All Forum Posts by: Jonathan Twombly

Jonathan Twombly has started 34 posts and replied 698 times.

Originally posted by @Dave S.:

Im looking to purchase a larger multifamily of 50+ units and my searches keep coming back to do syndication. So I would like to ask, can anyone do this? Is there a "step-by-step" guide / checklist to follow to ensure you have all your ducks in a row? Or do you simply start pitching your deal to investors and accumulate the funds needed to purchase the property?

Lets say I have 10 investors (not sure if there is a max number of people that can come onto any given deal or not). Do I just need to form an entity (LLC or the like), with each shareholder having the agreed upon % of that company (i.e. real estate)?

Dave, anyone can do it, in the sense that there are no licensing requirements (that I know of, anyway) to be a deal sponsor. You need, however, to learn how to structure these deals properly, use a qualified syndication attorney so you don't get sideways with the SEC or your state regulators, and to build a network of investors.

Building the network of investors first is the critical step. There is an old saying in real estate, "find a great deal and the money will come," but this is ONLY true if you have dug your well before you need the water.

My advice to you, if you are serious about syndicating deals, is to first figure out the kind of deals you want to buy and develop an "investment thesis" - what you want to buy, where you want to buy it, and why you think this makes sense. Then you should put together a pitch-deck with a sample deal, so you can talk with people about something concrete - i.e., "If I found a deal like this, would you be interested in investing?"

Then you start collecting names and "soft commitments" of the amount of money people would invest if you found the right deal. You need to assume that, no matter what they say, when it comes down to giving you the money, that 75-90% of the people who said yes won't be able to participate. They weren't lying; life just happens. (I can't tell you how many people have told me that they could not invest in one of my deals because they had decided to use the money to buy a new house instead.)

There are also strict rules about who you may let into your deals, to avoid trouble with the SEC. Again, this is why you need a really solid syndication attorney when you are working on these deals.

Syndication is not easy, but it can be extremely lucrative. If you are really serious about doing down this road, I am happy to talk more off-line.

6 Votes

Originally posted by @Gordon Forbes:

What do you invest in when all the cyclical investments seem to peak at once?

In my humble opinion:

Real estate is due for a correction.

The stock market is due for a big correction.

Every currency is on shaky ground.

Precious metals no longer seem to be the contrarian investment.

Crypotocurrencies are just too new to know which ones will have a future.

Inflation or hyperinflation is a real possibility so sitting in cash is suicide.

If everything goes really really bad then the only universal form of "monetary" exchange will be canned food and shotgun shells. I'm not enough of a doomsday prepper to go that far.

So what does that leave?

Does one diversify so that when 9 out 10 investments tank one has enough left over to buy Scotch and wallow in drunken misery? (Ok, perhaps that's a little too pessimistic).

It's just when I look at my portfolio I think "man, I should sell that (real estate, stocks, forex, metals) before it drops like a rock" and then do what with the money?

Apparently honey and vintage wines hold their value over the centuries, even better than gold and land. Start buying up all the honey you can - it never spoils. And the bees are all dying out, so it's going to rise in value.

And, as for wine, you can always use it to get drunk and forget your misery when all the other markets tank.

2 Votes

Originally posted by @Arun Chhatpar:

@Jonathan Twombly - Great insight and suggestion overall. I read an update that FoxConn is moving ahead with its plans in WI - https://www.bizjournals.com/milwaukee/news/2018/02...

I understand your perspective of looking at the bigger picture, but I would be curious to hear if your outlook for WI would change with this confirmation?

No. A single factory opening does not change a state's economy. And the other thing to consider here is how much of this factory is going to be automated. I suspect, given that Foxconn is trying to automate all of its factories in China, and have virtually no human employees, that in the United States where labor costs are much higher, they have an even greater incentive to automate.

If you were to get hold of a property within a mile radius of this plant, then perhaps that would be something. But once you get outside the radius that people are willing to commute in that area, it's going to be hard to say that the plant has any effect at all.

If the other major fundamentals are not there, I would say that the Foxconn plant would have little to no effect at all.

0 Votes

Originally posted by @Jordan Hamilton:

@Justin R. interesting.. So normally an investor would take all the net cash flow (once property is stable) until their agreed upon return is met (in this case 8% of 380k is $30,400) . Then once that amount is paid cash flow is split to agreed upon terms? Once the preferred return is met, upon sale of the property the investors get their initial cash back first (380k in my case), then split the profits?

@Jonathan Twombly thats awesome your in Osaka! Living the dream. Thanks for your info. In your opinion what is a typical friends and family deal structure look like? These investors are not pros when it comes to multifamily investments but are motivated for me to get this started and I want to be fair.

Thank you for the time and cant wait to get into the multifamily game.

I wouldn't structure it any differently than any other deal with investors in it. It's still a syndication and it requires all the appropriate legal bells and whistles.

1 Vote

Originally posted by @Elena C.:

Hello everyone, I am new to this forum. I became interested in REI about a year ago and started listening to the BP podcast. I hesitated before posting to this forum because I still do not know enough (no practical experience). However, I really want to get some advice on how to learn more this summer since I will be pretty much free.

I am moving to Cambridge, MA this fall to start graduate school in the area. My plan is to buy a multifamily, live in one unit, and rent out the rest and hope for a neutral or positive cash flow by end of 2018.

Ideally, I would love to buy near Cambridge because of the high demand and the proximity to the universities. However, my goal is to be able to buy several multi-family in 5 years and create passive income from it. So here is my question: Assuming I have $200k cash. Should I buy somewhere further away from Cambridge with a $100k down and save the other half for a second multi-family or should I just go all-in on my first multi-family in a more desirable location?

I am currently looking for anything with 4bd+, 2bath+ in an area within 20min commute to Harvard/MIT (Somerville, Cambridge). Also open to Revere, Everett, Watertown, maybe even Dorchester.

To gain some practical experience, I thought about moving to Cambridge a month prior to the start of the school year and work with someone who knows about the market in those areas. Not sure if it is a good idea.

Any suggestions would help.

Thanks,

Elena

My brother is a very successful real estate broker in Cambridge, representing buyers exclusively. If you are serious about this, and you would like an introduction, please PM me with contact information, and I will connect you.

0 Votes

@Jordan Hamilton

Hello from Osaka!

If your investors are willing to give you this deal, it's great for you. Typically the sponsor take is 20-30% of the cash flow, assuming that you make a hurdle. You are back-loading your hurdle and front-loading your share of the cash flow. It's a great deal for you, but not really typical, from what I have seen. Others will chime in as well, I am sure, but it's probably not realistic to expect this split as you get into bigger deals with more investors. But you may as well get it while you can! Nice work!

1 Vote

Originally posted by @Alex Flaugher:

I am wanting to bring on investors for the first time in a multifamily property. Here is what I am thinking:

$1,000,000 cost and putting $200,000 down. If I bring on 5 investors to fund the deal, how should I structure the deal for them?

I have read many different stories of offering a preferred return, waterfall return, etc. What has worked best for you in terms of structuring these types of deals with outside money? I want to make sure I structure this in a way that all parties can benefit from the deal. This is new to me and open to any recommendations on routes to take.

Thanks,

Alex

Before doing anything else, you need to speak to a good syndication lawyer, because what you're contemplating is a syndication. Any time that someone else is going to make money off your efforts, which is what it looks like you are thinking about (i.e., they are giving you money and you are doing the deal), you are issuing a security, and you really need to have a professional attorney involved.

4 Votes

Originally posted by @Gino Barbaro:

@Justin Thiesse

Hi Justin

I would look up @scott meyers education. He has been teaching self storage for years. I also favor multifamily, but self storage is a terrific niche. I think a 10 cap is a bit high for the asset class. I just moved to FLorida, and the fact that we don't have basements make self storage a necessary evil for the average homeowner.

If you have fear, then you are on the right path. Stepping out of your comfort zone will lead to growth and potentially a new opportunity. If you figured out apartments, I know you can figure out self storage.

Best

Gino

I'd echo what Gino said. I had Scott on my podcast and he is really one of the guys to go to on this stuff.

1 Vote

Originally posted by @Deepa Akula:

Hi All,

I have been looking for my first multifamily deal, after listening to multiple BP podcasts I am convinced that the only way to find pocket listings is through brokers, but I am not sure how to approach one without any deals under my belt.

Any suggestion on how to approach a broker so that they would like to work with a newbie is appreciated.

Thanks,

Deepa.

If you PM me, I can give you an e-book I have put together on this exact topic.

0 Votes

Originally posted by @Michael Kim:

Hello everyone.

I am new to biggerpockets and real estate. I am looking invest passively into mid to large multifamily complexes in any states in US. I am preparing to sell my present business and other liquid assets, and hopefully in about a year I will have as much as 500k to invest in real estate. I listened to Podcast 227 last year with Joe Fairless. He stated that he guarantees 18% return on investment to his passive investors on Multi-Family properties in the 1st year, with which I was quite impressed. However, I found out that he only works with "accredited investors," which I am not.

I was wondering if 18% return (as a passive investor in partnership with other active investors) is still attainable in today's market.

Even 15% sound really good. What kind of return should I realistically expect?

Also, I would appreciate your recommendations and referrals to reputable and trustworthy people or company who will work with passive investors. Please only trustworthy people/company with a good track records of high returns. Any advise in this regard would be greatly appreciated as well.

Thank you and God bless you all!

-Michael

Knowing Joe well, my guess is either he misspoke or you misheard and what he said was 8%. I’d also guess 8% is not a guarantee, but a preferred return. That isn’t a guarantee but a first claim on proceeds up to an 8% return on investment each year of the deal.

3 Votes

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All Forum Posts by: Jonathan Twombly

Jonathan Twombly has started 34 posts and replied 698 times.

Post: Syndication, Can anyone do it?

Post: What do you invest in when everything is over valued?

Post: Wisconsin and Foxconn = thousands of new jobs in the area

Post: 1st Deal - Who Gets What -

Post: Investing in Cambridge, MA as a grad student?

Post: 1st Deal - Who Gets What -

Post: Bringing on outside investors for the first time

Post: Looking at purchasing 160 Storage Units.

Post: How to approach a broker for my first deal multifamily deal?

Post: Passive Investor Looking for Partners to Invest in Multi Family P