All Forum Posts by: Charles Seaman

@Matthew Cooper Check out the resources listed below.

Book: Best Ever Apartment Syndication Book by Joe Fairless
https://www.amazon.com/Best-Ever-Apartment-Syndication-Book/dp/0997454326

Podcasts: The Real Estate Syndication Show with Whitney Sewell, The Apartment Building Investing Podcast with Michael Blank, Multifamily Investor Nation Podcast with Dan Handford

Underwriting Tool: Syndicated Deal Analyzer
https://themichaelblank.com/syndicated-deal-analyzer/

I'd also recommend getting on the Multifamily Investor Nation email mailing list because they have great free webinars each week that'll give you a lot of value as somebody just starting out.  If you need any more resources or information, feel free to reach out to me and I'll be glad to help.

@Shane Thomas As an active operator, I prefer to use 506(b) offerings because it allows you to attract a larger audience of potential investors.  At some point, we might switch to 506(c) offerings, but I'm always more hesitant to go that route because it greatly limits who can invest in your deal.

The benefit to using a 506(c) offering is the way that you can market the deal, but I often find that most investors (accredited or sophisticated) are highly unlikely to invest with you if you don't have a preexisting relationship with them.  They typically want to know you so that they can feel confident in your ability to operate the deal and protect their money.  Because of this, having the ability to market the deal doesn't seem like much of an added benefit to me, unless you have a strong enough brand that people simply want to invest with you on name value alone (think Grant Cardone or similar people with strong followings).

From the passive investor standpoint, I don't think that accredited investors would have any preference for the offering type, but I'm sure that sophisticated investors would prefer 506(b) offerings simply because they're allowed to participate in them.  I'm curious to see what some of them have to say in response to the question that you posed.

@Daniel Villanueva There are many people that purchase apartment complexes as their first deals and there's nothing that should stop you from doing so if that's your goal.  However, keep in mind that apartment complexes are much bigger deals than single-family homes or smaller multifamily complexes are and accordingly, they require more money, more risk, and different skills (I won't say more skills because there are many investors that invest in smaller deals that are very skillful).

The first thing that you need is expertise.  This is true for real estate of all sizes and shapes, but it's even more important when you're dealing with larger deals like apartment complexes.  My first deal was an apartment complex, but it also helped that I had 14 years of experience working for a commercial real estate investor in NYC.  This provided me with all of the expertise that I needed to feel confident in my ability to find a good deal and to make sure that it performs.  On top of that, I also took courses with a national guru and most of the course material reinforced what I already knew, but it was good to reinforce what I already knew.  There's many different ways for you to develop expertise, so figure out what works best for you and jump on it.

The second thing that you need is investors, unless you're planning to use your own capital to acquire these deals. If you don't have investors, then you'll want to work on building an investor list. This is a time consuming process if you're planning to use syndication as your primary strategy for investing in these deals. If you're planning to JV with somebody, then the requirements aren't as strict. But with syndication, you're taking money from other people and having them invest passively in a deal (essentially, you're selling them a security), so the SEC has strict rules and regulations that you must adhere to when raising capital. These rules include having a preexisting relationship with any non-accredited investors that invest in your deals. Even if you only have accredited investors invest in your deals, it's very unlikely that anybody will invest in your deals until they know you and feel confident in your ability to operate deals and safely return their money to them.

The third thing that you need is the ability to get approved for a loan.  Most lenders in the commercial space have high requirements for liquidity and net worth and they also prefer borrowers that have previous experience operating the asset class that they're buying (so somebody with previous multifamily experience that's owned properties in the same area as the one that you're currently buying will have an easier time getting approved for a loan than a newbie that meets only the financial requirements).  And these requirements have only been amplified by COVID-19.

So, you can definitely start with an apartment complex as your first deal.  Just make sure that you're prepared to put the time and effort in to do so.  I often tell people that syndication is a great long-term strategy, but that it's definitely NOT the real estate strategy for you if you're looking to make money quick.  It's important to really think about what you're hoping to get out of real estate and to then see if syndication is the strategy that best fits with what you want.

@Evan Loader There are two (2) things that I'm going to say.  The first is to start developing relationships with other syndicators that will accept sophisticated investors in their deals.  The second is to determine if you might actually qualify as an accredited investor currently based on your income.  I'm not sure if Total Income or Taxable Income is used to determine whether one is an accredited investor, but my understanding is that it's Total Income.  So if your Total Income exceeds the required amount, it likely won't matter if your Taxable Income is less than the required amount (it sounds like your Total Income is above the required amount, but that your Taxable Income isn't if I'm understanding your post correctly).  I'd recommend checking with your accountant for clarification on that.

@Ben Morand You might be interested in connecting with @Bailey Kramer.  He runs a multifamily Meetup group in Orlando that's currently meeting virtually until it's feasible to run live events again.  His group is geared towards larger multifamily, but there might be some members that also have interest in smaller multifamily.

@Nick Sandoval I closed a 92-unit deal in September 2019 and have a 48-unit deal under contract now that will close in late July.  Overall, the courses did help a lot, but I had a great head start because I worked full-time for a commercial real estate investor for 14 years and got to learn the ins and outs of the business while working there.  So the courses more reinforced what I already knew and taught me the basics of capital raising, which was new to me.

@Nick Sandoval I personally took courses with RE Mentor and found them to be very valuable.  Are you looking for courses or one-on-one mentoring?

@Brian Geiger In a nutshell, your high level summary of both is accurate.  Because of the additional oversight from the SEC, syndication deals typically have more costs associated with them and have more regulations that have to be adhered to.

@Ryan Webster I believe that many buyers are having trouble making deals work at the current time.  I know that we are.  There's a big disparity between the prices that buyers and sellers want and it'll likely still be a few months before they come to a meeting point on a large scale basis.  In seven (7) days, we'll officially be in a recession.  The speed that we come out of the recession is debatable.  If we do make a swift recovery, then the seller's market that we've been in for the last few years will likely continue.  However, if the recovery isn't as swift as many people are predicting and as it has started out to be, then we'll likely see a shift to a buyer's market.

In either scenario, the best recommendation that I can make to you is to be patient and prepared because there will likely be a multitude of good deals available in the next 6-12 months.

@Nick Love You're absolutely right about that.  That's true of all businesses.  Working just for the sake of working won't do much to benefit anybody in the long run.  Eventually you'll burn out and you're not usually any better off financially because of it.