Want to get into multifamily passively

Multi-Family and Apartment Investing
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Want to get into multifamily passively

David D'Ambrosio
Investor · Brielle, NJ · Member since 2015 · 121 posts · 21 votes

I currently own SFHs but want to try to get into the multifamily space in the next few years.  I have done a fair amount of research and realize I don't have the drive nor time to be in on my own. I work full time and I am an accredited investor, so it seems being an investor in a syndication makes sense for me.  Does anyone have any advice on people or firms to look at?  Im specifically looking to invest for long term cashflow, so Id like to partner with someone who in interested in doing a value add play but whose intention is to hold long term.  It seems to me that a lot of syndications are looking to go in, add value, and sell out after a hold time.  I want to be a long term owner getting cashflow longterm, similar to my philosophies with single family holds.  Thanks

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Brian BurkePro Member
Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
9y

I appreciate the mention, @Joel Owens!

@David D'Ambrosio, I don't blame you at all for wanting to avoid the middleman.  My observation of the crowdfunding platforms was that there were a lot of inexperienced sponsors listing deals because they had no investor base from which to draw, so they turn to the internet.  The concept has come a long way, though, so maybe that's changed as of late.

But my opinion is still that investors invest with groups they trust.  Those that they develop a relationship with.  It's not a "deal" decision, it's a relationship decision, and the crowdfunding avenue takes the relationship out and just makes it transactional.  I think that's why they struggle on the equity side and have better success on the debt side.

Not to mention that most established investment sponsors have a fairly robust base of investors, and if they are doing their job well, a steady stream of new investors coming in from word of mouth and referrals.  That's the primary reason that I don't use the online platforms for investor recruitment.  I just don't need to.

As you seek a group or groups to invest with, be sure to look for ones that have been around long enough to have seen a few cycles.  Don't let them get their initial experience with your dollars.

Ask about actual performance versus projected performance.  Anyone can tell a story with projections and mold that story to their advantage.  But doing so ensures a short life in the passive investment business as those projections are ultimately not achieved.  But I see it all the time.

As to hold times, there are a couple of reasons why investment sponsors tend to favor shorter hold times.  On the self-serving side, they participate in the upside so they don't get paid (much) until the property is sold. 

But most of the other reasons are external. First, the question most passive investors ask is "when will I get my money back." There are far fewer investors favoring undefined or long hold times than short. Then there is the equation of return on equity. Sure, your cash on cash return is high in year 8, but the return on equity is typically very low by then. A sale, followed by recycling the capital into a new offering, increases your return by layering in the gain from the previous sale along with your original capital. And with a value-add strategy, there is typically a large lift at the beginning of an investment cycle as the property is rehabbed and income is increased. After that the increases slow dramatically, so capturing the exit sooner results in a higher IRR. And then there is the issue of deterioration. For very long hold periods the property is going to need a second rehab somewhere along the line, and that could result in a capital call where the investors have to put money in, and investors really don't like to do that!

That said, I tend to underwrite all of my acquisitions to a ten year hold.  Not because the investors are looking for long term cash flow (but some are), but because at some point in the not too distant future there is likely to be an adverse market cycle.  The investment's business plan must be prepared to hold long-term in order to ride the cycle to the other side, to sell at the next market cycle peak.  Now if the market cooperates and the property can be sold for a huge return in three years, that's great, but there has to be an alternative plan, and a longer hold cycle along with stress tests and conservative underwriting are the best line of defense.

Good luck in your search!

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    9y

    Brian Burke with Praxis Capital, and Joe Fairless are a few.

    Most investors do not want an indefinite hold period. Now there are companies and developers where the investors stay with them over their whole life and even when they pass away the kids still keep the investments with that company and sponsor.

    I know someone who has been doing it for over 30 years as a sponsor. Now if you keep the same tax id group then you can keep doing a 1031 into other properties. If you do not want to 1031 then plan on paying long term capital gains when you exit.

    Make sure you have legal counsel to guide you on these type of investments. No legal advice given.    

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    4Reply
  • Craig CurelopBusiness Member
    Real Estate Agent · Post Falls, ID · Member since 2016 · 1k+ posts · 1k+ votes
    9y
    Just sent you a message David D'Ambrosio. Also - check out Realty Shares!
    [email protected]Podcast Guest on Show #350
    1Reply
  • David D'Ambrosio
    OP
    Investor · Brielle, NJ · Member since 2015 · 121 posts · 21 votes
    9y

    Thanks @Craig CurelopI invest in debt through realty shares but really don't want a middle man between me and the capital company i would be investing with for a long term hold. 

    0Reply
  • Brian BurkePro Member
    Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
    9y

    I appreciate the mention, @Joel Owens!

    @David D'Ambrosio, I don't blame you at all for wanting to avoid the middleman.  My observation of the crowdfunding platforms was that there were a lot of inexperienced sponsors listing deals because they had no investor base from which to draw, so they turn to the internet.  The concept has come a long way, though, so maybe that's changed as of late.

    But my opinion is still that investors invest with groups they trust.  Those that they develop a relationship with.  It's not a "deal" decision, it's a relationship decision, and the crowdfunding avenue takes the relationship out and just makes it transactional.  I think that's why they struggle on the equity side and have better success on the debt side.

    Not to mention that most established investment sponsors have a fairly robust base of investors, and if they are doing their job well, a steady stream of new investors coming in from word of mouth and referrals.  That's the primary reason that I don't use the online platforms for investor recruitment.  I just don't need to.

    As you seek a group or groups to invest with, be sure to look for ones that have been around long enough to have seen a few cycles.  Don't let them get their initial experience with your dollars.

    Ask about actual performance versus projected performance.  Anyone can tell a story with projections and mold that story to their advantage.  But doing so ensures a short life in the passive investment business as those projections are ultimately not achieved.  But I see it all the time.

    As to hold times, there are a couple of reasons why investment sponsors tend to favor shorter hold times.  On the self-serving side, they participate in the upside so they don't get paid (much) until the property is sold. 

    But most of the other reasons are external. First, the question most passive investors ask is "when will I get my money back." There are far fewer investors favoring undefined or long hold times than short. Then there is the equation of return on equity. Sure, your cash on cash return is high in year 8, but the return on equity is typically very low by then. A sale, followed by recycling the capital into a new offering, increases your return by layering in the gain from the previous sale along with your original capital. And with a value-add strategy, there is typically a large lift at the beginning of an investment cycle as the property is rehabbed and income is increased. After that the increases slow dramatically, so capturing the exit sooner results in a higher IRR. And then there is the issue of deterioration. For very long hold periods the property is going to need a second rehab somewhere along the line, and that could result in a capital call where the investors have to put money in, and investors really don't like to do that!

    That said, I tend to underwrite all of my acquisitions to a ten year hold.  Not because the investors are looking for long term cash flow (but some are), but because at some point in the not too distant future there is likely to be an adverse market cycle.  The investment's business plan must be prepared to hold long-term in order to ride the cycle to the other side, to sell at the next market cycle peak.  Now if the market cooperates and the property can be sold for a huge return in three years, that's great, but there has to be an alternative plan, and a longer hold cycle along with stress tests and conservative underwriting are the best line of defense.

    Good luck in your search!

    Podcast Guest on Show The Truth About Real Estate Investing in 2024 (What Investors NEED to Know)
    17Reply
  • David D'Ambrosio
    OP
    Investor · Brielle, NJ · Member since 2015 · 121 posts · 21 votes
    9y

    @Brian Burke  thanks for the input and advice.  I'm definitely gonna look into your company.  What you mention about return on equity being poor on a long term hold, I would like to see a cash out refinance event which would return some if not all of my capital but still have the investment paying me.  Then I would rinse and repeat. I guess that's what I meant about not selling in five years.  The self serving components for the sponsor profit taking I had not realized.  Great advice  thanks 

    3Reply
  • Jeff Greenberg
    Real Estate Consultant · Camarillo, CA · Member since 2010 · 2k+ posts · 1k+ votes
    9y

    @David D'Ambrosio I enjoy following @Brian Burke on a thread as he is so eloquent and accurate in his answers. In these times of high values we are looking for strong value add deals. These deals will see the a major increase in value in the first three years. After that, unless there is some other major value add, will see a decrease in the IRR, as Brian said. The nice thing about being a passive investor is, with only time spent vetting a group sponsor and deal every 3-5-7 years, they can maximize their equity growth.

    Many investors like the buy and hold strategy for several reason. 1. Who wants to keep working so hard to find properties.  Keep what you have. 2. Cash flow increases as rent go up.  3. Equity increases as values go up, and principle is paid down. 4. Property is paid off and becomes a cash cow. 

    As a passive investor, you don't have to do the work of finding the deals. Your cash flow typically increases over time. and your equity builds with the value add and rent increases.  You don't get a paid off asset, but not many people are able to hold for 25-30 years.

    There are trade offs for each strategy, but as you have discovered, syndication is much more passive.

    5Reply
  • Ian IppolitoBusiness Member
    Investor · Tampa, FL · Member since 2015 · 1k+ posts · 1k+ votes
    9y

    @David D'Ambrosio,  what's your definition of a long-term hold? 

    There are many crowdfunding investments with experienced and successful sponsors in multi family that enable you to invest passively.  They typically invest for maybe 7 to 10 years on the long end. If that works for you, then there are lots of options. 

    If  you need something longer,  1031 Crowdfunding has longer-term/indefinite hold investments.  The problem if you are not rolling over a property via a tax free 1031 exchange, is that the fees are pretty high. 

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    0Reply
  • William C.
    Real Estate Agent · Souderton, PA · Member since 2016 · 591 posts · 414 votes
    9y
    So are you looking to fund a deal, or a portion of it and be an equity owner that draws on the personal cash flow? If that's what your looking for I'd be happy to talk to about some projects we have in the works.
    0Reply
  • Leslie Pappas
    Professional · San Francisco, CA · Member since 2014 · 876 posts · 301 votes
    9y

    Hi David , there are many different real estate funds available to accredited investors. They provide you with hard real estate, but can also give you some diversification. Something else to possibly consider, happy to answer any questions.

    0Reply
  • Michael Lee
    Investor · Coppell, TX · Member since 2008 · 2k+ posts · 646 votes
    9y

    Hello and welcome to BP!  As you may have noticed that most of the people who have responded to your question are real edtate agents trying to make money off of you.  Not that there comments are not useful, just their intentions are.  i have come to realize that this location is used everyday to try to sell something, like their real estate service.  thwy have reminded me why i never did that full time eventhogh i use to have a broker license for about 30 years.  I am 60 years old now and being born and raised in Dallas Texas maybe has made me more aware of this mis-use.  

    I "would recommend you look at being a "turnkey" invester and go with a company you believe in.  There experience and knowledge of what they're doing is important.  if you need any companies to contact, they are Memphis Invest and Maverick.  I have looked at them both with my intentions.  If you want to be more involved and know of a good General Contractor you could do small apartment complexes without any experience, according to Lance Edwards that got his start ln real estate that way.  He did this for about 21/2 years while he had a full time W-2 job that he hated but had a family he had to support.  He then got into larger apartment projects and now teaching.

      He also authored a boo k about buying small apartments that was real go.od.  i am 60 years old now and i could make this letter real long.   i will spare you with more about me and my experience.

    Good luck to you!

    \\\

    1Reply
  • David D'Ambrosio
    OP
    Investor · Brielle, NJ · Member since 2015 · 121 posts · 21 votes
    9y

    thanks for all the replies everyone. Thanks for the welcomes as well but I'm not new to BP ;).   @Michael Lee I have used turnkey providers to buy sfh but I'm unaware of any that specialize in multi family 

    0Reply
  • Mark Allen
    Real Estate Investor/Broker · Irving, TX · Member since 2015 · 520 posts · 263 votes
    9y
    I broker Multifamily in Texas and can connect you with a few syndicators who are 15 year term guys investing in TX, GA, and FL. Send me an e-mail.
    0Reply
  • Chris Grenzig
    Property Manager · Orlando, FL · Member since 2016 · 479 posts · 277 votes
    9y
    David D'Ambrosio I can tell you that the 10-12 year deals we've done we're because we had a large equity partner(s) that wanted to hold onto a property long term. They were able to be most if not all of the equity for the deal. However, you will see groups do more 3-5 year deals because as a sponsor we make the most of our money during a sale of a property on which the value has exceeded the targeted IRR hurdles as set out in the agreement. That is why often deals are structured 3-5 years. I agree with some others in trying to find a group that you trust and have a conversation with them about what you're looking for and if they have something like that to bring it to you. I know that if a syndication group knew they had a large amount of money from 1 or several people that wanted long term deals, than they would be more inclined to structure them as such. Best of luck.
    0Reply
  • Cody L.
    Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
    9y
    Invest in a REIT?
    0Reply
  • Franklin F.Pro Member
    Investor · Crossville, TN · Member since 2016 · 58 posts · 27 votes
    9y

    David D'Ambrosio, thanks for starting this thread.  Your post sounds like you've been reading my mind!  And, Brian Burke, thanks for your explanation of how these deals play out.  It cleared up a lot for me!  As an accredited investor, I've invested with the crowdfunding guys but always held a big reservation in the back of my mind and couldn't quite put my finger on it, even though I felt like I fully understood the risk.  Maybe it's just too impersonal for the kind of money I've invested.  I'd much rather invest directly with a company like yours Brian, which sounds more like a personal relationship than the online platforms.  "Trust" is of the utmost importance!  With the online platforms you are extending a huge amount of trust and it seems that your only "collateral" is that they are very motivated to succeed and protect their reputation.  That puts you in a very dependent situation.  David, have you looked at PPR, or any other note investments?  

    1Reply
  • Alina Trigub
    Rental Property Investor · Glen Rock, NJ · Member since 2015 · 3k+ posts · 2k+ votes
    9y

    @David D'Ambrosio

    I have invested in a number of syndication deals as an equity partner. Feel free to PM me. Will gladly share my experience. 

    All the best!

    1Reply
  • Jeff Kehl
    Rental Property Investor · Charlottesville, VA · Member since 2012 · 1k+ posts · 726 votes
    9y

    @David D'Ambrosio I appreciate your long-term thinking. I really think that all of us, especially the investors, the wealthy, the builders, those with higher education should be thinking towards the betterment of all of us over the longer term.

    Unfortunately most people these days including myself are focused on short-term goals and rewards because that's the way the economy is setup. If my stock disappoints me on 3-month earnings it gets dumped. I evaluate real estate opportunities on a 3-5 year horizon. What happens after that?

    Sorry to get philosophical but I think if more people thought on a long-term time horizon we would get back to building a great real estate portfolio and country.  

    0Reply
  • Michael Lee
    Investor · Coppell, TX · Member since 2008 · 2k+ posts · 646 votes
    9y

    Hello again!  Thank you for your comment.  i have looked a little bit into Turnkey Investing and it never made me realize that i had seen none into MF.  Mybe in the back of my mind you could get into that fairly easy with another investor and it does not to have to be so technical if the people involved wanted to do that.  That was a good statement you made and might get a good response from somebody that does that type of investing like Alina.  Thanks again!

    0Reply
  • Mary F.
    San Francisco, CA · Member since 2017 · 11 posts · 5 votes
    9y

    As an accredited investor, you can find MF syndication deals/funds on RealCrowd and Crowdstreet. Unlike many other CF portals, these are purely listing sites. In other words, the sponsors pay to list their offerings but the sites have no input or investment in the offerings. You may find something like you're seeking there.

    0Reply
  • David D'Ambrosio
    OP
    Investor · Brielle, NJ · Member since 2015 · 121 posts · 21 votes
    9y

    thanks for the advice @Mary F.

    0Reply
  • Elijah Vo
    Investor · Fort Worth, TX · Member since 2014 · 59 posts · 51 votes
    9y

    David, I would recommend Mark and Tami Kenney.  They run a syndication group out of Dallas, TX called, "Think Multifamily" that focuses on value-add apartment investing that produces long-term cash flow.  Based on what you're telling us, I think they're what you're looking for to help you accomplish your goals.  We know them personally; they're down to earth and we've invested in a couple of deals with them and couldn't be happier with their professionalism.  You can also check them out at: or reach out to them over BP.  Let me know how it turns out!!

    0Reply
  • Tom Ott
    Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes
    9y
    Originally posted by @David D'Ambrosio:

    I currently own SFHs but want to try to get into the multifamily space in the next few years.  I have done a fair amount of research and realize I don't have the drive nor time to be in on my own. I work full time and I am an accredited investor, so it seems being an investor in a syndication makes sense for me.  Does anyone have any advice on people or firms to look at?  Im specifically looking to invest for long term cashflow, so Id like to partner with someone who in interested in doing a value add play but whose intention is to hold long term.  It seems to me that a lot of syndications are looking to go in, add value, and sell out after a hold time.  I want to be a long term owner getting cashflow longterm, similar to my philosophies with single family holds.  Thanks

     If you are going the turnkey route, I would suggest looking at:

    What to Ask When Working With a Turnkey Provider

    and

    How to Find the Right Turnkey Real Estate Investment Company for You

    0Reply
  • David D'Ambrosio
    OP
    Investor · Brielle, NJ · Member since 2015 · 121 posts · 21 votes
    9y

    @Tom Ott Do you do turnkey apartment buildings? I use turnkey for SFH but haven't seen this for turnkeys. I don't think it really lends itself to turnkey

    0Reply
  • Tom Ott
    Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes
    9y
    Originally posted by @David D'Ambrosio:

    @Tom Ott Do you do turnkey apartment buildings? I use turnkey for SFH but haven't seen this for turnkeys. I don't think it really lends itself to turnkey

     Send me a message. I'll point you in the right direction!

    0Reply
  • Lennon Lee
    Rental Property Investor · Miami, FL · Member since 2015 · 179 posts · 292 votes
    9y

    @David D'Ambrosio I'm sure by now you already have a clear path on how to identify a good sponsor or crowdfunding platform to invest with.

    Being both a limited partner (passive investor) and a multifamily syndicator myself, I would be happy to chat further with you and share my experience as a passive investor and how I was able to identify a reliable and trustworthy sponsor that also happened to perform above our expectations.

    Like @Brian Burke said: "It's not a 'deal' decision, it's a 'relationship' decision"

    Good luck!

    1Reply
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