All Forum Posts by: Charles LeMaire

And suddenly I feel the need to justify my choices.  Male ego or a desire for clarity, I will let the reader choose.  

Above Brian Burke suggests IRRs of 13% to 17% - I have seen his posts before and he always seem to have good knowledge and insight. I mentioned the IRRs I had experienced and note that the 5.44% IRR and a 13.2% IRR are below Brian's average. @Mike Dymski suggests I have a large number of under preforming deals.    

To be clear, I am saying IRR (sort of like the CD rate at the bank), not total return. IRR takes time into account, total return does not, but it looks way bigger. On the 5% IRR, the total return was 18%. On the 13%, the total return was 40%. On the 16% IRR, the total return was 57%. On the first, I feel the Sponsor sold too soon. On the second, we had to toss and replace the Sponsor as he lost focus. And the third was a combination of new city codes and a poor management company. But even these poor performers put some money in the pot for the next deals.

BTW, on the high end, I got a total return of 181% ($100K in and $281K back) in 19 months and a total return of 380% ($125K in and 475K back) over about 6 years. 

I'm not particularly unhappy with the results.

Regards,

Charles LeMaire

Thought I would add my $0.02 worth. I am a passive investor in many MF deals in 6 states, mostly TX. Of the 10 deals that have sold, my average annualized IRR is 30%; this includes the CoC and the big lump at the end. I typically see about a 8% CoC during a deal, but some pay better and some don't pay - don't think of it as eat'in money if you like to eat regularly.

Realize that this is a process, that is, the purchases started in 2011 and have continued and increased since then, so comparisons are a bit tenuous. The best deal was bought in 2014 and sold in 2017 (79% IRR). The worst was bought in 2011 and sold in 2104 (5% IRR). There were a several that under-performed because of a poor Sponsor (the above 5%, 13%, 18%, and 20% IRRs). One under-preformed because of the poor management company (16%). And I know my 30% is a bit inflated as the better deals sell faster; there are a couple of other under-performers coming. BTW, the other WOW IRRs are 59%, 45%, and 35%.

In all, MF has been berry-berry good to me!  And Brad Sumrok is our mentor!  

Regards,

Charles LeMaire

Hey @Gerald E. and anyone else who's interested...  I apologize, but I never have a short answer to anything, so here are my thoughts about what I call the Cosco equation. 

You would be foolish to get a $50 Cosco membership, if you only had $100; you would never get to break-even. 

Similarly, you have to weigh what you can make in more traditional investments against what you will make in RE, after you pay Brad, over the entire period.   You need to take into account that MF RE is not liquid, you are in the deal until the property sells - likely 3 to 5 years.  

Please realize I am referring to the Sumrok University (my name) passive only "Foundations Membership" (F), where you have access to the on-line training and access to the networking events, not the "Personal Student Membership" (PS) which is more expensive.

In about 2013/2014, when Brad started the Brad fee was less and the returns were likely to be 20% to 25% (annualized).  And the minimum was usually $25K.   So I felt one needed at least $100K for this to be smart (as a passive only).  Now the fee has increased and the annualized yields are a bit lower, so I think it takes at least $200K to make sense.  And the deal minimums have increased, usually $50K now.  This is my gut feel, your mileage may vary.  If you are a "roll the dice" person, less may work. 

BTW, I have actually averaged 30% annualized yields on the 10 deals that have sold; the lowest was 5%, but the highest 79% - yes, I promise I can do math and that is correct!  

I suppose the next big question is "How much?".  It seems to increase at each event.  As of Nov, I believe he was selling the F membership for $7.5K for a two year period.  I think the renewals were $2.5/year after that.

PS membership is almost $30K for 2 years and around $5K to renew.  This is for the person that wants to become a Deal Sponsor.  One has to be a PS to harvest money from the network and it includes hand-holding through the steps of the deal. 

I guess this is my chance to put in a couple of good words about our group - please realize I am not paid by him, I have been a student with him since the beginning and I usually volunteer at events to help repay what he has done for us.

1.  There have been 70 persons who have increased their net worth by $1M in the group.  This was announce last Aug.  This seemed to be the sponsor (PS) so I don't think the passive investors counted; I'm pretty sure there are many more, including me.  The point is, we are not making Brad rich (actually we are); as a group we are getting rich from our investments.

2.  I see several deals a month.  If one is active, that is, network with the group, it is easy to enter into deals.  This year, I have gotten into 13 so far.  Last year there were 45 deals and this year it looks like we will hit 60+.

3. I have to say that the network will step up and fund a deal in a matter of days making the fund-raising task a breeze for the sponsors.

4. The 'ecosphere' is greatly aided by the fact that we can fund and close deals; brokers love that and will definitely make sure we included when a deal is being considered for sale.

Regards

Charles LeMaire

As you live in TX and as you are looking for MF contacts, I suggest visiting both Brad Sumrok (BS) and Lifestyles Unlimited Inc (LSI).  I know BS spoke at a Jake & Gino event in Nashville recently (Oct?). BS's next big event is in March in DFW, but look on his web site for more info.  I believe LSU has an evening perspective member meeting each month in SA.  

I am a BS student.

I urge you to consider a couple of things.  Today, tax rates are about as low as they will likely be in the foreseeable future.  Unless you plan to be a failure in retirement your taxes will not likely go down.  My point is deferring taxes today till the future may not make sense.  Get the match and no more.  Select the Roth option if it's available.  Accumulate the rest to invest.

I do see the angst of pulling sums from Qualified accounts, but also realize that the depreciation and cap gain from RE completely evaporates inside these accounts. And if you have a loan on the property, you are looking at UBIT, the tax on 'tax free' money.

I did one MF deal via an IRA. I put in $100K. It's now worth about $400K. All of it will come out as Earned Income, rather than as Cap Gain.

Let me also offer the OLD Person perspective.  Clearly SS and Medicare may change, but today, the extra RMD from this account will push me over the SS limit, which causes me to pay tax on 85%, rather than on 50%, of my SS income, about a $5K price tag - I might be there anyway, but tax on the distribution and the extra is annoying. Medicare is a bit similar.  As I continue to have good income from property, the monthly fee for Medicare Part B is increased from $134 to $300 and when I pay my $16 per month to an insurance company for Part D, treasury takes another $33.   

Regards,

Charles LeMaire

Curtis and Amil, 

I'm not sure if multifamily (MF) is where you want to go, but...  I will present the possibly unpopular suggestion of finding and paying for a mentor.  There are several around; I choose Brad Sumrok in DFW.  He has taught me all about the process - I met him in 2010, knowing nothing about any of it.  I saw the MF presentation, could understand the math and logic of MF syndication (Sponsor and Passive investors) and went for it.  

After training, there is the 'ecosystem' (I like to call it Sumrok University) of students. Success requires being around several times a year to network (as a passive investor, you must have a relationship with the Sponsor).  Once you are known to a sponsor and he puts together a deal, he will send it to his 'buds'.  You decide if you want to jump in; it is a bit of a foot race for some deals.

Using the above, I have gotten into 37 deals (10 have sold).  My average returns on the sold properties is 30% annualized yield - you mileage may vary, no guarantees!

You may desire to be a Sponsor.  If you wish to be hand-held, the fee to Brad is more, but the rewards are potentially greater.  Sponsors take a cut of sweat equity in the deals.  

It is not my intent to discuss Brad's fees, but it is much less If you take the option that is without hand-holding and without harvesting money from the group.

There are many other options out there.  There was a guy that did similar training for hotels and motels.  There is a fellow that promotes old folks facilities.  

I do suggest that you only pay for training if there is a network behind it.  It is invaluable to have the knowledge base available in the network.

Charles LeMaire

If there are IRA investors in the deal, the sponsor must provide them a Property Evaluation form each year so that they can calculate their RMD, even if they are not yet at the point they must take the RMDs. Ask the sponsor for a copy of that form. It isn't perfect, but at least all the investors are working from the same number.

@Kevin Ferguson - I am along time (since 2010) Sumrok student.  I have invested passively in several deals over time.  You don't say if you joined or mention your experience, but making some assumptions...  I assume you are talking about your action, not your selection of Brad's Personal Mentoring vs. Foundations programs.

Say you attempt to be a sponsor, is your resume likely to attract me to your deal?  Can you swing an agency loan?  If you have 'creds' go for it, but if not, do a passive first, consider being a KP, and work up to sponsor if that is you goal.

Regards,

Charles LeMaire

Directly into MultiFamily!

I had no experience, so visited a group.  Heard the MF syndication story, the math made sense, joined the group (paid $$$) to avoid the University of Hard Knocks.  Invested passively first in a 160 unit in Irving TX, then another and another, a total of 37 to date.  I had a job, so did not make the leap to sponsor; I do OK and I know the sponsor make a bit more.  Mostly Bs and Cs. 10 have sold, 6 are being sold soon.  Currently holding a portion of 3800 doors.  The cash-on-cash is good, but the big payday is at the sale.

You don't mention where you are located (or did I miss that).  I know we have folks in our group from all over the country and I have invested in deals here in TX and also 4 other states.

Consider the Mentor path, it worked very well for me.  I suggest Brad Sumrok, but there are others.  I am only in the one, so my comparison would be a shallow pitch.

I do not work for Brad and he does not pay me!  My wife and I have been with him since 2010.

Regards,

Charles LeMaire

I am a Sumrok student.  I gather it is a scheduling issue for this week-end (Nov 10-11 2018).  For apartments, I think he is best, but here in DFW area there is also Lifestyles Unlimited and Think (find on MeetUp - Mark Kenney).  

One comment: we usually look for larger unit count.  Below 60 units, it is a bit harder to have professional management and on-site representation.