All Forum Posts by: Christine Bellish

 Hey Phil - we require our investors to fill out a self-accreditation questionnaire as part of the subscription process for every one of our syndication opportunities, just like @Ed Tamayo said. We don’t accept third party accreditation - it’s our responsibility to verify directly with each investor their accredited status for every investment. 

 Have not personally seen a deal structured this way, but there are usually some sort of fees associated with these types of opportunities. Acquisition fee, loan guarantee fee, asset management fee, refinance fee, dispossession fee, etc.

What fees are “acceptable” is really a personal preference - some passive investors don’t like feeling as if the sponsors (the people putting the deal together) are greedy by charging a bunch of fees, but if you are still happy with the returns despite the fees it doesn’t matter so much. Personally, I care more about my returns, than how the sponsors are making money on the deal via fees, but that being said, I would not be ok with excessive fees. 

I suspect this person who brought you the deal is not part of the general partnership team? Because if they are, but they are just charging another fee on top of that, I wouldn’t personally feel good about that.
You should check to see whether this person is getting a piece of the pie already and if they are maybe just honestly ask them about the fee, because they may be double dipping.

Meaning: if the group that’s building and managing the project gets a certain percentage of the profits - is she a part of that group? If not, this might be the way she is making her money on the deal, in which case, charging a fee might not be so unreasonable. She should be compensated somehow for helping to bring the deal together, but if she is being compensated already and just charging this on top, I think it’s reasonable for you to ask more about it.

 Hey Howard! I have a thread going about syndications now that you may want to check out. In the interest of not highjacking this thread, I just linked to that one, but also wanted to give a quick response about the best way to find good syndications here - short answer is networking. Connect with people you like and respect, and find out which syndicators they are investing with. Then get to know those people, ask lots of questions, make sure they have a successful track record, and evaluate the deal to make sure the underwriting is conservative and that the projected returns meet your goals (i.e. cash flow or appreciation or both). Happy to chat with you more about this - send me a message and we can set up time.

 Hey Blake - similar to @Jonathan Bombaci, I also raise capital for larger syndication deals, and am happy to share a presentation and webinar recording example with you. Shoot me over your email too and I'll send them over.

Also happy to hop on a call to chat with you about raising capital for the first time - my husband and I just raised for our first deal last year, so we can relate. We've raised over $3M in the last 9 months, and zero dollars before that :)

 Hey Jon - I agree with @Haresh Patel - you may want to consider selling your properties and investing passively in real estate syndications. Not all are suitable for 1031 exchange, but regardless you can make a lot more than the 3% you are right now, depending on what you choose to invest in. There are plenty of deals that offer both cash flow and appreciation, for zero work required from you - you just have to be sure to invest with syndicators that you trust and have a great track record. It's not uncommon to get 7-10% annually from cashflow as a passive investor, and additional returns after the sale/refi. Plus you get tax write-offs thanks to depreciation - usually even better than what you get if you own your own rental properties personally because it's worth it to do a cost segregation analysis to speed up the depreciation, and take more upfront paper losses on these larger acquisitions. I've seen a lot of deals with 2x equity multiple after 5-10 years. Example: invest $100K and get your initial $100K back plus $100K in returns to double your money over that time. 

 Good recommendation about looking for a more truly passive investment! A lot of people learn the hard way, and want a level of control, but aren't prepared for the actual work it takes to make an investment successful and manage a property properly, especially with little to no experience.

Hi Nathan!! Thanks for the feedback. You make great points! Yes, one of the biggest attractions to this type of investment is the fact that you get accelerated depreciation thanks to cost segregation and bonus depreciation. 

For those who aren't familiar, typical depreciation is spread over 27.5 years, but by doing a cost segregation analysis, you can depreciate certain items quicker (5, 10, 15 years), which means bigger write-offs sooner - that, plus bonus depreciation, which allows even more write offs in year 1. On smaller rental properties, most people don't do a cost seg because it's expensive, but on larger properties it makes sense.

Limited partners (passive investors) are usually equity partners in these syndication deals and they get a proportionate amount of these write offs from depreciation based on how much they invest, which means even if they are earning a return, they may show a paper loss. You can only use the write-offs against passive income unless you are a real estate professional or married to one and file jointly...which is why many successful realtors use syndication as a tax shield. You can be a real estate professional without being a realtor, but not getting into that here :) For non real estate professionals who are writing off against passive income, they can use the write offs against income from other syndication investments or against income they collect on rental properties they may personally own.

Real life example: my husband is still a W2 employee and a high income earner, but I am a real estate professional - we file jointly and are able to use our syndication write-offs against his income. It's pretty great!

What were some things that helped you transition from small multifamily into larger multifamily deals successfully. How long did it take you to get into your first deal?

Short answer: We met the right people at the right time and provided them with a lot of value. After learning about syndication, it took us 8 months to passively invest for the first time, and about a year and a half to get into our first big deal on the GP side of things.

Long answer: We read so many books and articles, watched videos, listened to podcasts, went to meetups and everyone was talking about buying a bunch of small multifamily properties and then eventually leveling up to larger multifamily deals, so we wanted to model their success and invest in more small multifamily properties locally in NJ, but couldn't find enough deals and the entry point here is so high - taxes are super high, and it's not a landlord friendly state, so we went to a meetup about buying multifamily properties out of state, which we thought was going to be about buying small multifamily properties in more affordable, landlord friendly states, but it actually ended up being about syndication, which we had never heard of before. The keynote speakers at this meetup are the guys we ended up investing passively with and partnering with as GPs.

They explained how syndication works, gave some examples of the types of deals they had worked on and the types of returns they were getting for their passive investors, and it seemed too good to be true honestly (my husband and I are cynical NY and NJ people), so we had lots of questions, but if what they were saying was true we wanted to know more because the returns they were talking about were better than the returns we could get doing something on our own in NJ...and it was completely passive. 

To put things in perspective, we just spent 9 months on a nightmare gut renovation project of a 100 year old two family home, that we had to put down 25% on and we paid for all of the downpayment, closing costs, holding costs and construction costs out of our pocket - everything ended up working out great on the project - we BRRRRed it and still have it today, cash flowing at 12%, but it took so much time, effort, energy and money for us to do it - we killed ourselves on this project and basically put our life's savings on the line, so thinking about trusting a professional to do all the work for us and we could make a similar return without the stress and sleepless nights, sounded really appealing to us. And listen, we're not saying $50K isn't a lot to invest (most common syndication minimum we've seen), but we were into that two family gut renovation project I mentioned for over $200K at one point before we did the cash out refi, so to invest $50K with professionals with a proven track record wasn't crazy to us.

After the meetup we kept in touch with them and got on their email list - we started evaluating their deals, and set up calls to ask them questions. We also got to know them and their businesses, and proactively offered our expertise to help improve their operations - my husband and I both come from corporate careers in the NYC advertising industry, so marketing, advertising and customer service are our specialties - we studied their business and put together a new marketing strategy and investor relations guidelines/procedures, which we presented to them (we helped them implement the marketing strategy and hire a full time investor relations manager too). We ended up investing passively with them two times, and consulted on their business for free for a year before we asked to partner with them on the GP side of things. By that time we had built great rapport, trust, credibility, and a true friendship - we had demonstrated that we are hardworking professionals and had something to bring to the table, so when we asked for our opportunity they didn't hesitate to say yes. We put our money where our mouth was by investing passively with them, but we also invested our time in their business and in getting to know them - they are busy individuals and didn't need us, we needed them, so we had to find a way to get their attention, and that's how we did it.

This is still very much a relationship business, which is what we love about it. If you lead with value and put yourself out there to make connections, that's the best way to get involved. People like working with people that they like, so get out there and make friends.

Personally for us, investing passively was a great way to learn - you get to see firsthand how the GPs operate, access to the reports, legal docs, how they communicate with investors, etc. 

What syndicators have you invested passively with? Have you GPed on any projects?

Our goal is to eventually be fully passive, but we want to generate enough income so that my husband can leave his W2 too, so that's why we are involved on the GP side of things for now also.

Hey Jacob! I have invested in multiple 506b syndications with GPs who have over $450M in assets under management, and over a decade of experience. Happy to chat with you more about my experience. I’ll message you to set up time.

Jim you are absolutely correct. Just because they are a great marketer, or public speaker doesn't mean they are going to successfully run a deal. I'd rather a sponsor was a great asset manager, than a great marketer, for sure! 

Taking your advice here, would love to hear what operators you have invested passively with that you'd recommend, what types of deals you invested in with them, and where.

When you say advertising, I think it's important to distinguish between advertising a deal or advertising the sponsor themselves - for those who are new to syndication, they may not know that there's a big difference. Syndication deals are 506b or 506c - 506b deals allow accredited and non-accredited investors to participate and the deals cannot be marketed/advertised at all - only people who have personal relationships with the sponsor can participate, so if you see a deal being advertised it's probably only open to accredited individuals (or they are doing something illegal).

Accredited means: you have a net worth of $1M minus your primary residence, or you are single and earn $200K, or you are married and earn $300K - there are also ways for businesses and entities to qualify, which you can read more about here: https://www.sec.gov/capitalrai...

For 506c deals, they are only open to accredited investors and advertising/marketing is allowed. I have personally only participated in 506b deals, even though my husband and I are accredited, so we have never participated in a deal that has been publicly advertised.

As far as sponsors marketing themselves and their businesses, we're talking about going on podcasts, attending meetups, speaking at conferences, being active on social media, posting on BP, etc.

Back to the main point, though - I love the advice here Jim - and 100% agree. Investing with someone who has integrity that you trust is the most important of all, and a great way to meet those people is through a  recommendation from someone you already know and trust.

Yes! There are so many syndications out there - so many different types, operators, and structures, in all different markets. It seems like once you start doing research and becoming apart of these networks there are endless opportunities, which I think is great because it gives people options - not every sponsor is right for every investor, not every deal is either.

The tactics you mentioned for finding syndicators who are not very public-facing figures are interesting - have you actually found anyone that you invested with that way? 1) have you invested with someone that an independent financial advisor recommended? 2) have you invested with someone that you found by Googling apartment complexes? - just genuinely curious! 

Also would love to hear about what GPs you have invested with passively, the markets, and the types of deals (multifamily, storage, net lease, development, etc) - using @Jim Pfeifer's advice and getting some recommendations for good operators for anyone following this thread :)