Multi-Family Syndication Help! (first one...)

7 Replies

BP,

We've found an 8-unit with great numbers and we've got enough investors lined up to make the 30% down on the property. 

Now what? I'm looking for some help with what happens next, as in what will the banks be looking for, how the loan will actually be structured, how do I actually accept everyones money and pool it for the down payment, etc. If you are local to the Norfolk/Virginia Beach area I would love to take you out to lunch or dinner to discuss. Otherwise I'd really appreciate getting on the phone with someone. 

Thanks for the help!

Best,

Rhett

@Rhett Z Begley Congrats on finding an 8-unit deal! I don't think you want to syndicate as syndication costs can be pretty steep and won't be worth it for an 8-unit. Consider doing JV or tenancy in common (TIC) but that's to be confirmed with an attorney.

Bottom line speak with a real estate attorney about the best structure for the deal and ask them to spell out all of the terms and responsibilities in the Operating Agreement.

Good luck!

Congrats! I'd echo what Alina said regarding contacting an attorney.

Have you selected a lender? Property management? Contractors if you're doing any reno?

Curious, as I'm also looking in that area, what class is the property? What is your plan for the property?

Congrats on your find! Depending on price you may want to consider just doing an LLC with you being the managing member. Less legal costs and less headache. Happy to walk you through all of this. I have an office in northern VA so am close.

Cory

@Alina Trigub thanks for the advice on syndicates, I believe my use of the term shows my inexperience. We are looking to purchase the property with an existing LLC (or transfer it to the LLC after purchase) with the investors (and the LLC) combing funds to total the 30% down payment. The LLC will pay out investors a monthly interest payment which will go on the books for the LLC as an expense. Based on the responses I don't think that what I've described is a syndicate.

@Taylor L. I've been in contact with an attorney but not yet specifically about this deal since it just came up this weekend. I saw that the down payment (~30%) on an 850k asking price was about 255k and wasn't confident that I'd be able to scrape together enough funds, but luckily I've fostered some pretty good relationships and it wasn't as difficult as I thought. I'll be contacting my attorney tomorrow about it to get smart on the structure and legal considerations. I have a solid property manager that I've been using for ten years, and the reno is relatively minimal at this point (haven't been into the units yet but based on the the pictures it would be minimal repairs and updating as desired), mostly cosmetic stuff outside and in the common areas. We plan to use all of the net from the LLC to renovate the units over a few years. I don't think we're going to be able to come up with enough capital to do it in one shot. I don't have much experience determining property classes, but my best estimate would be a Class C based on the fact that it was built in the early 1900's. Although it's Class C, it's in a wonderful neighborhood (I actually lived there about 10 years ago) only a few blocks from some of the more popular bars and restaurants in Norfolk.

@Cory Hoffman I would be very grateful to speak with you about how to work a deal like this since I think that what you've described is more in line with what we're trying to accomplish. I don't start my new job for another week or two so I'm pretty flexible. Please PM me so that we can coordinate a time that works for your schedule. 

@Rhett Z Begley if the raise that is needed less than 600k then it’s not worth it to syndicate and do an expensive ppm.

Instead get it done with a few friends and do a simple JV agreement.

Originally posted by @Lane Kawaoka :

Rhett Z Begley if the raise that is needed less than 600k then it’s not worth it to syndicate and do an expensive ppm.

Instead get it done with a few friends and do a simple JV agreement.

Maybe I'm being too literal, but can't you get most of the benefits as managing member of an LLC (JV) as you would from being the sponsor? Aside from the ability to solicit interest, the benefits seem similar - can determine payout structure, retain control, etc.

Am I missing something?