Creating Syndication for Multiple SFR Student Rentals

[Jim Froehlich]

Hello, I am looking for replies from anyone experienced or educated in the subject of syndicating for multiple single family homes (i.e. raise capital for down payment/CAPEX/reserves, while getting blanket mortgage for remainder). I have great near-campus properties, but not sure what good cash-on-cash should be for investors (10%, 15%, 20%?) or which Reg D exemption I should target (I'm shooting for family/friends, but may have to extend PPM to reach goals). This is state of MA and one commercial bank has given me guidelines for how they could do recourse (25% down) or non-recourse (35% down), but I'm not sure if there are other approaches I should consider. Any legal or accounting thoughts welcome too; my accountant advises one LLC per property, but that means I would have to create 10 right away. Thanks for any thoughts!

[Todd Dexheimer]

The cash on cash will depend on your investors expectations, but if you can reach double digit cash on cash with future upside that would likely be good. Most investors that I speak to want to see 15% IRR or better, but you may be able to get them happy with 12%

As for the Reg D offering, the most common is a 506B, however, you should really talk with a securities attorney to set it up properly. 

For the LLC, I would expect it to be all in 1 LLC for 2 reasons - 1.) The syndication will be expensive if you do a raise for each LLC and 2.) The lender will like it in 1 LLC vs. multiple