First Syndication Complete! - 64 units in Colorado Springs
I'm thrilled to share that I closed on my first real estate syndication deal today! I wanted to share this with the community to hopefully encourage others out there that larger-scale investing is possible without expensive courses or prior knowledge, it just requires making a goal and then taking consistent, persistent action with that goal in mind!
I stumbled on BP 13 months ago, listened to Episode #238 with "Swanny" (still one of my all-time favorite episodes), and was instantly hooked on real estate. I wasn't sure which niche I wanted to pursue, but decided to pull out some equity of our primary residence, then bought a student rental in Greeley last October as a start.
In December I put an atypical duplex under contract, but had significant issues with the financing end of the deal. After getting input from several folks here on BP, I ended up canceling the contract. At the same time I started to narrow my learning focus into multi-family, through content produced by BP, Grant Cardone, @Michael Blank, and @Gino Barbaro
In February I started reaching out to local brokers and building relationships, while also talking to several folks about partnering together if a deal could be found. In April, after evaluating over 40 deals, I finally identified a 64 unit complex in Colorado Springs as an attractive target. This property was built in the late 60's, had good bones and a new roof and pool, but was still owned by the original builder, and had been mismanaged for several years. Rents are 10-15% below market, and there are a number of straight forward exterior items (signage, overgrown landscaping, new paint) that we plan to address as part of our turnaround strategy. I ended up partnering with two folks that had prior experience in the development and SFR arenas.
The seller proved to be very difficult to pin down, and we spent most of May and part of June pushing for a response to our offer. We finally entered into contract June 10 with 2, 30 day extensions to facilitate a 1031 for the seller. Shortly after entering under contract we secured funding through Bellco Credit Union, though it was recourse debt, we got a 4% rate, 10 year term, 30 year am, with a 1 time adjustment at 5 years. We selected a local property management company with quite a bit of experience in the Springs submarket after vetting several local firms.
The final purchase price was $7.55 million, and we ended up raising just over $2 million through a 506(b) syndication structure. Oddly enough, the money raise ended up being the easiest part of the whole process!
Our plan is to hold for a minimum of 5 years, then either refinance into agency debt and hold for 5 more, or sell and distribute the profits. Our projected IRR with conservative rent growth numbers is just under 20% for our limited partners.
I'm so thankful to have resources like BP to learn from, and other folks like @Steve K. and @Bill S. that provided valuable insight early in my journey, thank you! I have much still to learn, and I look forward to creating more value for our investors in the future. Hopefully I'll meet some of you in person at a meetup in the Denver area soon!