How to Fund 60 unit apartment acquisition with Zero funds

23 Replies

I'm analyzing a 60 unit building in Tampa and the financials look solid. 42% expenses, 8% cap rate, 14% cash on cash. 

Problem is I need a money partner but feel like anyone with $400k+ to put into this deal has the ability to push me out of the picture and do it themselves. How do I handle bringing in possible partners without loosing the deal

Bring something to the table that is of equal worth. Knowledge,  skills, your track record, something they don't have that you do that will bring them value.

@Adam Gregory you are bringing something. You are bringing the deal. Find someone that can do the deal and partner with them. You can have them sign a NCND document if you are not under contract. Do you have it under LOI?

I could be all wrong here.. but  personally if I was going to do this.. would put a business plan together then go look for partners first then go find the deal..

Although I think your thought process is probably more realistic than you think. IE what does someone who can do the deal need with someone who has no funds and is basically brokering the deal.

Although I have seen many folks start in the syndication route in the last 5 years and they had to start somewhere although I think they probably had a pretty good grasp of real estate.. and had the funding to put the documents together etc etc and some pedigree.. not often folks will invest with someone with zero money and zero experience.. in these type of deals.

@Jeff Greenberg   Jeff I don't play in this space.. but know a few folks that own larger multis etc.. and when conversing with them they get cold called by commercial brokers quite frequently.. and I think if someone came to them wanting to buy they would want to vette them financially up front. So as to not waste there time..  whats your thought on this.. I get the no money wholesaler turning the 20k broken down mid west house.. but moving larger commercial.. just curious if there are sellers who would routinely just let someone tie up their property without checking their capacity to close. ?

@Jeff Greenberg I do not have an executed LOI and yes; there is more money chasing deals than deals chasing money. So I am bringing something of value. @Jay Hinrichs what I lack in experience and capital I more than make up for in tenancity, grit, and street smarts. I love this deal ( most important part ), I know the area, the numbers, and the trajectory of the market. I could be wrong here but as a licensed agent, former mortgage broker, wholesaler, and someone that has inspected 500+ houses...I understand commercial is a different animal but the math and the financials are the key. 

The age-old chicken and egg scenario. Which comes first, the deal or the money?

The answer is simple. Just as you wouldn’t go to the store to shop without bringing your wallet, you don’t go shopping for real estate without money.

This doesn’t mean it has to be your money, certainly it can be the much-coveted concept of OPM.  But getting OPM means that the investor is bringing money and the operator is bringing something. That “something” has to add value to the mixture or the investor doesn’t need you.

If you don’t want the investor to “steal the deal” you want the investor to need you as much as you need them.  Just finding the deal isn’t enough. You bring the time to run the deal because the investor is too busy. You bring the experience because the investor needs someone they can trust. You bring the track record because the investor wants to know that you’ll succeed at executing the plan. You bring a few bucks so you can make the earnest money deposit and pay for inspections and legal work so the investor doesn’t have to get involved until the deal has been fully vetted.  All of those things add value for the investor and give them a reason to want you involved. 

If you can’t bring those things, you need to go get them, even if it means building your track record one $20,000 house at a time.  If you do have the track record, document it well so that it’s convincing and develop a business plan to show. 

Then go find your money partners, and last, find your deal.  Line that up properly and the last thing on your mind will be that your potential investor will steal your deal.

There ya go you have experience..  your post made it sound like you were doing your first deal ever :)

good luck with it..

PM me please. I may have a JV interest.

@Jay Hinrichs You are correct that most brokers will require some vetting.  Typically when someone comes to me and tells me that they have been asked for proof of funds, I know the broker is doubting their experience and ability to close.  I welcome deals found by other investors on the hopes that they happen to discover a diamond in the rough.  I don't care about their experience, but how we would split the deal would depend on what they brought to the table.  On one hand, if they brought a finely tuned presentation of the deal with all of the info on the deal and market strength, compared to a deal straight from the broker as a birddog.  The partnership would look quite different depending on the value added.  It does come down to what the investor brings to the table.

What is the occupancy level of this 60 unit property?

Lots of good stuff on this thread. I would add that if you're going to move into this level of CREI with no money and little experience, I would optimize your education first. There's been nothing mentioned of deal structure, entity structure, PPM's, SA's, etc. The deal could be a slam dunk/homerun but if the "deal package" and business plan are not present or poorly constructed, then it will be difficult to close it.

Maybe it's just me, but someone without any funds trying to be a partner in purchasing a 60 unit complex doesn't sound very realistic.  Maybe someone with funds would pay you something for bringing the deal to them, or hire you to work for them.

The OP brings something of value to the deal....but is it enough?   Truth is that the amount of equity or profit each party receives, or even whether a syndicated transaction is doable at all is based on the money partners' perception of the 'strength' of the general partner/sponsor.

In my long and varied experience syndicating real estate property and mortgage deals, these are the attributes of the sponsor, in order of importance, that influence investors

1. A verifiable track record of success in the same space as the deal in question

2. A significant amount of personal capital invested in the deal

3. A verifiable track record of success in syndicating real estate deals in general

4. A multitude of positive information about the sponsor personally and his company when a google search is performed

5. Filing with the SEC

6. Professionally prepared PPM

7. Real estate experience and knowledge of the sponsor

Although I have seen a few exceptions, with the ease of due diligence in today's connected online world, identifying a commercial property opportunity is not enough to secure a significant equity interest without the above.

Most inexperienced syndicators - sponsors - promoters believe that the opportunity they've identified is the holly grail. They fail to realize the plethora of investment opportunities available to people with capital to invest.  A sponsor without the above mentioned attributes would be regarded as 'high risk', and even an above market return may not be enough to offset the perceived added risk in the minds of the investors providing capital.

The expenses seem low.

So you'd like to syndicate this first deal without any funds or experiences? I wouldn't mind shadowing with an experienced syndicator first.

Agree with Don here. Not only are these points important in sydicating the equity, a lender is going to want skin in the game and a track record for a deal this size.  Your best bet is to work under someone (or for a group) who is experienced rather than going it alone and trying to package and present a deal. You may just be spinning your wheels.



Originally posted by @Don Konipol:

The OP brings something of value to the deal....but is it enough?   Truth is that the amount of equity or profit each party receives, or even whether a syndicated transaction is doable at all is based on the money partners' perception of the 'strength' of the general partner/sponsor.

In my long and varied experience syndicating real estate property and mortgage deals, these are the attributes of the sponsor, in order of importance, that influence investors

1. A verifiable track record of success in the same space as the deal in question

2. A significant amount of personal capital invested in the deal

3. A verifiable track record of success in syndicating real estate deals in general

4. A multitude of positive information about the sponsor personally and his company when a google search is performed

5. Filing with the SEC

6. Professionally prepared PPM

7. Real estate experience and knowledge of the sponsor

I know a lot of syndicators who advocate get the deal first then get the money.  My advice is hustle your *** off.  Even if you make no money on this deal, you will have established yourself.  In fact, you should structure the deal where most of the upside goes to the investor.  You only get paid when there is a windfall and the proforma has been exceeded.  That's how you enter this game swinging.  

I invest money with the top syndicators and with people just getting into the game.  If I love their hustle and I think they respect my money more than their own, I'm all in!

I’m assuming that time is of the essence here. So trying to build a track record doesn’t seem realistic. Finding the deal is valuable. I’d try to cover whatever initial costs you can but either way it’s all about how you negotiate the deal. Don’t be greedy, present it professionally and negotiate.

I would have to agree that the person presenting the deal to establish a partnership should be required to have a resume providing evidence that they would be a good partner. At present, finding a good deal (and the investors have to assume you know how to assess a good deal) will provide evidence that you could be a wholesaler or future agent, but not a partner in the many areas involved in the process or purchasing, evaluating, due diligence, management and business of that real estate.

Tenacity, grit and determination are important. Make sure you have learned how to at least assess the deal appropriately and are competent in presenting the opportunity in the format that will be expected. That is your first steps in providing evidence of your value beyond that of a "deal finder"

Adam congrats on finding a deal and looking for advice and partnering. Two big steps already. You have received some great advice here and I will just add one thing. A caveat; you said 'you love this deal'. Don't. Love is the worst reason to do a business deal-even if you did not really mean it, make sure you are not even thinking it, or feeling it.  ;<)

Originally posted by @Bjorn Ahlblad :

Adam congrats on finding a deal and looking for advice and partnering. Two big steps already. You have received some great advice here and I will just add one thing. A caveat; you said 'you love this deal'. Don't. Love is the worst reason to do a business deal-even if you did not really mean it, make sure you are not even thinking it, or feeling it.  ;<)

 I guess I never got that memo.. I ONLY do deals I love if it don't love them I don't do them.

@Adam Gregory this thread popped back up after 3 months, can you tell us what happened?

@Shane Connor I never moved on the project. Couldn't convince the right people of the value. Ironically it went under contract a few weeks ago.

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