Starting out - Apartment Syndication - Large Multifamily Deals
New to Real Estate · Riverside, CA · Member since 2022 · 24 posts · 16 votes
Hello BP Family - has anyone started their real estate career in large multifamily deals? If so, I'd love to hear your story. When it comes to using bigger pockets as a medium for finding passive investors in large deals - what rules must be followed? Moreover, how poised is this community toward larger deals like 100-300 unit complexes? From what I've seen a lot of the content has been for single-family or small multifamily (2-4 units). What I have heard from people who are in large multifamily now - is that their biggest regret is that they didn't start sooner because it's easier to scale.
Here's a goal I made in light of my pursuits:
Within 2 years, I will buy 300+ MF properties in the/outside the (still determining area - maybe Plano, Texas) area that will earn an average annual return of 15%, double investor's money in 5 years or less, and will earn me an additional $30k per month net income (after tax).
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I have heard repeatedly that focus = power. On one hand, I want to focus my attention on being able to get into a 2-4 unit house hack (I spoke about this in a previous post I made)- but at the same time, I want to learn large multifamily and ultimately be a GP, build a team, and syndicate my own deals. If I divert my attention to both I think I would be worst off than if I were to choose one and give it my full attention. Would love to get the BP community's thoughts on this.
My very best,
Justin
#1....as a new investor...you probably need to bring some of your own capital to the game. Good investors want to see you're in it with them.
#2....I would guess most, but not all syndicators get started with friends and family....especially on the 1st 1-2-3-4 deals.....so how confident are you mortgaging your home to go all in....cashing in all your retirement savings.....and putting at risk your parents retirement money, your grandparents house, your uncles business. If you're not confident about doubling their money, don't go out and raise it from others.
#3....I would guess the majority of the investors on BP are not putting $50,000-$100,000 or more in syndication deals. There are some, but I would probably not just think you're going to go out and raise a significant amount of funds off the internet from people you don't know on your 1st deal, or the 2nd, or maybe the 3rd.
#4 I think your local REIA in LA is getting ready to ....in FACT tonight is the night you want to go....HOW TO GET STARTED IN MULTIFAMILY..... is the presentation tonight....check it out.... https://lareic.com/ tonight 6:30-9:30pm
3376 Motor Ave Los Angeles, CA 90034
#5 Plenty of discussion on here about different multi family networking/eco system groups.....go to one of their conferences....2-3 days of non-stop education and networking.....and I think you can figure out if that plan is for you
I think starting with small personal deals and going thru all the pains, trails and tribulations and potentially successes give you excellent training for larger deals....but there are people who skip all that and go straight to big or giant deals......how good are you at underwriting, how good are you at vetting tenants, how good are you at PM, how good are you at renovations.....how good are you at raising money for other ventures....how are your presentation skills for convincing high net worth people to work with you....how much money do you have to get started....how good are you at finding, hiring, managing contractors.....how good are you at managing thru tough times.....like right now where lots of syndicators have their backs to the wall, cutting off distributions, going back to investors for cash calls, renegotiating loan deals....Last 5+ years everyone looks like a freaking hero....generating 30-60-100% returns. It was all jets and limos...and Ferraris. This year and maybe next will not be fun for many people....it may be back to sleeping on the floor of vacant units during property visits to save money. Might be eating vending machine snacks for lunch in the managers office.....might be becoming an expert at where to find and install shark bites yourself when pipes freeze.
Take all this as motivation....to do what others can't
Good luck and best wishes.
Syndicators make the majority of their money when their properties sell. Yes, they make an acquisition fee and an asset management fee but the majority of the money is made when there is a liquidity event. There are also several GPs in most deals that have specific roles. You will be splitting fees and the carry (carried interest) with these partners. In other words, the passive investors are the ones that are receiving the consistent distributions; many general partners are not receiving that much consistently and the funds they do receive usually go mostly to their expenses.
House hacking is a great way to get involved in real estate investing. It also will start building your experience, something that all passive investors want to see before investing with you.
Syndicators make the majority of their money when their properties sell. Yes, they make an acquisition fee and an asset management fee but the majority of the money is made when there is a liquidity event. There are also several GPs in most deals that have specific roles. You will be splitting fees and the carry (carried interest) with these partners. In other words, the passive investors are the ones that are receiving the consistent distributions; many general partners are not receiving that much consistently and the funds they do receive usually go mostly to their expenses.
House hacking is a great way to get involved in real estate investing. It also will start building your experience, something that all passive investors want to see before investing with you.
That sounds like a mantra from 5 years ago. Party is over for multi family, you'll make thin margins buying on market properties. Equity raising is difficult, especially for a newbie.
Who is your deal team? Have you unwritten any debt?
That sounds like a mantra from 5 years ago. Party is over for multi family, you'll make thin margins buying on market properties. Equity raising is difficult, especially for a newbie.
Who is your deal team? Have you unwritten any debt?
Hey Ronald - thanks for sharing so your thoughts. Could you then please expound - what is the most attractive opportunity set in the current market from your POV?
That sounds like a mantra from 5 years ago. Party is over for multi family, you'll make thin margins buying on market properties. Equity raising is difficult, especially for a newbie.
Who is your deal team? Have you unwritten any debt?
Hey Ronald - thanks for sharing so your thoughts. Could you then please expound - what is the most attractive opportunity set in the current market from your POV?
Distressed equity fund. As syndicators who had floating rate debt need to fix, they can't cover DSCR, inject equity at pref rates. Thats if you want to be in multi family.
Finding investors is never easy, especially when you are just getting started. The easiest way to raise capital on your first deal is to leverage relationships you already have (family and friends). Once you get your first syndication done and show you are able to hit the returns you projected, your next raise from outside sources will be much easier.
Hey Justin,
If you are new to real estate, it might make sense to house hack first. You can get some hands on experience as a property manager, and leverage the "I own and operate 3-4 units" in conversations. This will give you some added savings in your living expenses, and have something to talk about with people who want to invest in real estate but don't know how. Depending on your market, liquidity, and current employment, this could be done in as quick as a few months. I've successfully done this and can provide some insight if you want.
Then, I think the play for people like you and I is to look at 10-40 unit apartments. If you are targeting 100-300 units, you are competing with high level players who can afford those small margins until the refi/ sale to see returns. At 10-40 units, you can target off market 'tired landlords' negotiate seller financing and, in my own opinion, have a higher success rate.
I freelance underwrite for syndicators and investors and can help you out when you find a deal. I'm just of the opinion that you should build up to those larger deals. If you came to me and asked me for financing, the first thing I'd ask is, "tell me about your last deal and what assets you have under management".
Good luck with everything!
@Ronald Rohde
The margins seem to be getting wafer thin these days, I’ve been thinking to get into syndication investments as an LP to go completely passive with my RE investments .an opportunity that I recently came across and reviewed has a 6% coc annual return and up to 1.5x to 16x principal return projection after 3 years, this seems closely comparable to other risk free asset classes such as CDs and bonds. Appreciate any feedback on this Syndication deal returns, is it possible to do better on syndications in this market?
Hey Justin,
If you are new to real estate, it might make sense to house hack first. You can get some hands on experience as a property manager, and leverage the "I own and operate 3-4 units" in conversations. This will give you some added savings in your living expenses, and have something to talk about with people who want to invest in real estate but don't know how. Depending on your market, liquidity, and current employment, this could be done in as quick as a few months. I've successfully done this and can provide some insight if you want.
Then, I think the play for people like you and I is to look at 10-40 unit apartments. If you are targeting 100-300 units, you are competing with high level players who can afford those small margins until the refi/ sale to see returns. At 10-40 units, you can target off market 'tired landlords' negotiate seller financing and, in my own opinion, have a higher success rate.
I freelance underwrite for syndicators and investors and can help you out when you find a deal. I'm just of the opinion that you should build up to those larger deals. If you came to me and asked me for financing, the first thing I'd ask is, "tell me about your last deal and what assets you have under management".
Good luck with everything!
Hey Tony - thank you for sharing your insights. Lets connect.
That sounds like a mantra from 5 years ago. Party is over for multi family, you'll make thin margins buying on market properties. Equity raising is difficult, especially for a newbie.
Who is your deal team? Have you unwritten any debt?
Hey Ronald - thanks for sharing so your thoughts. Could you then please expound - what is the most attractive opportunity set in the current market from your POV?
Distressed equity fund. As syndicators who had floating rate debt need to fix, they can't cover DSCR, inject equity at pref rates. Thats if you want to be in multi family.
Hey Ronald - thanks for sharing I'll do some research.
Personally I think now is a great time to be learning about syndication. While there aren't a ton of deals out there right now, in the next six, 12 or 24 months, I expect that a lot of distressed sellers will show up in the multifamily space.
In terms of investors, BiggerPockets can be a decent place to find investors, but not the best place. Real estate investors typically look for higher rates of return than high net worth people outside of real estate.
For example, if I were to pitch a deal with a solid 14% IRR to real estate investors, many of them would think that was okay, but wouldn't jump at it. On the other hand, if I were to pitch that same deal to friends of mine in the tech sector, they would think it was a scam because they don't typically see risk adjusted returns like that in their industry. They'd be thrilled with 12% IRR, or even less.
So it's important to cultivate investors outside of places like this as well.
But remember, raising capital is just one piece of the puzzle. Knowing how to find, underwrite, acquire and manage these types of deals is the bigger challenge. I see way too many people focused on raising money and not focus nearly enough on finding great deals. And then when they do find a decent deal, they have no idea how to manage it.
This is a good way to destroy your reputation and lose your investors forever.
So, if you're serious about multifamily, start learning now. Study. Read. Find some people that are actually syndicating deals and see how you can help them in return for learning the business.
Multifamily is a great way to make millions or even tens of millions of dollars. But it's also a great way to destroy your reputation and there's a lot of your investors' money if you're not good at it.
#1....as a new investor...you probably need to bring some of your own capital to the game. Good investors want to see you're in it with them.
#2....I would guess most, but not all syndicators get started with friends and family....especially on the 1st 1-2-3-4 deals.....so how confident are you mortgaging your home to go all in....cashing in all your retirement savings.....and putting at risk your parents retirement money, your grandparents house, your uncles business. If you're not confident about doubling their money, don't go out and raise it from others.
#3....I would guess the majority of the investors on BP are not putting $50,000-$100,000 or more in syndication deals. There are some, but I would probably not just think you're going to go out and raise a significant amount of funds off the internet from people you don't know on your 1st deal, or the 2nd, or maybe the 3rd.
#4 I think your local REIA in LA is getting ready to ....in FACT tonight is the night you want to go....HOW TO GET STARTED IN MULTIFAMILY..... is the presentation tonight....check it out.... https://lareic.com/ tonight 6:30-9:30pm
3376 Motor Ave Los Angeles, CA 90034
#5 Plenty of discussion on here about different multi family networking/eco system groups.....go to one of their conferences....2-3 days of non-stop education and networking.....and I think you can figure out if that plan is for you
I think starting with small personal deals and going thru all the pains, trails and tribulations and potentially successes give you excellent training for larger deals....but there are people who skip all that and go straight to big or giant deals......how good are you at underwriting, how good are you at vetting tenants, how good are you at PM, how good are you at renovations.....how good are you at raising money for other ventures....how are your presentation skills for convincing high net worth people to work with you....how much money do you have to get started....how good are you at finding, hiring, managing contractors.....how good are you at managing thru tough times.....like right now where lots of syndicators have their backs to the wall, cutting off distributions, going back to investors for cash calls, renegotiating loan deals....Last 5+ years everyone looks like a freaking hero....generating 30-60-100% returns. It was all jets and limos...and Ferraris. This year and maybe next will not be fun for many people....it may be back to sleeping on the floor of vacant units during property visits to save money. Might be eating vending machine snacks for lunch in the managers office.....might be becoming an expert at where to find and install shark bites yourself when pipes freeze.
Take all this as motivation....to do what others can't
Good luck and best wishes.
@Ronald Rohde
The margins seem to be getting wafer thin these days, I’ve been thinking to get into syndication investments as an LP to go completely passive with my RE investments .an opportunity that I recently came across and reviewed has a 6% coc annual return and up to 1.5x to 16x principal return projection after 3 years, this seems closely comparable to other risk free asset classes such as CDs and bonds. Appreciate any feedback on this Syndication deal returns, is it possible to do better on syndications in this market?
That seems like market, maybe a bit optimistic for CoC given they have floating debt. What is the market, class and size of building?
@Ronald Rohde
It’s Class A , 140 Units Baltimore 6% annual coc
@Ronald Rohde
It’s Class A , 140 Units Baltimore 6% annual coc