All Forum Posts by: Lennon Lee

 Tristan,

It looks to me like you are looking to fund the deal with private money and have the investors be passive while you and your group lead the way and take care of the asset management. So you are basically looking to syndicate this acquisition and you should be talking to an SEC Attorney for advise on this.

Via syndication or not, there infinite ways that you can structure a deal. It will all depend on the type of investors you bring in, their investment goals, your group's investment goals, risk tolerance, and many other factors. What is enticing to one investor might not be for another one, so is a very difficult question to answer with such limited info.

Also, I don't have experience with multi-use resorts so I'm not quite sure about what is a "typical" structure used in that niche. 

That being said, the way we structure our syndications with our operating partners and investors is typically a 70/30 LP/GP split with a preferred return of 7-8%. 

In todays market, and in the particular niche that we focus on which is class B stabilized multifamily with value add fundamentals, an enticing deal for investors is one where they can expect to nearly double their investment in 5 years and get cash flow  (8-10% yearly avg) from day one. 

I hope this helps you get an idea.

Good luck!

 Yishai,

The depreciation benefit gets passed through to the LPs as well. In addition, another potential tax benefit (if planned for) is to defer paying taxes on the capital gains via a 1031 exchange, and GPs and LPs alike can benefit from this.

I'm no tax advisor you if you are planning on syndicating a deal I would suggest you talk to your CPA, your RE Attorney, and an SEC Attorney.

Good Luck!

 Mario,

Having 10 units available at once sure makes it a little difficult for the PM to be successful when trying to lease 100% of them at once.

That being said, your PM should be taking care of the leasing for you and have the systems in place to market the units and convert leads into tenants.  You shouldn't be incurring on an extra expense (One month's rent on top of the percentage you are paying the PM? What?!) by hiring a leasing agent. 

Consider interviewing other PM companies.

Good luck! And congrats on adding those 28 units to your portfolio.

The Multifamily Investing Club has teamed up with The Crypto Hour to talk about how Blockchain and Cryptocurrencies can affect Multifamily Real Estate Investing.

The Multifamily Investing Club (MIC) welcomes apartment investors, real estate professionals, entrepreneurs, and everyone out there pursuing financial freedom through real estate. We are a knowledge-sharing and networking community with a special focus in Commercial Multifamily Real Estate Investing. At The MIC we are all about creating a SALES-FREE eco-system of constant learning where partnerships and friendships are built.

With technology impacting our lives more than ever before, we need to always be on top of the things that can impact us and of course impact our investing business.

As Blockchain technology is growing throughout the Real Estate Industry, having an open mind and willingness to learn about it is extremely important.

Our founder, Lennon Lee, will team up with Spencer Lyon from RealDax and together they will be interviewing Michel Triana.

Michel is a real estate investor, and a Co-founder and Chief Executive at RealDax, a predictive analytics investment platform for real estate agents and investors deploying capital in the US.

What we'll talk about:

- Basics of blockchain technology

- Cryptocurrencies and smart contracts as they relate to real estate

- The future of real estate investing

- Analyzing multifamily properties using blockchain based tech

- Much more...

When and Where?

We'll be meeting this coming Wednesday, March 28th at 6:30 PM at the amazing spaces of Voah in Wynwood.

10 NE 27th St, Miami, FL 33137

What to bring?

An open mind and a curious attitude.

NOTE: Tickets will be $25 at the door so make sure to purchase your tickets online in advance and save a few bucks!

 Deepa,

Here are my 2 cents:

- Have a well defined criteria and understanding of what you are looking for.  A good broker should be able to guide you in your investment decisions in terms of giving you insights about different markets and asset classes, current trends in those markets, any other specialized info and statistics that they have access to and that is not publicly available. What a broker will not take seriously is someone not knowing how big a property they are looking for and why, what markets and sub-markets they want to invest in and why, and what strategy will they be pursuing and why.

- There's no problem in being a newbie, we all started as newbies. But you don't have to sound like one. Learn the lingo and "talk the talk".

- Build a team of professionals around you and leverage their experience. Before actively pursuing deals and talking to brokers you should already have in place a team of professionals (RE Attorney, REI focused CPA, Property Manager, Contractor, etc) that you can refer to as your investment team when talking to them. Leverage the power of "We".

Good luck!

 Julian,

I'm betting that everyone is having a hard time finding good deals. The market has definitely gotten hotter, cap rates have compressed, and more and more people continue to overpay just to "get in the game" which makes it worse for everyone.

That being said, we continue to find deals that meet our strict criteria and project very attractive numbers for our investors. I don't believe in sitting on the side lines until the next downturn. We think there are still good deals out there to be found, and having the right systems in place and continuing to nurture relationships in the marketplace allow us to uncover them.

Of course it's now a hundred times harder to find a deal that works, and DISCIPLINE is the name of the game. A very strict underwriting criteria with truly conservative projections is a MUST. 

 Hi Craig,

The more straight forward advice would be: Go With What You Know.

That being said, I believe that some people tend to take that advice to literally and don't take the time to "Get to Know" and educate themselves about other options that are potentially better for their particular situation.

First thing that needs to be done (which you probably already did) is answer the question of how active you are looking to be in your real estate investments. The answer to this question will allow you to determine what strategy is probably best for you and will allow you to reach your goals faster.

If you are looking to be active and maximize your investment dollars by also investing your time then there are several strategies that you could dive into with those $500K. First thought would be to do the BRRRR strategy or build a Fix and Flip business and invest the proceeds in building a SFR portfolio.

You can definitely go ahead and purchase an apartment complex of $2MM, use third party property management and be somewhat active doing the asset management and making sure the business plan is accomplished.

And then if you want to go totally passive and get "mail money" you have REITS, Syndications, and some other strategies that will each be a good option for you or not, depending on your return expectations, risk tolerance, etc.

I used to own 4 SFRs and made the transition to large commercial multifamily. I initially started investing as a passive investors with experienced operators through syndication model and eventually built a business around that that allows me to keep my "not operator level active but not Limited Partner level passive" status, which was my goal.

To learn about how commercial lending works I would recommend you listen to Old Capital Podcast.

I'd be more than happy to chat further and go into further details about commercial real estate investing if you are interested. Just shoot me a PM.

Good luck Craig!

 Hi Lillian,

From what I see in your profile, you are based in Dallas, TX so you are definitely in a good place to network with many different apartment investors. I'm sure there are many meetup groups in Dallas where you can go and start building relationships with great operators that might have some active deals.

Also, like Todd said, this platform is also great to network with many active investors. Whether you are looking to be a passive investor in large deals, purchase your first duplex, or become a syndicator yourself, you should definitely get some good advice here. Just start shooting questions in the commercial multifamily forum and we will all try to help.

Podcasts is also a great way to learn about active investors in the apartment syndication arena. Check out Michael Blank's Apartment Investing Podcast and Old Capital Podcast. You can literally listen to them and build a very robust list of syndicators that you can later contact directly and start building a relationship with.

Good Luck! And again, feel free to start shooting questions our way that we are all happy to help. Or if you'd like to chat further go ahead and send me a PM, I'm always happy to talk some real estate.

John,

It seems like these guys up there have nailed the answers to your first set of questions.

You should definitely visit the property if possible, although is not a must. If it's your first investment and you haven't personally met the sponsor yet, then I'd recommend you spend the time/money to go tour the property, meet and talk to the sponsor and ask all the questions you have. Being there in person will allow you to get a good feel of the market, the property, and most importantly, the team that will be handling your hard earned money.

One thing I always try to do with my investors is tour the comparables properties. The sponsor team should have used nearby properties as comparables to know what rent premiums they can achieve at the subject property. Touring those comps yourself will allow you to confirm that the numbers that are being projected by the sponsor are accurate and will provide peace of mind (or not).

Before signing any legal commitments (Subscription agreement, PPM) you should have access to a comprehensive investment summary with info about the market, the team, and the deal itself, including the financial model. Basically you should have access to as much information as the sponsor is legally allowed to share. 

At the end try to remember this:

A good sponsor/operator/syndicator can make a bad deal work and be successful. A bad sponsor/operator/syndicator can make a great deal fail.

So focus more on vetting the sponsor and the team than the actual deal. Make sure you can trust them, run background checks, meet them in person, ask them a million questions, and trust your gut. (Yes running the numbers and analyzing the deal itself is very important as well, I'm just saying focus first on the team and then the market, and then the deal)

Good Luck!

Hey Michael! 

First off, good luck with the sale of your business! It sounds like it will bring you significant investment capital to "play" with.

I certainly believe that becoming a passive investor in multifamily real estate by partnering up with experienced operators is a great strategy. It's actually how I started investing in commercial real estate before starting my company in the same industry. I also must say that it's definitely not the only strategy, you do have several other options to passively invest in real estate and I recommend you take the time to educate yourself on the different options before jumping in. 

I also want to second what @Brian Burke said about anyone offering 18% return on investment to passive investors on the first year is just out of his mind and you should run the other way. That being said, I know Joe pretty well and have done deals with his company and if he did say that on one of his podcasts maybe the actual intention was to say that they offer 18% avg annual returns which is something that makes more sense.

In any case, here are the numbers that our operating partners are currently achieving, and what you should expect from serious operators that are playing in the Class C+,B+ stabilized multifamily with value-add components arena:

- 1st year Cash-on-cash: 5-8%

- Avg. Cash-on-cash: 8-12%

- Avg. Anual Returns (Including proceeds from sale on a 5 year hold): 15-22%

In regards, to trustworthy multifamily operators that bring in passive investors as Limited Partners, there are many around the country that are doing a great job for their investors and that work out of integrity and transparency first.

Just as an initial tip, focus on finding people/companies that not only have a good track record, but that have capital preservation as the main goal and capital growth second. Many operators out there are getting investors on board by offering very high returns but are not focused on protecting the downside going in. 

I'd be more than happy to chat further if you ever need some more guidance.

Happy Investing!