't work out. He moved out for no reason.

Since I didn't have much money budget to rehab this house and i don't want to risk touching the money for the other two, I reach out to my partners and any friends that could help. We then worked the house with my contractor during the labor day weekend to turn it around for lease next week.

Here is some before, during, and after pix. The house is currently on the market for lease now at 1150. we spent 5.5k for the rehab. We are getting decent traffic per my property manager. Hopefully we are able to place in good tenants soon.

AFTER

update: this house is now leased for $1150 the 2nd one leased for $1200

those  after pics look great.thanks for sharing and congratulations for negotiating down the buying price

Great work Huy N !

I definitely agree-don't work for free! I always include an Acquisition Fee of 3-5% for finding the deal and coordinating all the parties etc. Often times this is enough to fund my own participation in the deal too. Looking forward to your next project post--good luck!

Best wishes-

PRH

Philadelphia, PA

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