First Syndication Complete! - 64 units in Colorado Springs

First Syndication Complete! - 64 units in Colorado Springs

Specialist · Denver, CO · Member since 2017 · 60 posts · 137 votes

I'm thrilled to share that I closed on my first real estate syndication deal today! I wanted to share this with the community to hopefully encourage others out there that larger-scale investing is possible without expensive courses or prior knowledge, it just requires making a goal and then taking consistent, persistent action with that goal in mind!

I stumbled on BP 13 months ago, listened to Episode #238 with "Swanny" (still one of my all-time favorite episodes), and was instantly hooked on real estate. I wasn't sure which niche I wanted to pursue, but decided to pull out some equity of our primary residence, then bought a student rental in Greeley last October as a start.

In December I put an atypical duplex under contract, but had significant issues with the financing end of the deal. After getting input from several folks here on BP, I ended up canceling the contract. At the same time I started to narrow my learning focus into multi-family, through content produced by BP, Grant Cardone,  @Michael Blank, and @Gino Barbaro

In February I started reaching out to local brokers and building relationships, while also talking to several folks about partnering together if a deal could be found. In April, after evaluating over 40 deals, I finally identified a 64 unit complex in Colorado Springs as an attractive target. This property was built in the late 60's, had good bones and a new roof and pool, but was still owned by the original builder, and had been mismanaged for several years. Rents are 10-15% below market, and there are a number of straight forward exterior items (signage, overgrown landscaping, new paint) that we plan to address as part of our turnaround strategy. I ended up partnering with two folks that had prior experience in the development and SFR arenas.

The seller proved to be very difficult to pin down, and we spent most of May and part of June pushing for a response to our offer. We finally entered into contract June 10 with 2, 30 day extensions to facilitate a 1031 for the seller. Shortly after entering under contract we secured funding through Bellco Credit Union, though it was recourse debt, we got a 4% rate, 10 year term, 30 year am, with a 1 time adjustment at 5 years. We selected a local property management company with quite a bit of experience in the Springs submarket after vetting several local firms.

The final purchase price was $7.55 million, and we ended up raising just over $2 million through a 506(b) syndication structure. Oddly enough, the money raise ended up being the easiest part of the whole process!

Our plan is to hold for a minimum of 5 years, then either refinance into agency debt and hold for 5 more, or sell and distribute the profits. Our projected IRR with conservative rent growth numbers is just under 20% for our limited partners.

I'm so thankful to have resources like BP to learn from, and other folks like @Steve K. and @Bill S. that provided valuable insight early in my journey, thank you! I have much still to learn, and I look forward to creating more value for our investors in the future. Hopefully I'll meet some of you in person at a meetup in the Denver area soon!

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Investor · Littleton, CO · Member since 2017 · 41 posts · 30 votes
8y

@Sam Rust Congrats, Sam! First of all, I strongly agree with you on the Colorado Springs pick. Millennials have been storming in and looking for places to rent. The military presence also provides a nice population of renters. 

But best of all is that you went BIG on your first deal. That's something I'm sure all of us here at BP admire. Keep up the hustle! 

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  • Rental Property Investor · Fairfax, VA · Member since 2018 · 6 posts · 2 votes
    7y

    @Sam Rust Congrats, very motivating!!  a question - did you submit the initial offer first or presented the deal to investors first? I have realized that for the first project new investors take for ever to decide. and secondly did you follow the underwriting strictly as @Michaelblank suggests or did you go with your gut feeling and commonsense of course keeping the basics in mind.

  • Dan HandfordPro Member
    Investor · Lexington, SC · Member since 2018 · 779 posts · 501 votes
    7y

    @Sam Rust Congrats on this deal! Way to go!

  • Northern NJ · Member since 2018 · 128 posts · 39 votes
    7y

    @Sam Rust: very inspiring post! After being a landlord for SFRs, I am also looking into getting to the larger stage but always thought it will only be possible to be part of someone's management team before I can form my own syndicate because of lack of experience or lack of access to the funding that experienced operators can achieve. You disproved all those holdbacks and now it is grit and no quit! QQ: I think you mentioned 5.x% current cap rate and want to get 7.x% cap rate post improvement. You don't want higher cap rate but rather higher valuation to higher NOI, isn't it? Could you please provide reference for your syndication attorney?

  • Rental Property Investor · Philadelphia, PA · Member since 2016 · 28 posts · 16 votes
    7y

    @Sam Rust Congrats & well done!

  • Developer · Pittsburgh, PA · Member since 2017 · 16 posts · 9 votes
    7y

    @Sam Rust Congrats on getting the deal done!  I'm sure you have many more coming down the line! 

    As to the financing on the deal, did the Bank require you, personally, (and/or some of your LPs) to act as a recourse guarantor on the loan?  I think you mentioned that you used recourse debt in an earlier post.  If so, did you have any issues meeting their net worth/liquidity requirements? 

    Thanks for sharing your success with us and best of luck!

  • Syndicator · Austin, TX · Member since 2014 · 85 posts · 47 votes
    7y

    This is phenomenal Sam. Congratulations on the deal and for creating that success for yourself and your team. The amount of learning you've already acquired and are about to acquire is incredible. Nothing like your first! 

  • Rental Property Investor · Washington DC · Member since 2018 · 1 post · 0 votes
    7y

    This is totally awesome! Congrats my friend! Such an inspiration. 

  • Rental Property Investor · Bedminster, NJ · Member since 2014 · 42 posts · 5 votes
    7y

    Congratulations! This is awesome and very inspiring.

  • Rental Property Investor · Tyler, TX · Member since 2018 · 32 posts · 23 votes
    7y
    @Sam Rust Congrats Sam! Very inspiring. Can u give us details of your fundraising strategies? I'm interested to know more.
  • Rental Property Investor · San Francisco, CA · Member since 2015 · 6 posts · 2 votes
    7y

    Congratulations, Sam!  What an accomplishment and it's so great of you to share with everyone here. Thank you and best wishes on your next one, too.

  • Specialist · Denver, CO · Member since 2017 · 60 posts · 137 votes
    7y

    @Nathan Bise I have heard of Pine Financial, but haven't used them in a deal to date. Best of luck!

    @John Stoeber @Jeremy Tomes Myself and the 2 other MP's are the recourse guarantor for the loan. However, the process was pretty straight forward to meeting the net worth requirements primarily because we were working with a local credit union that knew the market, had prior experience with our property manager, and our collective balance sheets were sufficient.

    @RJ Sidhu We got the property under contract, then raised the remaining funds once we had completed enough DD to know we wanted to close. Our investors were willing to move relatively quickly (45 days) once we laid the deal out for them. We didn't compromise on our underwriting, and kept it conservative throughout the process.

  • Specialist · Denver, CO · Member since 2017 · 60 posts · 137 votes
    7y

    Thank you to all who took time to comment on this post, it is greatly encouraging to me!  

  • Flipper/Rehabber · Hager City, WI · Member since 2018 · 22 posts · 10 votes
    7y

    Thank you Sam. Much luck in your future! Looking forward to seeing your progress. Slainte!

  • Member since 2018 · 1 post · 0 votes
    7y

    this is fantastic! from zero to hero in just over a year of being on this platform!

  • Syndicator of Large Apartment Buildings · Glen Mills, PA · Member since 2009 · 1k+ posts · 1k+ votes
    7y

    @Sam Rust congrats!!

    Looking forward to hearing how this asset performs you - Great Job

  • Manchester, TN · Member since 2016 · 67 posts · 9 votes
    7y

    @Sam Rust Congratulations on achieving this milestone. Please PM me if you would be interested in doing an interview.

  • Johnny PineyroPro Member
    Golden Oak, FL · Member since 2018 · 78 posts · 25 votes
    7y

    Sam,

    Pre-1978 MFR...Any lead pain issues to contend with? Asbestos? Did you conduct inspections for these issues?

  • Rental Property Investor · Houston, TX · Member since 2018 · 6 posts · 2 votes
    7y
    @Sam Rust- Thank you for sharing your story. I am inspired and encouraged. Much success to you on this deal and future ones.
  • Palpark, NJ · Member since 2016 · 69 posts · 11 votes
    7y

    @Sam Rust congrats on your first syndication deal! Great to hear success stories. 

    Did you get quotes from several lenders? That 4% rate 10 year term at 30 yr arm is amazing! What was the process like to get that? Was there any negotiations?  

  • Rental Property Investor · New York City · Member since 2014 · 208 posts · 271 votes
    7y

    @Sam Rust  Sam that is an amazing story.  Good for you, and very smart.  Good luck and have fun with it!

  • Philadelphia, PA · Member since 2016 · 16 posts · 12 votes
    7y

    Nice Sam!  Way to put that education to good use taking action!

  • Member since 2018 · 28 posts · 18 votes
    7y

    Congratulations, Sam! Your story is very inspiring. Thank you for taking the time to post about it, and answer all of the questions about your experience. Your story is very motivating. :) Good on you. 

  • Investor · Denver, CO · Member since 2018 · 57 posts · 30 votes
    7y

    @Sam Rust Congratulations that's a big deal. Now that deals complete its time to start finding the next gem. 

    Good luck!

  • Investor · Atlanta, GA · Member since 2016 · 241 posts · 86 votes
    7y

    That's awesome Sam ...the power of persistence! Care to share how you did the 506B structure?

  • Kerry Noble JrPro Member
    Investor · Indianapolis, IN · Member since 2018 · 2k+ posts · 1k+ votes
    7y

    Nice work!

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