Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
Eight months ago I purchased my first duplex with an FHA loan. I only had to put down $15k, it was great! However I have had a dream of owning large multi-family properties (30 units or more).
How do I go from one duplex to a large apartment building?
Is financing the same, do I need 20% down? That seems like it would take a TON of money
What is the searching process like? Do I just search on Loop net?
Investor · Indianapolis, IN · Member since 2015 · 764 posts · 953 votes
7y
@Steven Foster Wilson I started with one duplex in 2010 and now own ~2400 apartments and manage nearly 1000 more as a PM company. My small deals are all long gone but I did have several before I jumped up to apartments.
I know you want to go big asap but your best move might be focusing on getting another 2-4 unit. Remember, there are no shortcuts.
Developer · Point Pleasant Beach, NJ · Member since 2015 · 303 posts · 216 votes
7y
@Steven Foster Wilson, the two types of investing are very similar. I went from a 3 family in philly to a 52 unit building and it wasnt much different. You still need 20% - 25% down. You usually don't have to personally guarantee the loans though. Yes, you need more money for more expensive properties, but if you find a great deal its easy to find that money from family and friends who want to make a good return. For your first one, you just need to get a foot in the door so dont keep much of the deal for yourself, let your investors make all (most) of the money on the deal.
Loopnet is where I found that 52 unit but I tend to find much better deals going directly to building owners and asking if they want to sell. The same is true for smaller deals though. You will always find better deals if you contact sellers directly before they list a property. Once you have a track record of closing on deals, brokers will also begin bringing the good ones to you before they hit the market.
Let me know if I can answer any other questions for you. I'm happy to help.
Rental Property Investor · Tampa, FL · Member since 2015 · 1k+ posts · 969 votes
7y
Expect to put 25% down for the loan, and expect to need 30% to 35% in liquid capital to cover the remaining project costs
Loopnet is an option. But your best bet is to reach out to brokers in your market and get set up on their automated mailing list. But you don't want to reach out to brokers until you have a property management company. And you don't want to reach out to a property management company until you've educated yourself enough on the apartment syndication process, have an idea of how you will fund your deals, and evaluated your target market, amount a few other things
Investor · Front Royal, VA · Member since 2013 · 586 posts · 418 votes
7y
@Steven Foster Wilson to answer your question as succinctly as possible. Find a mentor/coach that is actually doing deals, pay them, and watch your experience go through the roof.
If I were you, i'd save money and ask to be a part of a syndicated deal as an LP and learn as much as you can from that side and then start looking for your own deals.
Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
7y
@Christopher Lombardi do you mind sharing with me how you got your investors and how you convinced them to trust you when you only had a small property?
@Luke Miller thanks thats a great idea. Do you have any tips on how you found a mentor doing exactly what you wanted to do?
Unfortunately for me it was trial and error. Based on your background and strengths, i'd find a mentor that has what you lack. For example, if you're really good with relationships/raising money/marketing, but not so good at analytics, you might want to find someone with that strength.
It could also be regional too. If you know you want to invest in Texas, you might be well served choosing a mentor active in that market. That's really as specific as I can get without promoting any one person. Feel free to PM me if you'd like names.
Investor · Indianapolis, IN · Member since 2015 · 764 posts · 953 votes
7y
@Steven Foster Wilson I started with one duplex in 2010 and now own ~2400 apartments and manage nearly 1000 more as a PM company. My small deals are all long gone but I did have several before I jumped up to apartments.
I know you want to go big asap but your best move might be focusing on getting another 2-4 unit. Remember, there are no shortcuts.
Developer · Point Pleasant Beach, NJ · Member since 2015 · 303 posts · 216 votes
7y
@Steven Foster Wilson, I only have a few investors who gave me unsecured loans, and they are close friends of mine from college and a couple family members. I've done seller financing on some deals, hard money on some but always bank debt and construction loans. Its definitely a catch 22, because you need money to do deals but you need deals under your belt to get the money. Thats why I always recommend people start small and work your way up. There is plenty of time to make mistakes on small deals and they will prepare you for the big ones.
Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
7y
@Luke Miller@Ivan Barratt@Christopher Lombardi Thanks for the advice. I think, based off of what you guys have said I will try to get another 2-4 unit under my belt to build a good reputation for myself!
Rental Property Investor · West Palm Beach, FL · Member since 2017 · 262 posts · 136 votes
7y
@Theo Hicks I just ordered the Best Ever Syndication Book and am looking forward to reading it!
I listen to the Best Ever Podcast on most days on my way to the office (only started the series a couple weeks ago). The best advice I have gotten from it is to get your commitments from investors first. I was originally taught that if you find the deal the money will follow, which is true but I have lost out on good deals because I did not have a cash buyer ready. Also, you will want to line up the commitments from investors first so that when you approach brokers you are not wasting their time trying to assemble a group of investors.
One approach I am also taking is to try to find a good deal and then partner with someone who has experience in multi-family so they are just as invested in making sure you don't repeat any mistakes they've made. In one multi-family book I read (I think Multi-family Millions) he suggests even partnering with an experienced investor and giving them a small percentage of your equity in exchange for monitoring the deal and even connecting you with useful professionals.
I agree with finding the property management company first as I have made the mistake of hiring after I got the deal and as a result had to give up months of profit to cover evictions for carelessly moving tenants in (even after vetting 20 different property managers and interviewing two).
Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
7y
Another question for all of you is. Right now I own all the equity in my duplex, I also make all the cashflow. Is syndicating on large multifamily essentially just like investing in a mutual fund where Im not doing much, own a small portion of equity, and get a small payout each month?@Allyssa McCleery@Theo Hicks@Christopher Lombardi@Ivan Barratt@Luke Miller
Investor / Syndicator · Austin, TX · Member since 2015 · 366 posts · 220 votes
7y
@Steven Foster Wilson It is if you're an LP (limited partner) in a syndication. LP's have no liability, no management responsibilities, but participate in the profits (cash flow and at sale). If you're the lead sponsor on a syndication, then your managing the asset, managing the team of brokers, banker, prop mgmt, equity partners etc, to pull a deal together.
Rental Property Investor · Tampa, FL · Member since 2015 · 1k+ posts · 969 votes
7y
@Allyssa McCleery Thanks for ordering the book and for being a loyal best ever listener. If you have any more specific questions, feel free to send me a DM.
Having verbal commitments from investors before doing a deal is beneficial for those two reasons you laid out: 1) won't miss out on those fast moving deals and 2) have more credibility with brokers, lenders, property managers, etc. Also, you need to know how much money you are capable of raising in order to know what sized deals you can pursue.
I know of a few syndicators who do what you are referring to - they will sponsor the deal for a % stake in the GP. But I am not 100% sure about whether they monitor the deal. Now, if you hire a mentor, you will have access to their connections and expertise. They won't monitor the deal per say, but you will have access to them so that you can ask them questions to help you navigate the gray areas. At the end of the day, you should know how to asset manage a deal (or have someone on your team that can asset manage the deal) before you do your first syndication. The mentor/sponsor is just there to help you manage the deal more effectively.
Rental Property Investor · Tampa, FL · Member since 2015 · 1k+ posts · 969 votes
7y
@Steven Foster Wilson If you syndicate a deal, you will be a general partner. The amount of cash flow and equity you receive is entirely negotiable. A common structure is to offer a preferred return to the investors (limited partners) and then profits above the preferred return are split between the LP and GP. 8% preferred return and a 50/50 split is common.
Investor · Front Royal, VA · Member since 2013 · 586 posts · 418 votes
7y
@Steven Foster Wilson In a syndication there are general partners and limited partners. GPs are usually the sponsors or active investors in the deal. LPs are passive equity investors. The deal is usually split 70/30 80/20 (or any way you choose). In my example i'll use 70/30.
70% of the cash flow is going to go to the LPs, 30% is going to go to the GP. If you're the only general partner, you get to keep that 30%.
Syndications aren't a way to get rich quick, they are more about building generational wealth and building passive cash flow. Depending on where you come in on the deal, they can be lucrative on the cash-flow side, but also give you incredible tax savings through depreciation and cost segregation.
Get as Close to Team doing what you to do, add value to their operation, and soak it up!
Is financing the same, do I need 20% down? That seems like it would take a TON of money
Financing will be easier and the down can be brought in by Equity partners. In return you provide them with the opportunity, cash-flow, tax benefits, and profit sharing.
What is the searching process like? Do I just search on Loop net?
Build relationships with brokers to get to the deal behind the deals on Loopnet. An experienced team will have closed on deals and are getting pocket listings and off-market opportunities.
How do I transition my mindset?
Think Team Sport
Hope this was helpful - don't hesitate to reach out
Rental Property Investor · West Palm Beach, FL · Member since 2017 · 262 posts · 136 votes
7y
@Theo Hicks@Steven Foster Wilson The 8% preferred return is what I have heard the most from other syndicators I have met but one who I will be partnering with (once we find a deal) will structure it so that the syndicator gets 20% of the profit and the investors get 80%. I think this is the way I will go with my first deal as I am much more concerned about creating a deal that will make the cash providers feel secure and encourage them to send me referrals for the next deal or write a letter of recommendation to other potential cash providers they may not know. I am not 100% sure yet if there are any legal issues with this.
Rental Property Investor · Tampa, FL · Member since 2015 · 1k+ posts · 969 votes
7y
It varies. The pref can roll over to the next year, or the next month, or accumulate and get paid out at sale. Or the pref doesn't accrue and is never paid out at all. Depends on what is outlined in the initial partnership agreement documents.