All Forum Posts by: Lennon Lee

Originally posted by @Chase Gu:

Hi -  I have been reading posts about multi-family syndication. I wonder how the syndication works. Are investors LPs and the syndication guy/company as the GP? I assume these syndication deal are all-cash deals? No financing involve? Otherwise, how does financing work when you have so many investors? 

Thanks a lot!

 Chase,

A Limited Partnership or LLC is created for the sole purpose of purchasing the property.

The Limited Partners (LPs) are the passive investors and the General Partner (GP) is the person/company or group of people/companies putting the deal together. 

Deals done through syndication are typically financed, not cash deals. The GP is responsible for securing the debt. In large stabilized commercial properties non-recourse debt is typically available, meaning that the GP will not be personally guaranteeing the loan. (Unless the "Bad Boy" clause is violated, but that's a whole subject to discuss on a different post). LPs almost always don't need to be on the loan. (Some lenders require LPs with more than 20% equity on the deal to provide financials and sign on the loan as well).

The GPs are in charge of not only shopping for debt but also raise the equity from the investors. The GPs contribute 1 - 10% of the equity (Sometimes 0%) and the LPs the balance. These deal are open for sophisticated and accredited investors. Depending under what rule (506(b), 506(c), etc) of Reg D the syndication is structured, the number of accredited and sophisticated investors allowed to invest may vary, as well as the total amount allowed to raise. 

Minimum investments to get into these deals go from $25K to $500K. (A lot less via crowdfunding companies online).

Happy Investing!

Amir,

I started investing in SFR's in 2009 and had a mini portfolio of 4 total properties. Later in 2015 after significant appreciation I started making the transition into cash-flowing commercial real estate, specifically large apartment complexes.

The way I made my transition was to start investing as a passive investor with an experienced operator via syndication. After a few months of education and learning the ins and outs of the model and the commercial multifamily industry, I started partnering up with more operators and building my network of investors. Today I run a private equity investment firm focused on commercial real estate and along with my operating partners and investors now own 1200+ units worth almost $100MM.

So for me it was a good idea to change the strategy. But that doesn't mean it's always a good idea for everyone.

Are you looking to become an active investor and build a company around your investments? eventually buy large apartments and be a syndicator?

Or are you interested in partnering up as a passive investor with experienced operators and just get your checks every month/quarter?

Whatever your answer is, it will get you thinking on if and how to proceed into the commercial real estate world.

All that being said, my general answer is YES, it is a good strategy.

First step should be to start educating yourself about commercial real estate, how its valuation is based on profitability and not strictly on comps, how to leverage the power of partnerships to get large deals done through syndication, how job and population growth start playing a big role when evaluating markets to invest in, etc. The resources out there to get your education going are pretty much endless, from BP, to podcasts and coaches.

If you have specific questions you want answered shoot me a DM and I'd be more than happy to chat further.

Good luck!

Originally posted by @Account Closed:

Good evening to all experts. 

I have a question regarding the value after a Single Family has been converted in a Multi Family. It now is a a 4 unit studio.

The value of this property from the tax county is 29000 $ and the resale price is 60000 $. Is the tax county assesment always accurate or is it the fact that with the yield increase (due to the multiple tenants (4)) and the conversion works owner can resell at a higher price ? 

Sorry my english is not great I am a overseas investor.

Thanks for your reply (if you understand my question)

Adrien, the value at the county level is normally significantly less than the market value of the property. Converting the property from a SFR to a 4-Plex should definitely increase its market value.

All properties with less than 5 units are still considered residential and will be valued according to recent sales of comparables properties in the area. So if the property is now a 4-unit multifamily the CMA (Comparative Market Analysis) should be done based on that.

I would recommend you reach out to an experienced local broker that specializes on that type of assets and ask him/her to help you with the comps.

Good luck!

Originally posted by @Barry McCamant:

I'm very interested in real estate syndication and would love to talk with others who either have experience or are interested in it.

Hey Brian,

This is a pretty open question given that investing in real estate through syndications can be done on pretty much any of the asset classes.

Are you interested in learning how to structure a syndication to become an active sponsor or are you looking to learn more about the model to then be a passive investor with experienced operators / sponsors?

Since you posted on the Commercial REI forum, I will assume you are interested in multifamily, offices, retail or industrial real. At my company we focus on building partnerships with successful multifamily syndicators and bring our investors on board with us. I'd be happy to share my experience.

Do you want to know the definition? How to structure it? The team you need to build? Who can invest in syndications? Let us know specifically what questions you have about syndication so we can help you better. 

Originally posted by @Juan Rubio:

Hey guys, so my mind has been going all over the place lately trying to figure out what is the best strategy for me to start investing. I've been researching commercial and it looks very appealing, should I start taking it more serious actually educate myself in the field, or should I stay with residential? 

Thanks for the help!

 Juan, 

No one but yourself can know the "right" answer to this question. But that being said, I'm going to second what others have already commented and say that you should go with what you know. Hit the books, podcasts, REI meetups, and talk to people that are actively investing in both commercial and residential. Get that education going and you will start noticing what you like and don't like, the challenges that come with each strategy and the opportunities as well.

Not only do you have to decide whether to go invest in residential or commercial but then you have a world of different asset classes and/or investing strategies within those. On the residential side you can go be a wholesaler, do fix and flip, buy and hold, BRRRR, etc. Then on the commercial side you have offices, retail, multifamily, industrial, etc.. And of course each asset type is a whole industry of it's own.

Something else that you need to have in mind before deciding is whether you want to be active, some-what active or passive. Maybe if you just want to be a passive investor you want to consider investing in commercial multifamily with experienced operators and just get a check in the mail every month. On the other hand maybe you want to be super active and build a business flipping houses in your local market. Or maybe you want to do both and invest the proceeds  from the flipping business in large commercial deals as a Limited Partner.

I know this is probably the answer you were NOT looking for but I also know that no one serious enough would be able to answer that questions for you. We just don't have enough info about you, your goals, your market, your strengths and weaknesses, etc.

I would be more than happy to chat further with you and give you my personal advice based on my personal experience.

Best,

Lennon

Dennis,

you've already gotten some great advice here. And instead of going ahead and writing a long post about the techniques I would use, I am sharing a link to my friend's @Joe Fairless website. The link will take you directly to the multifamily lead generation archives containing 30 different articles that specifically talk about ways to find deals.

Here it is: https://joefairless.com/category/lead-generation/

I hope it helps!

Originally posted by @Collin Goodwin:

@Lennon Lee my biggest advice for Podio would be just to start. To be honest, if your familiar with excel, you'll get along pretty easy in Podio to start. It wont be very advanced, but you'll be able to start migrating all of your data into one centralized location. 

What is the biggest challenge your having? I'd be happy to see if I could help you tackle it to kind of get the wheels rolling!

 Honestly I haven't really put in a lot of time into getting the Podio CRM built. Going in it felt overwhelming so I decided to look for alternatives that can have the same capabilities but that comes already built up and ready to go.

I now realize that Podio may be the best alternative since the type of software that I'm imagining will be very expensive for us for now.

Thanks for the help Collin!

Bill Carovano that’s great. I keep getting redirected towards Podio. I will definitely go ahead and give it another try with a better and unbiased attitude. Thanks for the advice Bill. Best!

Brian Burke makes total sense. Your comments are pretty much in line with what I’ve been getting from other experienced investors. I appreciate you taking the time to reply. Happy Investing!

Hey everyone! I started my company early 2017 and we are a private equity investment firm focused on multifamily real estate. I’ve been using a simple investor tracker excel worksheet to manage and follow the capital raising efforts, combined with a very simple CRM that is not really focused on real estate investments or investor relations for my contacts management, and then Mailchimp for all the reporting and communications with my investors. I am now looking for an Investor Relations/Private Equity Real Estate Firm focused software (CRM), to start using in my business where I can have all this integrated and will not break the bank. Any suggestions? How are you tackling all these tasks? Note: Many investors I know and bigger firms use Podio. I think I’ll eventually get it built to my company’s needs using Podio since I understand the benefits. That being said, it is very overwhelming to learn how to “program” in Podio and very costly to have someone build it for us. Thanks in advance! Happy Investing!