All Forum Posts by: Charles Carillo

@Heather Thuli

It depends on a number of factors. I would figure out what your 5 and 10 year goals are and work back from that. How much involvement do you want to have? What do you want to invest into? What is your time and financial ability at this point?

@Gurjot Grewal

We have partners who are foreign investors. DM me and I will send you contacts for; attorneys, lenders and accountants that they have previously used. It is important that you hire professionals that have experience working with foreign investors.

@Ashley Cooper

For purchasing an already built mixed-use property; I would say 1%-3% for the EMD is accurate. Yes, MOST of the time there should be a period of time (inspection/due diligence period) when the money is refundable. After that it become hard or non-refundable. In hot markets, EMD might go non-refundable from the beginning (this is not suggested). Make sure you consult with an attorney.

@Kay M.

Make sure to get all of the correct environmental reports; starting with a phase 1.

@Paul Luna

What happens after you move to Colorado with the property? Are you selling it or renting it? Who will be managing it? Being a long distance landlord is possible but you need to find the right manager.

@Sam Gra

We have partners who are foreign investors. DM me and I will send you contacts for; attorneys, lenders and accountants that they have previously used. It is important that you hire professionals that have experience working with foreign investors.

Mandy McAllister went to school and got a master’s degree. Noticing the student housing situation there inadvertently gave her a career. She saw her friend whose parents had purchased a home for her and then rent it out to her college friends. Mandy wishes that at 19 she had started investing, but she bought a $400,000 house first for herself. Finally, in 2016 she purchased a fourplex using her own money as a 25% down payment. This was in a college town in Illinois near a state school. She realized the benefits of furnishing it and relied on her property management to furnish it for a larger profit. She setup one bedrooms that went from $450 to $800 per month, largely because they were furnished. She realized that an exit strategy would be to sell houses to the college afterwards. From there, her progression of investing was incremental as she went from a four to a six to an eight-unit multi-family property. She liked this strategy because she could own them all by herself. Mandy started to scale by setting up joint ventures with other investors. She herself did joint ventures through knowing people for a long time. She divides tasks up for her team so that everyone has an active role. Mandy suggests to rely strongly on property management who know what they’re doing. Her stress test is if the building could have 30-40% economic vacancy and still cover expenses. Mandy likes smaller properties as a strategy since many are owned by people that aren’t necessarily profit minded. She says that you still have to know what you’re doing in these smaller complexes because even one vacancy can make a big difference in a fourplex.

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Welcome to Strategy Saturday; I’m Charles Carillo and today we’re going to be discussing Should I Passively Invest in Real Estate Syndications?

Many future real estate investors ask themselves if they really want to be real estate operators or just passive investors? This is a great question and in this episode, Charles discusses the pros and cons of investing into a syndication vs purchasing a property and managing it themselves.

Talking Points:

➡ What Is a Syndication?

o A syndication is the pooling of funds from several investors to invest into a single real estate asset.

o There are usually 2 groups of people in a syndication; general partners (operators) and limited partners (passive investors). Typically, general partners will also be limited partners to a certain degree.

➡ What Is an Equity Fund?

o An equity fund is similar to a syndication but the general partners are purchasing several properties; typically, over a calendar year.

➡ Liquidity

o Real estate is an illiquid investment; however, in certain situations, you may be able to access cash from your real estate investments.

o If you own a property, and it has increased in value, you can refinance it or take out a supplemental loan against the property and tap your equity. These solutions are not quick or cheap. You will be paying fees and spending months trying to complete the process. In addition to submitting endless documents.

o In syndications and most funds; the funds are locked in for the entire term of the investment.

o Any investment into real estate should be considered illiquid.

➡ Investment Term

o If you are flipping properties then your term will only be a few months but if you are a long-term investor, the terms usually range from 3-10 years. In a hot market, the hold times will be on the lower end and in a stagnant market, the hold times will be on the longer side.

➡ Reserves

o If you are an active investor, you might have major problems come up that you have not expected and with smaller properties, there is less cashflow to cover them. Requiring you to tap your reserves.

➡ Investment Minimums

o Typically, syndications require a $50,000 minimum. If you were to invest $50,000 into an investment property, you would only be able to purchase a $200,000 property at a 25% loan to value. This is not including; closing costs, reserves, repairs etc.

➡ Diversification & Risk

o With minimums usually being lower with syndications vs purchasing a property yourself, it is much easier to diversify with syndications.

➡ Returns

o The more work I do on a project; the higher the returns I require.

o If I am passively investing; a 7%-8% cash on cash return and a total return in the double digits will suffice.

o If I am purchasing a property myself; I want to see double digit cash on cash returns; which is very difficult, if you are purchasing properties in C+/B- areas and above.

o Smaller properties are also more volatile and are less predictable when compared to larger properties that you will be investing into in a normal syndication deal.

➡ Return on Time

o When, I am planning on passively investing; I spend a few hours underwriting the deal and then on an ongoing basis; I will spend about 1 hour a year managing my investment; mainly on reading monthly reports and saving and sending the K1 tax statement to my accountant.

o Compare that with the hours upon hours per week or month you will spend managing your own property or managing your property manager.

➡ Perform a Self-Assessment

o Do you like acquiring and managing (asset managing) real estate?

o Do you have capital, do you have a high paying career?

o What is your time worth?

o What are your ultimate goals?

➡ If you are interested in learning more about future investment opportunities our company is working out; please go to Harborside Partners .com and click on “Invest With Us”.

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@Juan Sierra

There really is nothing truly passive in real estate when you are purchasing properties yourself. Yes, hiring a property manager will make the investment semi-passive but you will still need to be part of the management; even if it is mostly on the asset management side (managing the manager). 

@Samira Ouraga

Pay off the credit card immediately. It depends on when your statement period ends to when your credit score will be recalculated. Credit bureaus say it takes 30 days but normally within a week of your statement date, the bureaus are updated. I would review your credit report and pay off anything else that is pulling your score down as well.

The affordability of the mortgage is a whole other issue. Has the monthly payment increased because of your credit issue or is it just because interest rates have increased? I would speak to the lenders and ask them.