Rapid Growth to 21,000 Units

45 Replies

Hey BP,

I recently read a story about 3 entrepreneurs in their late 20s doing syndication. They acquired 21,000 units in about 8-9 years. 

My question is, how is that even possible. I know there’s a lot of syndicators on this platform so I wanted to get some feedback from that. I know this business is in no means a get rich quick plan, or easy. But, if they did it, I don’t see why it can’t be duplicated.


Any thoughts as to how they grew so fast?

Originally posted by @Jordan Santiago :

Hey BP,

I recently read a story about 3 entrepreneurs in their late 20s doing syndication. They acquired 21,000 units in about 8-9 years. 

My question is, how is that even possible. I know there’s a lot of syndicators on this platform so I wanted to get some feedback from that. I know this business is in no means a get rich quick plan, or easy. But, if they did it, I don’t see why it can’t be duplicated.


Any thoughts as to how they grew so fast?

 Jordan,

Sure it can be done. I've acquired 8.6% of what they have doing it longer because I focus on quality deals. That's why I never lost money even during the Great Recession of 2008-2009. In fact, I've made more money during that time. It remains to be seen if they will survive the next downturn.

I am not discrediting those guys though. Good for them. They're smart & they hustled - they bought right after the downturn and they aggressively raised capital. They probably gave away 90% of their equity (is my suspicion) in order to raise big money in a hurry. 

But, I only give up 30% (and sometimes 50% of the equity). In other words, even if I assume 50% equity, with the 1,000 apartment units I hold now, I am making the same money as someone with 5,000 apartment units who give up 90% equity and I have 1/5th the management headaches.

But going back to your question: how is acquiring 21,000 units in 8-9 years even possible?

1. Don't start with buying houses but rather partner up with established apartment syndicators.

2. Focus on finding good deals (100+ units as institutional investors love 100 units and above)

3. Aggressively raise BIG capital from institutional investors leveraging on the credibility and track record of established apartment syndicators (and give up 90% equity)

4. Hire out great PM companies

5. Do value-add on the apartments acquired 

6. Raise rents, raise value 

7. then Refinance to buy even more apartment communities

In other words, do BRRRR but with apartment complexes

@Jordan Santiago hard to believe, 2100 maybe, but still not the norm, but who cares, focus on what you can do and do it. Do you have cash, or props to buy,  or experience ,  or partners with a lot of cash ?  If no then focus on attaining all. Who cares what others are doing, focus on you, 

Good Luck 

Originally posted by @Bjorn Ahlblad :

@Jordan Santiago here is a list of the top 50 owners-full disclosure I'm not on it! ;)) https://www.nmhc.org/research-...

it would be fun to also take that list and see which one has the greatest market value.. my vote would be that the Irvine company would be top 5 .. 

 

Tough to find many deals that have palatable caprates in this segment.  Using more leverage and not having all the outside equity can be nice but finding loans allowing good leverage I believe is challenging. I’m not seeing much more than 70 percent loan to value.   

Originally posted by @Michael Ealy :
Originally posted by @Jordan Santiago:

Hey BP,

I recently read a story about 3 entrepreneurs in their late 20s doing syndication. They acquired 21,000 units in about 8-9 years. 

My question is, how is that even possible. I know there’s a lot of syndicators on this platform so I wanted to get some feedback from that. I know this business is in no means a get rich quick plan, or easy. But, if they did it, I don’t see why it can’t be duplicated.


Any thoughts as to how they grew so fast?

 Jordan,

Sure it can be done. I've acquired 8.6% of what they have doing it longer because I focus on quality deals. That's why I never lost money even during the Great Recession of 2008-2009. In fact, I've made more money during that time. It remains to be seen if they will survive the next downturn.

I am not discrediting those guys though. Good for them. They're smart & they hustled - they bought right after the downturn and they aggressively raised capital. They probably gave away 90% of their equity (is my suspicion) in order to raise big money in a hurry. 

But, I only give up 30% (and sometimes 50% of the equity). In other words, even if I assume 50% equity, with the 1,000 apartment units I hold now, I am making the same money as someone with 5,000 apartment units who give up 90% equity and I have 1/5th the management headaches.

But going back to your question: how is acquiring 21,000 units in 8-9 years even possible?

1. Don't start with buying houses but rather partner up with established apartment syndicators.

2. Focus on finding good deals (100+ units as institutional investors love 100 units and above)

3. Aggressively raise BIG capital from institutional investors leveraging on the credibility and track record of established apartment syndicators (and give up 90% equity)

4. Hire out great PM companies

5. Do value-add on the apartments acquired 

6. Raise rents, raise value 

7. then Refinance to buy even more apartment communities

In other words, do BRRRR but with apartment complexes

Wow Michael, what a great response. Congrats on your success and thanks so much for the advice and tips!

 

Originally posted by @Jay Hinrichs :
Originally posted by @Bjorn Ahlblad:

@Jordan Santiago here is a list of the top 50 owners-full disclosure I'm not on it! ;)) https://www.nmhc.org/research-...

it would be fun to also take that list and see which one has the greatest market value.. my vote would be that the Irvine company would be top 5 .. 

 

Irvine has what, 60,000-70,000 units? Haha. Insane.  

21,000 units in under a decade is certainly an outlier. It is hard to speculate on what connections they started with. Getting to several thousand units in a decade is certainly possible though. 

Here is their site. It looks like they have most of their properties in tertiary and some secondary MSA's with most of their assets being in the the Detroit area. The apartment buildings look to be C-B class with rents in the $700-$1500 range.

There isn't a lot out there about the four principles... and their website is light on the details of their investment strategy, management pedigree, ect so that leads me to believe they aren't looking to raise money from individuals or people they don't already have connections with. 

Is it possible? Of course it is. But remember in the last 10 years we’ve seen huge growth in appreciation. That percentage of growth happened because the markets had such a strong decline. While we can look back to see what’s happened is not wise to expect this will occurs again in the next ten years. 

@Jordan Santiago sounds as if they may have a strong network of partners to where they can scale this fast. Congrats to those guys. They probably put in a lot of work behind the scenes too as well. In all it can definitely be done. There are no limitations. The only limitations you have are the limitations you put on yourself. Develop the mindset. Work on personal growth development and you can achieve anything. Take care. Good luck.

Originally posted by @Tj Hines :

@Jordan Santiago sounds as if they may have a strong network of partners to where they can scale this fast. Congrats to those guys. They probably put in a lot of work behind the scenes too as well. In all it can definitely be done. There are no limitations. The only limitations you have are the limitations you put on yourself. Develop the mindset. Work on personal growth development and you can achieve anything. Take care. Good luck.

Great response, thank you! 

@Jay Hinrichs Irvine Co easily has highest market value. They have lots of complexes at 1M/door+ and I bet their average is over 400k/door. And that is just saying their resi market cap is top that list, add in their commercial holdings and I don't think anyone has more. Don has done real well for himself, he owns absolutely everything around here.

@Jordan Santiago It is absolutely possible with the right kind of capital backing you. They could be working with some family office & institution capital for 80-90% of their equity and syndicating the last 20-30%. Keep in mind that the market has been on a massive upswing and if they were to get into this business 8-9 years ago they probably acquired a lot of those units early on when the market wasn't so hot. 

Originally posted by @Scott Morongell :

@Jordan Santiago It is absolutely possible with the right kind of capital backing you. They could be working with some family office & institution capital for 80-90% of their equity and syndicating the last 20-30%. Keep in mind that the market has been on a massive upswing and if they were to get into this business 8-9 years ago they probably acquired a lot of those units early on when the market wasn't so hot. 

 Very good point. I see the capital raising and deal finding part a bit of a hurdle, but hurdles are overcome. They could have an off market marketing/prospecting process that finds them a ton of direct deals, and like you said institutional funding. Thanks for the response!

Originally posted by @Jordan Santiago :
Originally posted by @Scott Morongell:

@Jordan Santiago It is absolutely possible with the right kind of capital backing you. They could be working with some family office & institution capital for 80-90% of their equity and syndicating the last 20-30%. Keep in mind that the market has been on a massive upswing and if they were to get into this business 8-9 years ago they probably acquired a lot of those units early on when the market wasn't so hot. 

 Very good point. I see the capital raising and deal finding part a bit of a hurdle, but hurdles are overcome. They could have an off market marketing/prospecting process that finds them a ton of direct deals, and like you said institutional funding. Thanks for the response!

 A lot of people starting out struggle with raising capital. If you can get in with the right capital partners you can buy a lot of units in a very short period of time. Keep in mind that by using this type of capital structure your hands become tied quickly. They will force you when to sell, buy you out of the deal, kick you out of the deal, etc. You are essentially working for fees at this point and don't have as much money coming in or upside potential as many people think. 

Originally posted by @Scott Morongell :
Originally posted by @Jordan Santiago:
Originally posted by @Scott Morongell:

@Jordan Santiago It is absolutely possible with the right kind of capital backing you. They could be working with some family office & institution capital for 80-90% of their equity and syndicating the last 20-30%. Keep in mind that the market has been on a massive upswing and if they were to get into this business 8-9 years ago they probably acquired a lot of those units early on when the market wasn't so hot. 

 Very good point. I see the capital raising and deal finding part a bit of a hurdle, but hurdles are overcome. They could have an off market marketing/prospecting process that finds them a ton of direct deals, and like you said institutional funding. Thanks for the response!

 A lot of people starting out struggle with raising capital. If you can get in with the right capital partners you can buy a lot of units in a very short period of time. Keep in mind that by using this type of capital structure your hands become tied quickly. They will force you when to sell, buy you out of the deal, kick you out of the deal, etc. You are essentially working for fees at this point and don't have as much money coming in or upside potential as many people think. 

 Can you give me an example of what exactly you mean? 

Originally posted by @Jordan Santiago :
Originally posted by @Scott Morongell:
Originally posted by @Jordan Santiago:
Originally posted by @Scott Morongell:

@Jordan Santiago It is absolutely possible with the right kind of capital backing you. They could be working with some family office & institution capital for 80-90% of their equity and syndicating the last 20-30%. Keep in mind that the market has been on a massive upswing and if they were to get into this business 8-9 years ago they probably acquired a lot of those units early on when the market wasn't so hot. 

 Very good point. I see the capital raising and deal finding part a bit of a hurdle, but hurdles are overcome. They could have an off market marketing/prospecting process that finds them a ton of direct deals, and like you said institutional funding. Thanks for the response!

 A lot of people starting out struggle with raising capital. If you can get in with the right capital partners you can buy a lot of units in a very short period of time. Keep in mind that by using this type of capital structure your hands become tied quickly. They will force you when to sell, buy you out of the deal, kick you out of the deal, etc. You are essentially working for fees at this point and don't have as much money coming in or upside potential as many people think. 

 Can you give me an example of what exactly you mean? 

Institutions, family office, or just large PE firms that will co-gp or be a large portion of your LP capital won't just give you money. They will also have a pile high set of documents for you to sign that you must stay compliant within. If your not example: miss your KPI's for 6 months straight they can essentially override you and take over as the asset manager. Also in the paperwork will have language in regards to liquidating the asset and who gets paid out first etc. You're essentially giving up control in the deal for convenience of equity. 

Originally posted by @Jordan Santiago :

Hey BP,

I recently read a story about 3 entrepreneurs in their late 20s doing syndication. They acquired 21,000 units in about 8-9 years. 

My question is, how is that even possible. I know there’s a lot of syndicators on this platform so I wanted to get some feedback from that. I know this business is in no means a get rich quick plan, or easy. But, if they did it, I don’t see why it can’t be duplicated.


Any thoughts as to how they grew so fast?

Hi Jordan,

Access to a lot of money, either through knowing a lot of people who are well off enough to be allowed to invest in this, or knowing a few people who can steer others money into the investments.

That plus an attractive business proposition.

If you run in those circles and understand this business you might be able to duplicate it.

Good Luck!

 

Originally posted by @Scott Morongell :
Originally posted by @Jordan Santiago:
Originally posted by @Scott Morongell:
Originally posted by @Jordan Santiago:
Originally posted by @Scott Morongell:

@Jordan Santiago It is absolutely possible with the right kind of capital backing you. They could be working with some family office & institution capital for 80-90% of their equity and syndicating the last 20-30%. Keep in mind that the market has been on a massive upswing and if they were to get into this business 8-9 years ago they probably acquired a lot of those units early on when the market wasn't so hot. 

 Very good point. I see the capital raising and deal finding part a bit of a hurdle, but hurdles are overcome. They could have an off market marketing/prospecting process that finds them a ton of direct deals, and like you said institutional funding. Thanks for the response!

 A lot of people starting out struggle with raising capital. If you can get in with the right capital partners you can buy a lot of units in a very short period of time. Keep in mind that by using this type of capital structure your hands become tied quickly. They will force you when to sell, buy you out of the deal, kick you out of the deal, etc. You are essentially working for fees at this point and don't have as much money coming in or upside potential as many people think. 

 Can you give me an example of what exactly you mean? 

Institutions, family office, or just large PE firms that will co-gp or be a large portion of your LP capital won't just give you money. They will also have a pile high set of documents for you to sign that you must stay compliant within. If your not example: miss your KPI's for 6 months straight they can essentially override you and take over as the asset manager. Also in the paperwork will have language in regards to liquidating the asset and who gets paid out first etc. You're essentially giving up control in the deal for convenience of equity. 

Ah, I see. I understand. So you may have to take the good with the bad. Got it. Thanks so much, your responses were insightful and extremely helpful.  

Originally posted by @Scott Mac :
Originally posted by @Jordan Santiago:

Hey BP,

I recently read a story about 3 entrepreneurs in their late 20s doing syndication. They acquired 21,000 units in about 8-9 years. 

My question is, how is that even possible. I know there’s a lot of syndicators on this platform so I wanted to get some feedback from that. I know this business is in no means a get rich quick plan, or easy. But, if they did it, I don’t see why it can’t be duplicated.


Any thoughts as to how they grew so fast?

Hi Jordan,

Access to a lot of money, either through knowing a lot of people who are well off enough to be allowed to invest in this, or knowing a few people who can steer others money into the investments.

That plus an attractive business proposition.

If you run in those circles and understand this business you might be able to duplicate it.

Good Luck!

 

Thank you Scott!!!

 

Originally posted by @Jordan Santiago :
Originally posted by @Scott Morongell:
Originally posted by @Jordan Santiago:
Originally posted by @Scott Morongell:
Originally posted by @Jordan Santiago:
Originally posted by @Scott Morongell:

@Jordan Santiago It is absolutely possible with the right kind of capital backing you. They could be working with some family office & institution capital for 80-90% of their equity and syndicating the last 20-30%. Keep in mind that the market has been on a massive upswing and if they were to get into this business 8-9 years ago they probably acquired a lot of those units early on when the market wasn't so hot. 

 Very good point. I see the capital raising and deal finding part a bit of a hurdle, but hurdles are overcome. They could have an off market marketing/prospecting process that finds them a ton of direct deals, and like you said institutional funding. Thanks for the response!

 A lot of people starting out struggle with raising capital. If you can get in with the right capital partners you can buy a lot of units in a very short period of time. Keep in mind that by using this type of capital structure your hands become tied quickly. They will force you when to sell, buy you out of the deal, kick you out of the deal, etc. You are essentially working for fees at this point and don't have as much money coming in or upside potential as many people think. 

 Can you give me an example of what exactly you mean? 

Institutions, family office, or just large PE firms that will co-gp or be a large portion of your LP capital won't just give you money. They will also have a pile high set of documents for you to sign that you must stay compliant within. If your not example: miss your KPI's for 6 months straight they can essentially override you and take over as the asset manager. Also in the paperwork will have language in regards to liquidating the asset and who gets paid out first etc. You're essentially giving up control in the deal for convenience of equity. 

Ah, I see. I understand. So you may have to take the good with the bad. Got it. Thanks so much, your responses were insightful and extremely helpful.  

 You can or, you can just syndicate all the capital and stay at the helm of the ship. Sometimes easy isn't always the best route.

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