All Forum Posts by: David Thompson
David Thompson has started 7 posts and replied 875 times.
Post: Larger Apartment buildings Vs 4plexes/duplexes.
- Investor
- Austin, TX
- Posts 933
- Votes 1,127
Joey,
Go big or go home ! I'm saying this nicely, just so you remember. With big comes scale and forced appreciation is more impactful. You will want professional mgt over time.
Post: Apartment vs SFH Investing
- Investor
- Austin, TX
- Posts 933
- Votes 1,127
Hi Travis,
You are on the natural path which is most folks start w/SFRs like I did and then w/further study recognized their are some advantages w/MF I cannot get w/SFRs and the time hassles of more and more SFRs (loan challenges, etc) just don't get you excited anymore / natural limits. Now, I play in the big apartment space so keep that in mind. If you are a DIY person, then like anything, w/study you should start taking advantage of concepts like scale and perhaps forced appreciation where you find value add properties (5 units or more) and are now into a different valuation model which is income vs comparison value approach you are exposed to w/SFRs. Most would argue that w/some ingenuity and the right value add opportunity / purchase that the "ball is in your court" so to speak more so than SFRs in creating value. One example: We have a 320 unit apt in Dallas that we added a carport. It created $60K in extra income but added $1m to the FMV (read 1st blog link below for the workup). I don't think adding a carport to a SFR would really add much value especially if my neighbor has one.
If you read the blog below you may get a greater appreciation for it. Now w/larger apts, it will likely take a team (syndication). You can play as a limited partner (passive) but get a lot of advantages you cannot get in your SFRs such as geographic diversification, professional management to find, implement and reward investors w/o a lot of involvement on your side. Or, you can decide to start along this path as a DIY, perhaps partnering w/some other folks who are knowledgeable in some aspects of the apartment business and you find a role to play such as bringing own capital, raising funds (small syndication), time (mgt oversight of business plan - asset mgr), or unique skills such as finding properties and doing the underwriting to put together the deal. It really all depends on your time, energy, talents and resources.
Post: Starting out with money???
- Investor
- Austin, TX
- Posts 933
- Votes 1,127
Ellis,
Keeping your capital aside, I think you have some skills in the capital raising area through your nonprofit activity that could be leveraged to work with a REI syndication team. You can learn the business, develop your money raising skills and help the syndicate in a variety of roles to increase your value to the team. You can gradually invest some of that $200K money into the deals you are part of the syndicate so that you are aligned with investors you are working with who will want to see that and increase your equity / passive income. I've done it and here's my story for hopefully inspiration and idea generation.
Post: 1031 exchange, syndication, taxes
- Investor
- Austin, TX
- Posts 933
- Votes 1,127
Hi John,
Here's a blog on this topic you might find helpful. As @Dave Foster mentions, 1031 into and out of the syndication (sponsor) from your own investments (i.e sale of a SFR property) or out of the syndication into another of your personal investments (i.e. another SFR property you want to buy) is prohibited unless the syndicate has been established as a DST or TIC. However, it is possible for the investors in the syndication deal to 1031 into that syndicates next deal at sale, hence deferring the capital gains tax.
Post: How should I invest 200k?
- Investor
- Austin, TX
- Posts 933
- Votes 1,127
Michael,
Sounds like you like MF apartments but not crazy about actively managing them. You can be passive as a limited partner. Syndications may focus on MF apartments and are seeking limited partners like yourself who appreciate the benefits of investing in apartments but don't have the time, skill, money to invest in say a 200-300 unit apartment. See blog links below on why I like investing in large apartments and 25 FAQs on syndications. Many of these types of offerings require accredited investor status so if you qualify great, if not, you'll have to hunt around for specific syndicates / deals that will allow some number of non accredited investors.
Post: New CA investor looking for passive ways to get into real estate
- Investor
- Austin, TX
- Posts 933
- Votes 1,127
Hi Patrick,
Here's something to review re: syndication / crowdfunding and what's right for you. There are advantages and disadvantages depending on your qualifications / needs. Wish you the best.
Post: Where and how would you invest $350,000 to make $1,000,000?
- Investor
- Austin, TX
- Posts 933
- Votes 1,127
Definitely value add and MF is a good opportunity. You can learn and team w/experienced folks in a more active pursuit or if limited on knowledge, time and significant dollars you could diversify into several value add apartment syndications that are in markets you covet. Couple ideas to get you started (links below). A good value add MF syndication targets a 2x in 5 years so it may get you closer although the kind of returns you are looking for may require a more active approach or you'll have to take on more risk.
Post: Success with attracting foreign investors to investors.
- Investor
- Austin, TX
- Posts 933
- Votes 1,127
Hi Pat,
I have experience dealing with foreign investors. It's not complicated and foreign investors are good source of capital given a variety of motivating factors these investors have for investing in the U.S. There are a few things to keep in mind from mechanics as well. Hope this helps.
Post: Large apartment complexes. How do people get them?
- Investor
- Austin, TX
- Posts 933
- Votes 1,127
Another technique that a value add syndicator will do is renovate a few or say 25% to 50% of the apt community to show the potential buyer a proven strategy of what renovations can do. Ex. you do these upgrades at "x" cost and you get "y" higher rent. We have purchased several properties like this from other value add syndicators, then with "meat still on the bone" we will continue w/the renovation process. We are not always only looking for a complete unrenovated apt community.
Why do this as a seller? Could be lack of budget, could be their balloon loan is coming due, but often its because there is a much larger pool of value add buyers than buyers who want stabilized properties. A broker once told me its a 10:1 ratio of value add buyers to institutional buyers.
Post: Large apartment complexes. How do people get them?
- Investor
- Austin, TX
- Posts 933
- Votes 1,127
Benjamin,
You are describing an apartment that sounds like it's already been upgraded and stabilized. The investors that buy this type of property are typically institutional investors like REITs. They like steady eddy 8-10% returns. What you really want to own are value add apt properties. A larger deal like this would usually be put together by a syndication team that pools investor money from someone like yourself who wants to invest in apartments but doesn't have the capital, knowledge or time to pull off something like this. The syndicate will typically renovate the apartment to command higher rents, bring in expert property management to further optimize the property including focusing on expense reduction and other income producing opportunities that may have been overlooked.
The returns on this can be 15 - 20% IRR over say a 5 year hold that includes income paid out to investors along the way in the area of say 8-10% CoC. If you can envision a house flip, this is akin to that w/apartments, but takes a few years minimum because you only renovate vacant units when they come up and move those w/expiring leases into the upgraded units to start renovating their old unit for the next resident. So, yes, you noticed something that attracts you as a renter, renovated older apartments that can rent a lot cheaper than brand new apts. It's call value add investing and is a great space to be in where there is less risk than buying new. Here's a couple blogs to get familiar w/the opportunity.