All Forum Posts by: Charles Seaman

@Jordan Akins Is the deferred maintenance preventing tenants from renting units at these properties?  If not, then what's the downside to your father continuing to hold the properties and not addressing the deferred maintenance?  A little more context will allow me (and others on the forum) to give you better feedback.

@Jason Thompson Different tools work for different people.  If you're happy with the spreadsheet that you created and if it's functioning as you expected it to, then there's no need to use a different tool.  I use Michael Blank's Syndicated Deal Analyzer.  There's a one-time fee to purchase it, but there's no ongoing subscription cost.  It's reasonably priced and is one of the more popular underwriting tools in the industry.

https://themichaelblank.com/sy...

Sure. JV stands for Joint Venture.

@Pepper Bradford  You have some valid concerns.  Relationships are very valuable in this business, so it's important to protect relationships and not to waste people's time.  However, you'll never move forward if you're not willing to fail along the way.  Most people fail.  The key is to get back up and keep chugging along.

You're right that the broker won't want to deal with you if you tell them that you have no money.  Brokers get paid on commission and that motivates them to deal with people that can close.  However, if the broker doesn't ask you that question, then don't offer the information.  If they do ask it, be prepared with a good answer (don't lie, but frame your answer in a different perspective).

With a deal this size, it seems primed for a JV opportunity. This means that you can start looking for money partners (they could be equity partners or they could be private lenders that provide debt). You want to do that on an ongoing basis so that you have money lined up for future deals. Having a deal that you're looking at now or actively working on gives you something to talk about and it makes you more attractive to people that might want to work with you. Use the opportunity to network more and to meet new connections that could be money partners for this deal and for future deals.

Got it.  Requirements might be different for a property that size.  My expertise is in properties with loan amounts greater than $1MM.  Maybe somebody else can chime in with feedback.

@Jack Miller While it's true that the underwriting for commercial loans is more focused on the asset than the individual or the borrower, it doesn't mean that it's solely focused on the asset.  The creditworthiness of the borrower is still important and most lenders will underwrite any individual that has control over the asset.  What size multifamily properties are you looking at?  The criteria might vary a bit for deals with loans greater than $1MM compared to deals with loans less than $1MM.

@Jason Thompson There's four (4) things you need to do when starting out in syndication. In short, getting the capital needed is possible, but doing so will take time and effort. Keep in mind that there's two (2) different types of capital that you'll need. The first is equity. This is typically raised from investors and it's used to close on deals and to operate the asset(s) after closing. The second is risk capital. This is the capital that's provided for everything from the time that the LOI is accepted until closing (ex. EMD, loan application fee, securities attorney retainer, due diligence expenses, etc.). Risk capital is provided by people on the GP team, so you'll need to make prospective partners aware of your need for risk capital if you're unable to lay it out yourself.

1.  Pick a target market (only 1-2 markets when you're starting out).  It sounds like you're ahead of the game here because you're focusing on your local market, which certainly makes things much easier.  Remaining focused allows you to develop market knowledge and to build better relationships.

2.  Find partners.  Similar to a marriage, you want to be diligent about picking the right partner(s).  Get to know yourself well and get a firm understanding of what you're good at.  In short, this business comes down to finding deals, finding money, and running deals.  Figure out which side you belong on and find people that can handle the remaining tasks.  As you gain momentum, you'll realize that each of these tasks are full-time commitments and that they'll quickly become more than any one person can handle.  Also make sure that your values align.  Complementary skill sets are important, but there's more to a partnership than just that.

3.  Find investors.  People often think "find the deal and the money will come."  This can be an effective technique with a single-family home.  It's quite difficult to do (and sometimes illegal) when purchasing multimillion dollar multifamily properties through a syndication structure.  You need to spend just as much time finding investors as you do finding deals.  Attracting capital will be tough when you start out due to not having a track record.  In addition to finding investors, you'll also need to find other syndicators that you can co-GP with until you're able to raise capital for your own deals.

4.  Find key principals/sponsors.  A key principal/sponsor is somebody that has the net worth, liquidity, and experience to qualify for a loan.  This is important, but there's a greater value to building these relationships.  If you do a good job building these relationships, then you can ask the key principal/sponsor if you can use their track record when speaking with people.  If they say yes, then that will be a big help to you.  Being that this business is all about track record, using somebody else's track record allows you to get a track record before you have your own.  This helps you attract both deals and investors.

@Tony S.You're welcome.

@Tony S.  I bought a property with an open fire claim earlier this year.  My replies to your questions are below in Italics.

1. 1. Should I forget about closing this year? Or can I still make it happen?  It's possible that you can still close this year.  Are you obtaining traditional financing to acquire the property or is the seller financing the sole source of debt?  If you are using traditional financing, then it might make it tougher, but it's still possible.
2. 2. How do handle processing this with the seller’s insurance if we close next month? Can the seller assign the insurance claim to me as the buyer?  The seller can assign the insurance claim to you, however it'll likely be easier just having them keep the proceeds from the claim and giving you a credit to the purchase price now.
3. 3. The purchase contract states that the seller will indemnify me as the buyer for any claims arising from anything that happened before closing. Should I be worried abiout anything from a liability perspective?  Your best bet is to speak with your insurance broker or attorney about this.  If the seller has already filed the claim or will file it prior to closing, then your liability should be limited.  While indemnification provisions are good in theory, there are times where it can be tough to enforce them in practicality.
4. 4. If I estimate about $40,000 in damage and the unit being offline for a couple of months, how much of a purchase price reduction should I request.  $40,000 + whatever lost rent you'll incur.  Keep in mind that your insurance premium will also most likely increase if you provide your insurance broker or carrier with updated loss runs that reflect this claim, so you'll want to include a further reduction to reflect that.
   5. Any other considerations I should be thinking about?  If you haven't already done so, then you probably want to have an electrician and a structural engineer inspect the property to evaluate any further issues that you might encounter.  If you're getting the deal at an attractive price and you're planning to bring the units down to the studs, then you'll likely be fine.

@Account Closed Any findings or insight that you care to share?