What would a seasoned investor do with this deal….?

2 Replies

I wanted to get some feedback on what seasoned investors would do given the below mentioned projections offered in a 65-unit syndication:

65 units recently remodeled/upgraded insides built in 1992 – 2000 (Class C)

Tertiary Market 3min from a medium size university (~11,000 students)

New roofs, New siding, New parking lots, Some new HVACs

4% Vacancy Rate due to units finishing remodeling

Listed Cap Rate 8%

Value Add: Rents are 20 – 25% below market

Projected returns:

Exit Strategy no more than 5 years

65/35 Equity Split

8% Preferred Return

17 – 18% Annual Average Return

15 – 16% Internal Rate of Return

10.9% Average Cash on Cash Return

87% Overall Return on Investment

@Daniel Brown , the first question that comes to my mind is: How did they arrive at 65/35 Equity split? (Remember the film: "The Producers"?)

Q. #2: How much is your money earning currently? 

Q. #3: How much have you researched their track record? (Not just the projects they want to brag about! eg. How did they fare in 2008-9?)

Q. #4: My calculator tells me that if you're getting 10.9% compound (monthly) interest on your investment deposit for 5 years, it comes to 172% of your outlay. So how does it work? Can you access that cash-on-cash during all of those 5 years? In which case it won't accumulate to 172%. But if not, why don't they just say your cash-on-cash return should be 187% after 5 years, if that's what they're projecting? (Which is higher than 10.9% annually!) My 2c...

 [Disclaimer: not a seasoned investor with syndications. From my ramblings, that could be obvious].

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