All Forum Posts by: Dave Rav

Matt thanks for your post.  You should check out my post entitled "Ownership Survey - 5% or 100%.  

12+ year REI veteran here. I've done over 2 dozen transactions and have experience in SFRs, duplexes, MHs, MHPs, and small multifamily. I've done both flips and rentals, using traditional as well as creative financing (owner fi, no-money-down techniques etc).

I've vetted a couple syndication deals and, though always open to looking at future synd deals, I keep arriving at the same conclusion:  too complex/convoluted, watered down returns, and very little control.  

Here, I will try to address some of the questions you posed.  First off, I care NOT about control.  It does nothing for me as far as ego, etc.  However, a higher degree of control over a real estate asset is usually a positive thing when it comes to profits.  Further, it allows you flexibility and opens up more exit strategies and options.  Too many decision makers = harder to arrive at decisions (case in point is the inherited property with 5 heirs --> there's a reason these are almost always harder to close quickly!).  To spare further detail, in summary, with respect to asset control and exit strategy flexibility syndication deals are likely best when the head decision makers number 3 or less. 

You ask "do you not know of good opportunities?"  = I have no idea what you're saying here.  Clarify.

Lastly: profitability.  In syndication deals, as the number of involved parties goes up, this is inversely related to the profits of each individual.  Sharing the pie is very real.  Again, best conducted if the number of participants is kept small.  Tackling a 200-unit MF with 8 GPs and 8 other (basically) private lenders, sounds like a headache to me and undoubtedly waters down profits.  Though it may sound cool to say "I own 200 doors", in reality any one participant here actually does not.  Its like owning 0.5% stock of a company and walking around saying you own the company.  Not entirely truthful.  

Me personally, I'd rather own 30% or better yet 100% of the thing.  Else, what's the point?

Hey Caleb!  This topic could require a longer post, but for brevity's sake I throw out a few pointers on the differences MH vs stick built SFRs:

- MHs are held via title and can be sold/transferred rather quickly.  SFRs are held by deed or other legal document and require a formal closing.  This closing is more expensive and drawn out.

-MHs tend to depreciate much faster than a house.  They are like cars in the way of depreciation.

-MHs are typically built differently than SFRs, especially the older MHs.  Older MHs have specific construction hardware (such as square-head screws) that aren't found in SFRs.

-MHs are significantly less expensive to get into, and often best cashflows that can be obtained on rental houses.

-MHs are affordable housing, which is in very high demand (and demand will only further skyrocket as inflation and other costs of living rise)

-MHs can be in Parks or on private land.  Be sure to complete due diligence on the Park before purchase of MH; some parks have rules for rentals.  Biggest one is they almost always require their own screening of your tenant.  (thus, the tenant is screened twice - both by you, and by Park).  Some Parks dont even allow rentals.  

Hello BP group! Appreciate you checking out my post. I am an REI with almost 15 years experience in rentals, a few flips, and multifamily. I came across a different type of deal that looks decent at outset.

Laundromat for sale.

$145k

Includes the "turnkey" business with over 70 machines (W/Ds) and 3 snack machines. Coin-op and drop off service.  Business has been in existence for at least 10 years.  Location is within 15 miles of a mid-size metro in the southeast.  Doesn't include the real estate, but includes takeover of their lease (I've requested the details and terms of the lease; await data). They are also willing to consider some owner finance.

My question - do you have experience with laundromats?

If so, is this a "high-touch" biz, with alot of machine maintenance and other hassle? Or can it be setup to where its low maintenance?

Any other input on the laundromat biz industry is certainly welcome.  Thank you!!

(Pardon me - I'm just that green when it comes to this sort of biz)

Hello BP group! Appreciate you checking out my post. I am an REI with almost 15 years experience in rentals, a few flips, and multifamily. I came across a different type of deal that looks decent at outset.

Laundromat for sale.  

$145k 

Includes the "turnkey" business with over 70 machines (W/Ds) and 3 snack machines.  Coin-op and drop off service.  Doesn't include the real estate, but includes takeover of their lease (I've requested the details and terms of the lease; await data).  They are also willing to consider some owner finance.  

My question - do you have experience with laundromats?  

If so, is this a "high-touch" biz, with alot of machine maintenance and other hassle?  Or can it be setup to where its low maintenance?   

Any other input on the laundromat biz industry is certainly welcome.

(Pardon me - I'm just that green when it comes to this sort of biz)

Quote from @Shalini Kadaveru:

@Dave Rav@Dave Rav, it boils down to the individual's goals. The analogy that comes to mind is the founder of a startup. If you have 100% ownership of the company, the company will not be able to grow as fast in most cases. Some founders have lifestyle businesses and want to keep their businesses small. There is no problem with that approach. However, if your desire to grow the business and serve more customers, you have to dilute the equity to hire the best talent and build the right team. You have to share the pie with others so that the size of the overall pie increases.

thank you for your insight. This is one reason why I posed the question. It does depend on the investor's goals. However, with larger syndications, the equity (and directly profitability and control to the REI) is definitely diluted. Some models I've seen have things so far diluted (not to mention complex) that once the smoke clears, the returns pale. Though I like your altruistic description of how larger business "serve", I question if this is truly the case. So many businesses are in the business of making money first; they give no cares about "serving." They may tell you they care, though their actions show something else altogether.  

Mobile homes themselves are already a different animal for renovations.  Add in older building codes, different design schemes, and the like and you will undoubtedly have complication.  I personally have gone as old as '72.  Keep in mind too, these things aren't built to last either.  Once they are 40-50+ years old, if not taken care of properly (like so many we see) the question arises:  "Tear down vs fully rebuild"?  (Dont recommend full rebuild of a 70s MH)

Quote from @Percy N.:

As usual, it depends.

Does the 80 unit deal have better economics due to scale and ability to potentially support an in-house leasing and maintenance person?

Which deal has the better depreciation? How important is that to you? Are you passive vs active? Recourse vs Non-recourse loan, etc, etc.

 Percy, great questions.  I could see how the vast majority of larger deals definitely scale better.  However, typically the number of investors usually goes up as well.  In some cases, WAY up, as in the cases of some syndication deals.  

Otherwise, the profits get reduced and watered down due to "spreadage"  (that a word?!).  You share with too many REIs.  This also reduces your power and control of the deal.  I think it works better if you have a small number of partners, and your ownership remains substantial.

By the way, I am speaking from an active investor standpoint. And one seeking the very best returns (ROI and ROR), as well as exceptional cashflow. By truly passive investors, I assume you mean private lenders who aren't GPs/LPs.

Quote from @Guy Gimenez:

100% of 10 units....more ownership, more control on future income. It's cool to tell people you "own 80 doors" when if fact you don't...you own a small percentage of 80 doors and the 95%'ers control you future. 

Guy, you took the words out of my mouth. Some (not all) syndicate investors walk around saying they own "100 doors" or "500 doors" and some (not all) do it to sound cool. Well, once you ask questions, its learned that they own a mere fractional share or equivalent of the "hundreds" of doors. Its like owning stock in Amazon and walking around saying you own Amazon. How silly!

Quick survey:

Would you rather own 5% of 80 units OR 75-100% of 10 units?

And why?

Why mess up a good thing?  PLUS, if you choose to re-invest in your area locally you will undoubtedly pay more for the next property.  

Be happy you bought at the right time, in an [constantly] overheated CA market