Finding Investor Partners - My current ONE Thing (...and my biggest frustration)

For me, the difficulty is not being able to predict when your efforts will finally tip the scale. With consistency and perseverance, all efforts are bound to take us in the right direction. Connecting with helpful people along the way will just help to propel forward in the most efficient way. Any and ALL insight is valuable at this point of the game!

Amanda Fernandez

Member since 2020 · 1 post · 0 votes

Ronald RohdePro Member

Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes

Do you actually have a deal? Sounds like you have enough of an audience, just blast the deal

money will come if its a good deal.

Hari Mann

OP

Investor · Atlanta, GA · Member since 2016 · 43 posts · 18 votes

Quote from @Ronald Rohde:

Do you actually have a deal? Sounds like you have enough of an audience, just blast the deal

money will come if its a good deal.

Hi Ronald, thanks for the reply. We have started sending out deals to our newsletter subscribers and CRM but no bites yet. Planning to send out a bunch of example underwritten deals from our actual target market and finalize enough soft commits of funds through investor meetings to conduct our first syndication

Scott TrenchPro Member

Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes

Podcast Guest on Show #223

Large Multifamily is hard for everyone right now. That's why I'm sticking with Single Family and small multifamily - I believe they are much more insulated from price and rent corrections.

On average large apartment complexes just don't make sense. Across most of the US, but especially in the Southeast. I see you are in Atlanta. That market is brutal. If you are in Kansas City, maybe a little more optimism.

All you as the operator can control is operations. But so much outside of your control is happening to deals.

- We have the most supply EVER currently under construction. This will hit the South hardest, and West second-hardest

- We have insurance costs skyrocketing. This is not in operators control. It goes right to the bottom line, and right to valuation.

- We have taxes skyrocketing.

- Cap rates are still lower than interest rates. While it’s still possible to make money, you have to believe one or a combination of four things, strongly, to bet into a negative leverage environment:

1) Rents grow

2) Expenses decrease

3) interest rates will fall

4) cap rates will fall

I, and a lot of other potential investors just don’t believe any one of those things. Much less any combination, in 2024. So, I expect prices to correct, with cap rates increasing.

Without looking at your deal, if you aren’t assuming a 7-8% cap rate on the exit in your base case scenario, I’m not interested.

And no way are you making money on a deal if you are assuming a 7-8% exit cap.

it’s not you, it’s the brutal reality of the market.

Only thing worse than not raising capital is raising it and then having the market work against you while you operate to the best of your ability and still get crushed by that which is outside of your control.

I just watched a multi-decade veteran likely lose 100% of my investment, after executing his plan to the best of his considerable abilities. I’m not even mad. I respect him and may invest with him again. It’s just that he was helpless and will be until conditions change.

That’s where I, and many other LPs are at right now. You have to combat this outlook. Make it make sense at the highest level. The best deal of all time in 2021 is getting wrecked and it’s hard to believe in greener pastures for multifamily until they stop building new units at record pace.

5 Reply

Todd Dexheimer

Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes

Quote from @Scott Trench:

Multifamily is hard for everyone right now. On average it just doesn’t make sense. Across most of the US, but especially in the Southeast. I see you are in Atlanta. That market is brutal. If you are in Kansas City, maybe a little more optimism.

All you as the operator can control is operations. But so much outside of your control is happening to deals.

- We have the most supply EVER currently under construction. This will hit the South hardest, and West second-hardest

- We have insurance costs skyrocketing. This is not in operators control. It goes right to the bottom line, and right to valuation.

- We have taxes skyrocketing.

- Cap rates are still lower than interest rates. While it’s still possible to make money, you have to believe one or a combination of four things, strongly, to bet into a negative leverage environment:

1) Rents grow

2) Expenses decrease

3) interest rates will fall

4) cap rates will fall

I, and a lot of other potential investors just don’t believe any one of those things. Much less any combination, in 2024. So, I expect prices to correct, with cap rates increasing.

Without looking at your deal, if you aren’t assuming a 7-8% cap rate on the exit in your base case scenario, I’m not interested.

And no way are you making money on a deal if you are assuming a 7-8% exit cap.

it’s not you, it’s the brutal reality of the market.

Only thing worse than not raising capital is raising it and then having the market work against you while you operate to the best of your ability and still get crushed by that which is outside of your control.

I just watched a multi-decade veteran likely lose 100% of my investment, after executing his plan to the best of his considerable abilities. I’m not even mad. I respect him and may invest with him again. It’s just that he was helpless and will be until conditions change.

That’s where I, and many other LPs are at right now. You have to combat this outlook. Make it make sense at the highest level. The best deal of all time in 2021 is getting wrecked and it’s hard to believe in greener pastures for multifamily until they stop building new units at record pace.

Wow, great reply. This sums up many investors sentiment that were LP's over the past decade. Many are staying on the sidelines or shifting gears. Right now, as a sponsor, the best approach is to focus on building your network and being very patient. Maybe a deal comes in 2024, but be patient and don't force a deal through.

Kudos to you Scott for not being mad at the sponsor that lost your money!

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

Podcast Guest on Show #222

since you have gone to all this work maybe you change asset class or niche that is a good deal these days.. There are a lot of ways to make money in ALL RE cycles..

@Scott Trench is correct on current sentiment when it comes to syndicated apartment deals one just has to look at the threads on BP where investors are complaining about halted distributions and so on and so forth. Some of it probably is warranted others probably not things do happen.

Right now to me a few things appear to be working well:

1. Be the bank there is always a demand

2. Storage seems to be a good space.

3. QUALITY MHP ( Not ghetto cheapy parks)

4. BTR developments as long as you have a solid take out some of my clients are doing quite well with those.

5. New construction in the right markets ( thats working well for us) Sold 3 Homes this week although the fall was dead but I think we are heading in the right direction.

6. Vulture foreclosure fund I fund one client that is buying at least 5 a month that I fund for him and I am not his only funding source.. So if you have private capital you can do quite well if you identify the market correctly.

7. And development buy land prosecute subdivision lots or change zone to commercial this works well also for funds with cash.

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Hari Mann

OP

Investor · Atlanta, GA · Member since 2016 · 43 posts · 18 votes

@Scott Trench Super great reply! I appreciate the perspective. Abraham Lincoln said something about sharpening your axe that sounds applicable right now :) We definitely want to be positioned to ride the uptrend after this low period (whenever that happens).

@Jay Hinrichs Love your suggestions here as well. I totally agree there are always methods that work in the current market regardless of the kind of market it is and I have personally been very curious about MHPs. We've actually pivoted our strategy for these reasons to find deals in KC that are closer to new-build quality but still have some margin for rent growth

Robert EllisBusiness Member

Developer · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes

[email protected]786-494-6766

Quote from @Jay Hinrichs:

since you have gone to all this work maybe you change asset class or niche that is a good deal these days.. There are a lot of ways to make money in ALL RE cycles..

@Scott Trench is correct on current sentiment when it comes to syndicated apartment deals one just has to look at the threads on BP where investors are complaining about halted distributions and so on and so forth. Some of it probably is warranted others probably not things do happen.

Right now to me a few things appear to be working well:

1. Be the bank there is always a demand

2. Storage seems to be a good space.

3. QUALITY MHP ( Not ghetto cheapy parks)

4. BTR developments as long as you have a solid take out some of my clients are doing quite well with those.

5. New construction in the right markets ( thats working well for us) Sold 3 Homes this week although the fall was dead but I think we are heading in the right direction.

6. Vulture foreclosure fund I fund one client that is buying at least 5 a month that I fund for him and I am not his only funding source.. So if you have private capital you can do quite well if you identify the market correctly.

7. And development buy land prosecute subdivision lots or change zone to commercial this works well also for funds with cash.

I've been following jay for about two months now and all of this is true. We do BTR for single family and now we are doing BTR triplex with rezoning as a service for investors in Columbus OH and expanding to Tampa FL and Miami FL where the economics are 2-3x better. I just spent a whole week in Florida looking at land all over the state and zoning regulations to do this, meeting with other builders, agents, etc. The only way to make more money than what we do is land entitlement, and land entitlement is part of what we do as part of the smaller infill lots with use variances. We tend to focus on urban core and higher density where it's easier to get approval than suburban but it's basically development. In Columbus, the number of houses dropped this year by the peak in 2021 by 10,000 sales, but new construction has gone up every year by units and percentage. Most people who do single family then go to multifamily then syndication then new construction. I can show the same trend for large funds, as they grow they get more into development as they build a track record. Jay is spot on

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Henry ClarkPro Member

Developer · Member since 2020 · 4k+ posts · 4k+ votes

Step back and look at your portfolio and storyline with someone not in your circle. Does it tell the story of expertise growth? Compared to other syndicators, storylines where does it rank? On a $10mm deal noted above, are you bringing $1mm personal money into the deal?

You need your storyline and personal investment to match your syndication goals.

If it doesn't match, then re-configure your deal to fit it.

Your taking others people money along for the ride. They need security at this moment.

Hari Mann

OP

Investor · Atlanta, GA · Member since 2016 · 43 posts · 18 votes

Quote from @Robert Ellis:

Quote from @Jay Hinrichs:

since you have gone to all this work maybe you change asset class or niche that is a good deal these days.. There are a lot of ways to make money in ALL RE cycles..

@Scott Trench is correct on current sentiment when it comes to syndicated apartment deals one just has to look at the threads on BP where investors are complaining about halted distributions and so on and so forth. Some of it probably is warranted others probably not things do happen.

Right now to me a few things appear to be working well:

1. Be the bank there is always a demand

2. Storage seems to be a good space.

3. QUALITY MHP ( Not ghetto cheapy parks)

4. BTR developments as long as you have a solid take out some of my clients are doing quite well with those.

5. New construction in the right markets ( thats working well for us) Sold 3 Homes this week although the fall was dead but I think we are heading in the right direction.

6. Vulture foreclosure fund I fund one client that is buying at least 5 a month that I fund for him and I am not his only funding source.. So if you have private capital you can do quite well if you identify the market correctly.

7. And development buy land prosecute subdivision lots or change zone to commercial this works well also for funds with cash.

I've been following jay for about two months now and all of this is true. We do BTR for single family and now we are doing BTR triplex with rezoning as a service for investors in Columbus OH and expanding to Tampa FL and Miami FL where the economics are 2-3x better. I just spent a whole week in Florida looking at land all over the state and zoning regulations to do this, meeting with other builders, agents, etc. The only way to make more money than what we do is land entitlement, and land entitlement is part of what we do as part of the smaller infill lots with use variances. We tend to focus on urban core and higher density where it's easier to get approval than suburban but it's basically development. In Columbus, the number of houses dropped this year by the peak in 2021 by 10,000 sales, but new construction has gone up every year by units and percentage. Most people who do single family then go to multifamily then syndication then new construction. I can show the same trend for large funds, as they grow they get more into development as they build a track record. Jay is spot on

Great notes on the progression through the various strategies. I would like to follow this path eventually but right now I'm focused on going from multifamily to syndication.

@Robert Ellis Do you have any experience doing wetland mitigation? I have a piece of land I've been holding on to for a couple years outside Tampa that would be great for BTR multifamily if only we could address the wetland issues.

Robert EllisBusiness Member

Developer · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes

[email protected]786-494-6766

Quote from @Hari Mann:

Quote from @Robert Ellis:

Quote from @Jay Hinrichs:

since you have gone to all this work maybe you change asset class or niche that is a good deal these days.. There are a lot of ways to make money in ALL RE cycles..

@Scott Trench is correct on current sentiment when it comes to syndicated apartment deals one just has to look at the threads on BP where investors are complaining about halted distributions and so on and so forth. Some of it probably is warranted others probably not things do happen.

Right now to me a few things appear to be working well:

1. Be the bank there is always a demand

2. Storage seems to be a good space.

3. QUALITY MHP ( Not ghetto cheapy parks)

4. BTR developments as long as you have a solid take out some of my clients are doing quite well with those.

5. New construction in the right markets ( thats working well for us) Sold 3 Homes this week although the fall was dead but I think we are heading in the right direction.

6. Vulture foreclosure fund I fund one client that is buying at least 5 a month that I fund for him and I am not his only funding source.. So if you have private capital you can do quite well if you identify the market correctly.

7. And development buy land prosecute subdivision lots or change zone to commercial this works well also for funds with cash.

I've been following jay for about two months now and all of this is true. We do BTR for single family and now we are doing BTR triplex with rezoning as a service for investors in Columbus OH and expanding to Tampa FL and Miami FL where the economics are 2-3x better. I just spent a whole week in Florida looking at land all over the state and zoning regulations to do this, meeting with other builders, agents, etc. The only way to make more money than what we do is land entitlement, and land entitlement is part of what we do as part of the smaller infill lots with use variances. We tend to focus on urban core and higher density where it's easier to get approval than suburban but it's basically development. In Columbus, the number of houses dropped this year by the peak in 2021 by 10,000 sales, but new construction has gone up every year by units and percentage. Most people who do single family then go to multifamily then syndication then new construction. I can show the same trend for large funds, as they grow they get more into development as they build a track record. Jay is spot on

Great notes on the progression through the various strategies. I would like to follow this path eventually but right now I'm focused on going from multifamily to syndication.

@Robert Ellis Do you have any experience doing wetland mitigation? I have a piece of land I've been holding on to for a couple years outside Tampa that would be great for BTR multifamily if only we could address the wetland issues.

with floodplain plenty. I just pulled one out of a flood zone FEMA map. I'm very interested in that because there is huge value in it especially in higher price point markets. I'll shoot you a PM. We would help get quotes for some services we can't self perform like mostly engineering. I'm sure there would be some engineering requirements.

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