Apartment Building Syndication
Lowell, AR · Member since 2018 · 4 posts · 1 vote
I have what seems like a very simple question about Real Estate Syndication's that I am having a hard time finding an answer for.
If I was to invest $200,000 in a real estate syndication. After 2 years the syndication refinances the property and pays back my $200,000 investment. If the company continues to own the property and the property continues to receive a positive cash flow. Would I receive a percentage of that cash flow until the property is sold?
@Mitchell Handley if the deal is structured such that you no longer receive cash flow after receiving a return of your capital, run, do not walk, as far as you can from that deal. Those are not market terms. Yes, you see plenty of syndicators doing this, but there is no reason why investors should accept such terms.
In essence what the syndicator is saying with this structure is, "I don't have the money to buy this deal, so I want you to buy it for me. You take all of the risk, and I get all of the upside. I can pay you back your $200,000 and own the deal for myself." No way in heck should you accept that.
@Scott Morongell was absolutely correct that syndications can be structured however the parties agree. If you are new to investing in syndications, you might be lured into investing in something that you don't fully understand. So agreeing, and knowing what you are agreeing to are two different things. Study the language in the operating agreement very carefully because waterfall terms in operating agreements can be confusing and it isn't difficult for sponsors to hide onerous terms among the fluff.
The way the waterfall calculations should work is that you receive 100% of all distributable cash (divided among you and the other investors pro-rata) until you reach the preferred return hurdle. For sake of example let's say that's 8%. Once that hurdle has been met you would receive the portion of distributable cash as specified in the operating agreement, usually somewhere between 50% and 80%.
If you get some of your capital returned, the amount of dollars added to the accumulation of preferred return goes down, which means that satisfying the distributions required to get you to an 8% return on your unreturned capital takes fewer dollars.
Let's walk through an example. Let's say that in the first year you have $200,000 committed. It takes $16,000 to satisfy the preferred return hurdle.
In year 2 you have $100,000 committed because the sponsor refinanced and sent you $100,000 back. For year 2, your preferred return hurdle is $8,000. At the end of year 2 the sponsor refinances and returns another $100,000 so now you have no capital left in the deal. Your preferred return hurdle for year 3 is $0.
Now let's say that the operating distributions total $10,000 for year 1. You get all of it, because the sponsor owes you $16,000 in preferred return. The other $6,000 carries over.
In year 2 there is also $10,000 to distribute. You get all of it, because to satisfy the preferred return the sponsor owes you $6,000 from last year and $8,000 from this year, so $14,000. The remaining $4,000 carries over to year 3.
In year 3 there is $10,000 to distribute. You get $4,000 of it to satisfy the remaining preferred return left over from previous years. Since you had no money in the deal in year 3 there is no preferred return added to the accumulation. The remaining $6,000 is split between you and the sponsor according to the terms of the hurdles in the operating agreement. So for example, if the next tier is a 70/30 split, you get 70% of $6,000, or $4,200.
In year 4 there is $10,000 to distribute. You have no remaining unpaid preferred return and because you got all of your money back there is no preferred return added. If the next tier is 70/30, you get $7,000. And so on.
But let me re-state, the operating agreement can say whatever the sponsor wants it to say. You have to study carefully. What I described is how I do it and is generally considered market terms by sophisticated investors. But plenty of sponsors look for unsophisticated investors that don't know any better and slip in all kinds of stuff that are not in your best interest.
There should never be an alteration of your ownership percentage whether you have your capital back or not. Unless you agree to it, but why would you?
I would do your homework on the sponsor and the deal. I would read the PPM and Operating Agreement and so forth. The typical deal is you should still hold your ownership percentage even after re-finance or getting all your equity back. Also look at splitting your $200k either in 4, $50k investment so you get to try 4 sponsors or even $100k each so you get to see 2 sponsors. a Market correction is on the Horizon and I think some of the Syndicators out there will be in for an awakening.
@Michael Ealy yeah, thanks for the heads up and I agree(profusely), I would not even think twice about a deal that I don't retain equity and participation in cash flow and appreciation. I would just keep going with my current status quo.
I am curious and would pose the following questions to you and @Roni E. and @Brian Burke and other syndicators or investors on the thread. I have noticed and seen mentioned that the sponsors are looking for $50-250k investment amounts from "accredited investors"($300k per year, more than $1m assets), and then noticed at Brian's company site that some of the actual assets are acquired in the $4-6m range and some for more, but even some for less.
Are there opportunities for limited partnerships that involve a larger investment of say $1-2M?
Is it possible to get into a 40/60 or 50/50(or whatever reasonable percentage is attractive to the sponsor, and agreeable to me) partnership with me and an experienced sponsor both putting up 50% of the equity and/or being the only partners, and possibly having a more active position/role, as a "premium" partner-investor?
OR will most high quality syndicators prefer to have multiple investors at arms length?
It's not something I would necessarily do immediately, I would rather get my toes wet with traditional arrangements and minimum investments in several different sponsors, at first...but, I am realizing more and more, that real big opportunities require a team effort of multiple special skills and larger capital requirements and long established financing-contractor-developer-management-broker arrangements/relationships, that could(should) take the better part of a lifetime to establish/cultivate.
@Michael Ealy yeah, thanks for the heads up and I agree(profusely), I would not even think twice about a deal that I don't retain equity and participation in cash flow and appreciation. I would just keep going with my current status quo.
I am curious and would pose the following questions to you and @Roni E. and @Brian Burke and other syndicators or investors on the thread. I have noticed and seen mentioned that the sponsors are looking for $50-250k investment amounts from "accredited investors"($300k per year, more than $1m assets), and then noticed at Brian's company site that some of the actual assets are acquired in the $4-6m range and some for more, but even some for less.
Are there opportunities for limited partnerships that involve a larger investment of say $1-2M?
Is it possible to get into a 40/60 or 50/50(or whatever reasonable percentage is attractive to the sponsor, and agreeable to me) partnership with me and an experienced sponsor both putting up 50% of the equity and/or being the only partners, and possibly having a more active position/role, as a "premium" partner-investor?
OR will most high quality syndicators prefer to have multiple investors at arms length?
It's not something I would necessarily do immediately, I would rather get my toes wet with traditional arrangements and minimum investments in several different sponsors, at first...but, I am realizing more and more, that real big opportunities require a team effort of multiple special skills and larger capital requirements and long established financing-contractor-developer-management-broker arrangements/relationships, that could(should) take the better part of a lifetime to establish/cultivate.
@Michael Ealy yeah, thanks for the heads up and I agree(profusely), I would not even think twice about a deal that I don't retain equity and participation in cash flow and appreciation. I would just keep going with my current status quo.
I am curious and would pose the following questions to you and @Roni E. and @Brian Burke and other syndicators or investors on the thread. I have noticed and seen mentioned that the sponsors are looking for $50-250k investment amounts from "accredited investors"($300k per year, more than $1m assets), and then noticed at Brian's company site that some of the actual assets are acquired in the $4-6m range and some for more, but even some for less.
Are there opportunities for limited partnerships that involve a larger investment of say $1-2M?
Is it possible to get into a 40/60 or 50/50(or whatever reasonable percentage is attractive to the sponsor, and agreeable to me) partnership with me and an experienced sponsor both putting up 50% of the equity and/or being the only partners, and possibly having a more active position/role, as a "premium" partner-investor?
OR will most high quality syndicators prefer to have multiple investors at arms length?
It's not something I would necessarily do immediately, I would rather get my toes wet with traditional arrangements and minimum investments in several different sponsors, at first...but, I am realizing more and more, that real big opportunities require a team effort of multiple special skills and larger capital requirements and long established financing-contractor-developer-management-broker arrangements/relationships, that could(should) take the better part of a lifetime to establish/cultivate.
Isaac, most of my investors can write a $1M check or more. I actually prefer to deal with less investors.
If you can bring more than the money to the deal (say you can be a co-guarantor of the mortgage or bring in a certain expertise that the sponsor would rather delegate or not have), you can be part of the GP. Or there can be a deal where there are no LPs - meaning, it's not a syndicated deal at all but rather a tenants-in-common situation, where you (or LLC) can own the property directly. The percentage split can be decided based on the value that each partner can bring to the table.
Are there opportunities for limited partnerships that involve a larger investment of say $1-2M?
Is it possible to get into a 40/60 or 50/50(or whatever reasonable percentage is attractive to the sponsor, and agreeable to me) partnership with me and an experienced sponsor both putting up 50% of the equity and/or being the only partners, and possibly having a more active position/role, as a "premium" partner-investor?
OR will most high quality syndicators prefer to have multiple investors at arms length?
I can’t generalize what “most” sponsors would do because I sense that each would have a different answer. A lesser-experienced sponsor would probably jump at the chance for anyone to write them a million dollar check even if that means having them be an active partner.
At the same time, other firms wouldn’t want to do that. I wouldn’t...we have investors writing checks as large as $7 million (and growing), up to 90% of the total equity, without any active participation—although they might get some control rights such as being consulted before a sale. Most of our investors are smaller, say $100-$500K and they wouldn’t want to have a whale investor in control—they invested because they trust the sponsor, they don’t know/trust the whale.
Nor would many sponsors want to commit 50% of the deal from their funds. The economics don’t work. They could put in 10% of five deals for the same cash and earn a promote from all five, or partner with one investor in one deal and earn 80% less money and have a partner calling some of the shots. Easy choice.
I suppose it’s just a matter of asking around. You might find someone who would do it, and maybe even someone who is also highly experienced...
Are there opportunities for limited partnerships that involve a larger investment of say $1-2M?
Is it possible to get into a 40/60 or 50/50(or whatever reasonable percentage is attractive to the sponsor, and agreeable to me) partnership with me and an experienced sponsor both putting up 50% of the equity and/or being the only partners, and possibly having a more active position/role, as a "premium" partner-investor?
OR will most high quality syndicators prefer to have multiple investors at arms length?
I can’t generalize what “most” sponsors would do because I sense that each would have a different answer. A lesser-experienced sponsor would probably jump at the chance for anyone to write them a million dollar check even if that means having them be an active partner.
At the same time, other firms wouldn’t want to do that. I wouldn’t...we have investors writing checks as large as $7 million (and growing), up to 90% of the total equity, without any active participation—although they might get some control rights such as being consulted before a sale. Most of our investors are smaller, say $100-$500K and they wouldn’t want to have a whale investor in control—they invested because they trust the sponsor, they don’t know/trust the whale.
Nor would many sponsors want to commit 50% of the deal from their funds. The economics don’t work. They could put in 10% of five deals for the same cash and earn a promote from all five, or partner with one investor in one deal and earn 80% less money and have a partner calling some of the shots. Easy choice.
I suppose it’s just a matter of asking around. You might find someone who would do it, and maybe even someone who is also highly experienced...
Agreed. If someone was going to put down 50% on their own deal and try to fill the gap, it seems most people would either look for a proper active business partner to split the duties with, or scale down so they could do the whole deal on their own.
@Michael Ealy yeah, thanks for the heads up and I agree(profusely), I would not even think twice about a deal that I don't retain equity and participation in cash flow and appreciation. I would just keep going with my current status quo.
I am curious and would pose the following questions to you and @Roni E. and @Brian Burke and other syndicators or investors on the thread. I have noticed and seen mentioned that the sponsors are looking for $50-250k investment amounts from "accredited investors"($300k per year, more than $1m assets), and then noticed at Brian's company site that some of the actual assets are acquired in the $4-6m range and some for more, but even some for less.
Are there opportunities for limited partnerships that involve a larger investment of say $1-2M?
Is it possible to get into a 40/60 or 50/50(or whatever reasonable percentage is attractive to the sponsor, and agreeable to me) partnership with me and an experienced sponsor both putting up 50% of the equity and/or being the only partners, and possibly having a more active position/role, as a "premium" partner-investor?
OR will most high quality syndicators prefer to have multiple investors at arms length?
It's not something I would necessarily do immediately, I would rather get my toes wet with traditional arrangements and minimum investments in several different sponsors, at first...but, I am realizing more and more, that real big opportunities require a team effort of multiple special skills and larger capital requirements and long established financing-contractor-developer-management-broker arrangements/relationships, that could(should) take the better part of a lifetime to establish/cultivate.
Isaac, most of my investors can write a $1M check or more. I actually prefer to deal with less investors.
If you can bring more than the money to the deal (say you can be a co-guarantor of the mortgage or bring in a certain expertise that the sponsor would rather delegate or not have), you can be part of the GP. Or there can be a deal where there are no LPs - meaning, it's not a syndicated deal at all but rather a tenants-in-common situation, where you (or LLC) can own the property directly. The percentage split can be decided based on the value that each partner can bring to the table.
Hey Michael,
OK, thanks for the detailed answer! So it seems, that TIC may be a possible path of interest for me. And that I am trying to narrow in on a specific size/experienced syndicator or investor that is active enough to have a track record that demonstrates ability and trustworthiness, but not so active that they are too big to be bothered with another partner.
I will keep in touch with you and I appreciate your posts and taking the time to cultivate new contacts.
Thanks again and keep in touch!
Are there opportunities for limited partnerships that involve a larger investment of say $1-2M?
Is it possible to get into a 40/60 or 50/50(or whatever reasonable percentage is attractive to the sponsor, and agreeable to me) partnership with me and an experienced sponsor both putting up 50% of the equity and/or being the only partners, and possibly having a more active position/role, as a "premium" partner-investor?
OR will most high quality syndicators prefer to have multiple investors at arms length?
I can’t generalize what “most” sponsors would do because I sense that each would have a different answer. A lesser-experienced sponsor would probably jump at the chance for anyone to write them a million dollar check even if that means having them be an active partner.
At the same time, other firms wouldn’t want to do that. I wouldn’t...we have investors writing checks as large as $7 million (and growing), up to 90% of the total equity, without any active participation—although they might get some control rights such as being consulted before a sale. Most of our investors are smaller, say $100-$500K and they wouldn’t want to have a whale investor in control—they invested because they trust the sponsor, they don’t know/trust the whale.
Nor would many sponsors want to commit 50% of the deal from their funds. The economics don’t work. They could put in 10% of five deals for the same cash and earn a promote from all five, or partner with one investor in one deal and earn 80% less money and have a partner calling some of the shots. Easy choice.
I suppose it’s just a matter of asking around. You might find someone who would do it, and maybe even someone who is also highly experienced...
Hey Brian,
Thanks so much for detailed explanation! Frankly, I prefer the idea of being a silent investor, it's just that every offering memo has the disclaimer about, blah,blah,blah, being an accredited investor and "...you could loose all your money..."
I know, I know...you can loose your money investing on your own in RE or in the stock market, but, with RE you have fee simple ownership, so, absent some real unusual scenario or very aggressive play and/or wrong speculation, the downside is somewhat limited and RE(multi-family) seems to be more forgiving over time, in that respect. Of course, my assumptions could be based on my limited experience!
The previous example you mentioned about your friend that lost everything with a fraudulent sponsor is the real fear I have. Of course, that's why diversification so important and to just start small with amounts that I wouldn't want to loose, but, would not kill me financially. It's a longer timeline, but safer and more conservative.
Anyway, thanks again for your time and the education! I have scheduled an initial meeting with Bob Dreher for next Tuesday. I look forward to finding out more about future offerings from your company and learning more about syndication investing in general.
FYI, I ordered the book Investing in Real Estate Private Equity, by Sean Cook to learn a bit more on the topic myself, without having to pester you and the other pros on BP too much. But, you can still put me on the list to pre-order your book, when you have a release date.
Are there opportunities for limited partnerships that involve a larger investment of say $1-2M?
Is it possible to get into a 40/60 or 50/50(or whatever reasonable percentage is attractive to the sponsor, and agreeable to me) partnership with me and an experienced sponsor both putting up 50% of the equity and/or being the only partners, and possibly having a more active position/role, as a "premium" partner-investor?
OR will most high quality syndicators prefer to have multiple investors at arms length?
I can’t generalize what “most” sponsors would do because I sense that each would have a different answer. A lesser-experienced sponsor would probably jump at the chance for anyone to write them a million dollar check even if that means having them be an active partner.
At the same time, other firms wouldn’t want to do that. I wouldn’t...we have investors writing checks as large as $7 million (and growing), up to 90% of the total equity, without any active participation—although they might get some control rights such as being consulted before a sale. Most of our investors are smaller, say $100-$500K and they wouldn’t want to have a whale investor in control—they invested because they trust the sponsor, they don’t know/trust the whale.
Nor would many sponsors want to commit 50% of the deal from their funds. The economics don’t work. They could put in 10% of five deals for the same cash and earn a promote from all five, or partner with one investor in one deal and earn 80% less money and have a partner calling some of the shots. Easy choice.
I suppose it’s just a matter of asking around. You might find someone who would do it, and maybe even someone who is also highly experienced...
Agreed. If someone was going to put down 50% on their own deal and try to fill the gap, it seems most people would either look for a proper active business partner to split the duties with, or scale down so they could do the whole deal on their own.
Hey Taylor,
I guess that's it, I am thinking about the best fastest way to find highly competent and trustworthy partners, so, why not try to inject myself into existing syndication team.
Although now I think that seems kind of presumptuous, considering, I come from a more mom and pop background. Despite having a BS in Business, my real world RE experience has been hands on managing and renovating a 37 unit apartment building in Hollywood, CA. For most of my landlord tenure I worked other jobs or had other business, until the last 5 years. The last five years I have only managed this primary asset and learned many trades involved in renovation and have also forced so much appreciation that it has really smacked me in the face and made me realize the huge potential opportunity I have to expand my portfolio and increase my wealth.
SO, I am trying to either leverage my experience or my newly realized equity and/or both.
Although, I do confess, I have dealt with enough Tenants, Trash, Toilets to be very tempted by passive investing.
Thanks for chiming in! I really enjoy posting on BP, it helps me work through things.
Hey Taylor,
I guess that's it, I am thinking about the best fastest way to find highly competent and trustworthy partners, so, why not try to inject myself into existing syndication team.
Although now I think that seems kind of presumptuous, considering, I come from a more mom and pop background. Despite having a BS in Business, my real world RE experience has been hands on managing and renovating a 37 unit apartment building in Hollywood, CA. For most of my landlord tenure I worked other jobs or had other business, until the last 5 years. The last five years I have only managed this primary asset and learned many trades involved in renovation and have also forced so much appreciation that it has really smacked me in the face and made me realize the huge potential opportunity I have to expand my portfolio and increase my wealth.
SO, I am trying to either leverage my experience or my newly realized equity and/or both.
Although, I do confess, I have dealt with enough Tenants, Trash, Toilets to be very tempted by passive investing.
Thanks for chiming in! I really enjoy posting on BP, it helps me work through things.
Hey Taylor,
I guess that's it, I am thinking about the best fastest way to find highly competent and trustworthy partners, so, why not try to inject myself into existing syndication team.
Although now I think that seems kind of presumptuous, considering, I come from a more mom and pop background. Despite having a BS in Business, my real world RE experience has been hands on managing and renovating a 37 unit apartment building in Hollywood, CA. For most of my landlord tenure I worked other jobs or had other business, until the last 5 years. The last five years I have only managed this primary asset and learned many trades involved in renovation and have also forced so much appreciation that it has really smacked me in the face and made me realize the huge potential opportunity I have to expand my portfolio and increase my wealth.
SO, I am trying to either leverage my experience or my newly realized equity and/or both.
Although, I do confess, I have dealt with enough Tenants, Trash, Toilets to be very tempted by passive investing.
Thanks for chiming in! I really enjoy posting on BP, it helps me work through things.
Thanks! I'll check it out now.
@Mitchell Handley
If there is a preferred return, it is usually based on unreturned capital contributions, so the amount of pref you might receive could be reduced by the % of capital you were repaid. However, there is usually a split that occurs once the preferred return is satisfied, based on an investor’s percentage ownership. So, if capital is returned after a refi, there should be more available for the split. Look at the projected returns after the refi to see how that might affect the actual dollars you are projected to receive.
Are there opportunities for limited partnerships that involve a larger investment of say $1-2M?
Is it possible to get into a 40/60 or 50/50(or whatever reasonable percentage is attractive to the sponsor, and agreeable to me) partnership with me and an experienced sponsor both putting up 50% of the equity and/or being the only partners, and possibly having a more active position/role, as a "premium" partner-investor?
OR will most high quality syndicators prefer to have multiple investors at arms length?
I can’t generalize what “most” sponsors would do because I sense that each would have a different answer. A lesser-experienced sponsor would probably jump at the chance for anyone to write them a million dollar check even if that means having them be an active partner.
At the same time, other firms wouldn’t want to do that. I wouldn’t...we have investors writing checks as large as $7 million (and growing), up to 90% of the total equity, without any active participation—although they might get some control rights such as being consulted before a sale. Most of our investors are smaller, say $100-$500K and they wouldn’t want to have a whale investor in control—they invested because they trust the sponsor, they don’t know/trust the whale.
Nor would many sponsors want to commit 50% of the deal from their funds. The economics don’t work. They could put in 10% of five deals for the same cash and earn a promote from all five, or partner with one investor in one deal and earn 80% less money and have a partner calling some of the shots. Easy choice.
I suppose it’s just a matter of asking around. You might find someone who would do it, and maybe even someone who is also highly experienced...
Agreed. If someone was going to put down 50% on their own deal and try to fill the gap, it seems most people would either look for a proper active business partner to split the duties with, or scale down so they could do the whole deal on their own.
Hey Taylor,
I guess that's it, I am thinking about the best fastest way to find highly competent and trustworthy partners, so, why not try to inject myself into existing syndication team.
Although now I think that seems kind of presumptuous, considering, I come from a more mom and pop background. Despite having a BS in Business, my real world RE experience has been hands on managing and renovating a 37 unit apartment building in Hollywood, CA. For most of my landlord tenure I worked other jobs or had other business, until the last 5 years. The last five years I have only managed this primary asset and learned many trades involved in renovation and have also forced so much appreciation that it has really smacked me in the face and made me realize the huge potential opportunity I have to expand my portfolio and increase my wealth.
SO, I am trying to either leverage my experience or my newly realized equity and/or both.
Although, I do confess, I have dealt with enough Tenants, Trash, Toilets to be very tempted by passive investing.
Thanks for chiming in! I really enjoy posting on BP, it helps me work through things.
Don't undersell yourself! You can still get involved with syndication. I'm sure you have experiences that would be valuable. You're unlikely to take a deal full cycle right off the bat (that would be ill-advised) but that doesn't mean you can't add value to a team.
I'm both active and passive in syndications. I think that's the way to go, if you can manage it. Lots of diversification in asset classes, regions, and teams.
Are there opportunities for limited partnerships that involve a larger investment of say $1-2M?
Is it possible to get into a 40/60 or 50/50(or whatever reasonable percentage is attractive to the sponsor, and agreeable to me) partnership with me and an experienced sponsor both putting up 50% of the equity and/or being the only partners, and possibly having a more active position/role, as a "premium" partner-investor?
OR will most high quality syndicators prefer to have multiple investors at arms length?
I can’t generalize what “most” sponsors would do because I sense that each would have a different answer. A lesser-experienced sponsor would probably jump at the chance for anyone to write them a million dollar check even if that means having them be an active partner.
At the same time, other firms wouldn’t want to do that. I wouldn’t...we have investors writing checks as large as $7 million (and growing), up to 90% of the total equity, without any active participation—although they might get some control rights such as being consulted before a sale. Most of our investors are smaller, say $100-$500K and they wouldn’t want to have a whale investor in control—they invested because they trust the sponsor, they don’t know/trust the whale.
Nor would many sponsors want to commit 50% of the deal from their funds. The economics don’t work. They could put in 10% of five deals for the same cash and earn a promote from all five, or partner with one investor in one deal and earn 80% less money and have a partner calling some of the shots. Easy choice.
I suppose it’s just a matter of asking around. You might find someone who would do it, and maybe even someone who is also highly experienced...
Agreed. If someone was going to put down 50% on their own deal and try to fill the gap, it seems most people would either look for a proper active business partner to split the duties with, or scale down so they could do the whole deal on their own.
Hey Taylor,
I guess that's it, I am thinking about the best fastest way to find highly competent and trustworthy partners, so, why not try to inject myself into existing syndication team.
Although now I think that seems kind of presumptuous, considering, I come from a more mom and pop background. Despite having a BS in Business, my real world RE experience has been hands on managing and renovating a 37 unit apartment building in Hollywood, CA. For most of my landlord tenure I worked other jobs or had other business, until the last 5 years. The last five years I have only managed this primary asset and learned many trades involved in renovation and have also forced so much appreciation that it has really smacked me in the face and made me realize the huge potential opportunity I have to expand my portfolio and increase my wealth.
SO, I am trying to either leverage my experience or my newly realized equity and/or both.
Although, I do confess, I have dealt with enough Tenants, Trash, Toilets to be very tempted by passive investing.
Thanks for chiming in! I really enjoy posting on BP, it helps me work through things.
Don't undersell yourself! You can still get involved with syndication. I'm sure you have experiences that would be valuable. You're unlikely to take a deal full cycle right off the bat (that would be ill-advised) but that doesn't mean you can't add value to a team.
I'm both active and passive in syndications. I think that's the way to go, if you can manage it. Lots of diversification in asset classes, regions, and teams.
Thanks, I guess it comes off as selling myself short, but I am just realizing where, in the bigger picture, I would best fit in. It seems like @Brian Burke made it kind of clear, in his previous post, that there is a potential ceiling for my hands-on-in-the-trenches kind of experience, even when coupled with a 1-2 million dollars, when it comes to trying to actively partner with a more established sponsor, like his company. I get his position, too much potential head-ache with unknown quantity of new partner(s) and potentially less return for him, when he has spent a life time forming his own company/dream team and investor pool.
Also, just like I would carefully vet my partners, anybody worth doing business with, would be vetting me too. So, I am trying to be honest, with myself, about what I really bring to the table and how that would best compliment what type of partnership and the best place/way to try and cultivate that. And furthermore, if that is even a path I would travel, instead of just finding several great sponsors and expand more into passive investing, instead of my natural inclination to want to be hands on.
Anyway, I don't want to hi-jack the thread...so, I will ask how should someone that has just pulled equity out of existing investment, redeploy capital safely to a syndication?
Is there a list of top syndicators? Just for passive investing.
Are there syndications that I could potentially be active partners with? How would I find and vet them?
I am open to any direction you want to go with the apartment syndication topic.
Thanks again!
I have what seems like a very simple question about Real Estate Syndication's that I am having a hard time finding an answer for.
If I was to invest $200,000 in a real estate syndication. After 2 years the syndication refinances the property and pays back my $200,000 investment. If the company continues to own the property and the property continues to receive a positive cash flow. Would I receive a percentage of that cash flow until the property is sold?
It depends on the deal and what the PPM says.
If that operator has paid back the $200k most will keep you in the deal but you will get paid the projections when the deal is exited.
I would read the PPM.
Good luck and looking forward to your future.
I have what seems like a very simple question about Real Estate Syndication's that I am having a hard time finding an answer for.
If I was to invest $200,000 in a real estate syndication. After 2 years the syndication refinances the property and pays back my $200,000 investment. If the company continues to own the property and the property continues to receive a positive cash flow. Would I receive a percentage of that cash flow until the property is sold?
It depends on the deal and what the PPM says.
If that operator has paid back the $200k most will keep you in the deal but you will get paid the projections when the deal is exited.
I would read the PPM.
Good luck and looking forward to your future.
This is a very good question. From a legal perspective, the PPM should answer this question, and every syndicator is different. We do share cash flow at sale even with refinancing, but again, kit doesn't mean that the specific deal you are talking about has similar terms. Ask your syndicator directly, and if the answer is "no", then you might want to consider investing with someone who will share the profits from the sale and cash flow with you even after full return on your investment. But I have to be honest - I believe most syndicators do. We're all here for the long run, and I'm assuming your syndicator wants you to invest with them again, so they will probably distribute the funds beyond the refinancing. Ask them and review the PPM.
Thanks, I guess it comes off as selling myself short, but I am just realizing where, in the bigger picture, I would best fit in. It seems like @Brian Burke made it kind of clear, in his previous post, that there is a potential ceiling for my hands-on-in-the-trenches kind of experience, even when coupled with a 1-2 million dollars, when it comes to trying to actively partner with a more established sponsor, like his company. I get his position, too much potential head-ache with unknown quantity of new partner(s) and potentially less return for him, when he has spent a life time forming his own company/dream team and investor pool.
Also, just like I would carefully vet my partners, anybody worth doing business with, would be vetting me too. So, I am trying to be honest, with myself, about what I really bring to the table and how that would best compliment what type of partnership and the best place/way to try and cultivate that. And furthermore, if that is even a path I would travel, instead of just finding several great sponsors and expand more into passive investing, instead of my natural inclination to want to be hands on.
Anyway, I don't want to hi-jack the thread...so, I will ask how should someone that has just pulled equity out of existing investment, redeploy capital safely to a syndication?
Is there a list of top syndicators? Just for passive investing.
Are there syndications that I could potentially be active partners with? How would I find and vet them?
I am open to any direction you want to go with the apartment syndication topic.
Thanks again!
Isaac,
For passive syndication opportunities:
You can watch the apartment syndicators here on BP and talk to them offline. Another option is to invest in crowdfunding platforms and check the opportunities listed there. They usually do a thorough job at vetting the sponsors because some of them look for extensive experience.
For active JV opportunities:
As to how you can find apartment investors willing to partner, well - talk to people. Start with your local market and attend your local REIA (Real estate investors association) or BP Meetup or search Meetup.com for apartment investing groups. Established and long time apartment syndicators like Brian Burke and myself are not really looking for active partners. However, you might be able to find some local investors who are investing for 5-10 years (so they have some track record but they're still small) and they want to scale up (say they have been buying 10-40 unit apartment buildings but partnering with you could help them buy 50-100 unit buildings instead).
Hope this helps.
Thanks, I guess it comes off as selling myself short, but I am just realizing where, in the bigger picture, I would best fit in. It seems like @Brian Burke made it kind of clear, in his previous post, that there is a potential ceiling for my hands-on-in-the-trenches kind of experience, even when coupled with a 1-2 million dollars, when it comes to trying to actively partner with a more established sponsor, like his company. I get his position, too much potential head-ache with unknown quantity of new partner(s) and potentially less return for him, when he has spent a life time forming his own company/dream team and investor pool.
Also, just like I would carefully vet my partners, anybody worth doing business with, would be vetting me too. So, I am trying to be honest, with myself, about what I really bring to the table and how that would best compliment what type of partnership and the best place/way to try and cultivate that. And furthermore, if that is even a path I would travel, instead of just finding several great sponsors and expand more into passive investing, instead of my natural inclination to want to be hands on.
Anyway, I don't want to hi-jack the thread...so, I will ask how should someone that has just pulled equity out of existing investment, redeploy capital safely to a syndication?
Is there a list of top syndicators? Just for passive investing.
Are there syndications that I could potentially be active partners with? How would I find and vet them?
I am open to any direction you want to go with the apartment syndication topic.
Thanks again!
Re: a syndicator list: Not that I'm aware of. The sites I've seen mainly focus on crowdfunding companies. There are a few where folks have posted reviews of syndicators, but I always take that information with a grain of salt. I'd rather talk with people in private and ask which sponsors they like, their experiences, etc.
Having an active participation: Yes! You can work toward that. You'll need to bring more to the deal than just capital. Maybe risk capital, net worth and liquidity, deal sourcing, or some other skillset you can add to the deal. Get out there and network to figure out what people need! You can find them by contacting people via BiggerPockets, Podcasts, and going to live networking events.
As a career real estate professional on the debt side who is just now exploring the equity side of multifamily real estate, this discussion has been very helpful. At the very least, I realize I still have a lot to learn about how the equity side works before I decide to place any of my personal capital.
Thanks to everyone who contributed.