What kind of cash-on-cash returns are you finding in syndication?

5 Replies

Just curious, I am investing in a few multifamily syndication deals that pay 12% annually. Is anyone finding better results? 

Hi Travis,

Are these projected numbers? Ranges are typically 8% preferred up to 10%. Most experienced sponsors want to under promise and over deliver. If these are tracking numbers in year 1 and 2 then that is pretty solid. Keep in mind if you are in value add plays, CoC and IRR can go up as a result of refinancing at the end of the renovation period or if a supplemental loan is applied as well. I'm leary of deals forecasting that right out of the gate as that to me indicates they are not as experienced.

12% is good if it is cash on cash during operations. If it is IRR, then it is a little low. We aim for 20% although we tell our investors to expect between 12-16%

@Travis Watts Just looking at 12% cash on cash is misleading to compare whether what actually a deal is potentially able to pay. I have seen syndicators who just pay flat 13% annually for 5 years investments. The investment may make 200% in 5 years but you will receive only 65% of your money . So you have to distinguish whether its cash flow from operations or overall returns of investments. if its overall annual return(i.e 12% per annum average), then 12% is one of the lowest for the market currently. If its based on the operation and paid monthly/quarterly, then 12% is great. The better indicator to evaluate investments is IRR. You can compare IRR easily as it takes out the payout timeline factors.

I second what @David Thompson and @James K. have said.

However, keep in mind that CoC and IRR can be "tweaked", so in general, we look for the following KPIs on a deal:

CoC of 8% - 12% (for operating years)

Avg IRR of 18% - 20%

Multiplier of 2x

Term of 3 to 7 yrs

thank you everyone. To clarify, I have been investing in multi-family residential deals with an annualized cash-on-cash of 10-12% and IRRs of 18-20%. Sounds like that is in line with industry standards at this stage in the cycle. 

Are there investments that pay higher without taking excessive risk?