Large multi family deals (how to invest)

[Przemek Kos]

Hi All.

I am a small time investor with just a few properties here in New York. I think I am at a point in my professional and investing career where I do not want to increase my exposure to New York, I also don’t feel comfortable to seek investments out of state by myself (perhaps with a partner).

I have come across a few syndication sponsors, mainly the guys who have podcasts and looked at a few PPMs and reviewed their presentations. Found a few that charged an arm and leg upfront (5.0% origination fee on commitment and in some cases collecting carry before full principal is repaid along with a hurdle in the payment waterfall). So needless to say those have been red flags and I didn’t pursue those. Or maybe I am looking at this incorrectly and 5% upfront is very much in line with industry? Obviously sponsors should be paid an upfront for the work they have done in bringing the deal, but I am still having a hard time with a 5 point fee day 1. Would prefer something where the incentives are more aligned and tied to long term success of the deal.

Where do you typically come in contact with out of state sponsors and investors? Thanks.

Regards,

Przemek

[Richard Neuharth]

In my experience 5% is pretty high, but maybe those groups have investors that are comfortable paying that and they are fantastic operators. We keep our fee to 2%. I know truly great operators that are at 2% acquisition though. It depends on what you are comfortable paying and who you know. BP is a great place to meet operators from all over the country. Conferences are another great place as well. We do a lot of social media networking and we speak with sponsors and investors daily from all over the world honestly. Out of state investments aren’t much different. We live in Texas but invest in multiple states throughout the south. We travel regularly to visit the properties but I believe that is very important in maintaining a strong asset.