All Forum Posts by: Charles Seaman

@Katie Jewell If you're doing a physical value add that includes upgrading the unit interiors, then I'd suggest implementing the rent increase after you upgrade each unit.  My best suggestion is to upgrade the unit interiors as the units turn.  Being that the units will already be vacant, you can then start turning the tenant base little by little.

@Katie Jewell It really depends on your approach.  If you send out letters in the style that you mentioned, you should expect most of your tenant base to leave once their current leases expire.  It's definitely one way to do it, but you should be prepared for higher vacancy and you should make sure that the area has a good supply of the tenant base that you're looking for in order to get those higher rents.

A better approach is likely phasing the increase in over 2-3 years, adding a little bit to the rent each year.  Is the increase being achieved through the implementation of a physical value-add program or simply through organic rent pushes?

Thanks guys.

@Daren Weintraub I sent you a message.

@Michael Ohara Does your company provide debt or equity?

@Jordon Kellett What's the exact issue?  Was the tenant evicted?  Did the tenant leave voluntarily?  Did they just abandon their occupancy of the unit?  And what state is the property in?

You're welcome @LaRhonda M.  Questions are always welcome.  With regard to what happens to the investors after the 18-24 month period, it really depends on the deal.  There's generally three (3) possibilities (but I can't tell you which one applies to the deal that you're looking at without seeing the offering documents).

1.  Keep the deal structure exactly the same and return part or all of the initial investment to the investors, giving them less "skin in the game" and still allowing them to receive the same return.

2.  Restructure the deal after returning part or all of the initial investment to the investors, with the returns being split more evenly or perhaps more in favor of the syndicator (ex. the split is 80/20 at the beginning of the deal, with 80% going to the investors.  After the cash out refinance, the investors now have little or no "skin in the game," so the split becomes 50/50).

3.  Return the full amount of the initial investment to the investors, along with any portion of the return due to them and cash them out of the deal, thus allowing the syndicator to keep ownership of it.

With regard to it being late in the cycle, I was referring to the overall market cycle.  Think of us as being in 2006 or 2007 prior to the big crash at the end of the last cycle.  What that means is that competition is at a high right now, prices are at a high, and it's still a great time to be a seller.  While good deals can still be bought, it should be expected that returns are somewhat lower (and this will continue to be the case until the market resets).

@LaRhonda M As a full disclosure before I answer this question, I am a syndicator.

Investing passively through syndication deals is a great strategy if you're looking to invest passively (some people are and some people aren't), assuming that you're investing with a good operator.  The syndicator (operator) finds the deal, does all of the due diligence, and operates the property after acquisition all the way through sale.  The passive investors simply put their money into the deal and get an equity stake in exchange for that.

Most syndicators give investors a combination of cash flow and part of the profits from the eventual sale or refinance, but it does vary from deal to deal.  Cash flow distributions are made either monthly or quarterly in most cases.  Again, this varies from deal to deal.  It's also very common for syndicators to offer investors a preferred return, meaning that the investors get that return before the syndicator takes their portion of it.  The investors don't have responsibility for the operation of the property.  The syndicator handles all of that.  The investors simply receive a return.

The returns that you detailed sound very enticing.  My biggest concern is making sure that the projections are realistic.  Being that it's so late in the cycle, I'd be a bit skeptical about such great returns.  I'd say make sure that you feel confident in the syndicator because the success or failure of the deal will largely depend on their ability to operate it properly.

From having looked at hundreds of deals over the last three years, I'd say that this is a very good deal if the projections are realistic and if you feel confident in the syndicator.  The money is made off of the successful operation of the property and the eventual sale or refinance of it, which then returns the initial investment to the investor(s).  To know what happens after the two (2) year period, you'll need to read through the offering documents because it varies from deal to deal.  It could be possible that the plan is to sell the property or to refinance it and potentially change the structure of it after the investors receive their initial investment back.

Keep in mind that this is still investing, so there is an element of risk.  It won't give you the same sense of security that keeping liquid cash will, but if it's a good deal in a good area with a good operator, then you do have a high probability of getting your money back with a nice return.

@Benjamin Yeager  I can help you with that.  Do you have any specific questions about underwriting or do you just need general help with it?

@Victoria Quero Hi!  The numbers are still being finalized, but it'll likely be somewhere in the $700K range.

@Account Closed already mentioned, both books and mentors are great resources for you to use while learning about syndication.  The resources that you use will largely depend on your budget and your level of commitment.  Books and the BiggerPockets forums (and articles) are great free and low cost resources to use.

As a disclosure, I did take courses with RE Mentor and found them to be very valuable, but they're also very expensive.  I didn't buy coaching/mentorship with them, but I really didn't need it either because I was fortunate enough to work full-time for a commercial real estate investor before getting involved with multifamily syndication.

Another resource that you can use right now is attending virtual Meetup events that will allow you to connect with people all over the country that are active in the space.  You might find that offering to work for free for one of them in exchange for training could be a valuable resource for you because you can learn through doing and also get the benefit of being involved with somebody else that's more advanced than you are.

@Ellie Perlman Thanks for sharing this.  For clarification, did you survey current tenants about upgrading the units that they were living in or prospective tenants who were considering renting a unit from you?