All Forum Posts by: Lennon Lee

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 everyone!

Daniel,

For what you are describing it definitely looks like you are not looking at a syndication, which has a more complex fee structure.

So in your case, as everyone has already pointed out, it will depend on the negotiation between you and your partners and what everyone is bringing to the table. That being said, if you are the partner managing the daily operations of the property and carrying out the business plan for the investment, then for that size property 9% sounds fair.

Beyond that, if your other two partners are only bringing capital and nothing else, you can negotiate an acquisition fee at the time of closing (In large syndicated deals goes from 1% to 3% of purchase price or total raise). This is of course if you are the one finding the deal, securing the financing, and putting everything together. And just as @Gino Barbaro you can roll that acquisition fee into your equity, which many people do to enhance their upside at disposition.

Happy investing!

Thomas,

Your formula is correct. If you have done your research correctly and have consulted with experienced brokers in the area about what Cap Rates have recent properties traded for, then your numbers should be fine.

As everyone has mentioned here, the problem is about other people's willingness to overpay in a hot market and get the property at a much lower cap rate.

Don't give in to that and keep playing the game under a conservative approach. 

One advice I would give you is to focus on building strong(er) relationships with brokers and property owners and do it from a genuine place. Try to add value in whatever way possible and with patience, you will reap the rewards in the form of potential deals coming your way without the need to overpay.

Happy Investing!

Anatoly,

Congrats on all the hard work you've already put into getting your first deal under your belt. 

I believe you are doing a lot of the right things by building a team around you, and just know that you don't necessarily need to have everything perfectly arranged around you before finding a deal. Once you get the deal a lot of the things will fall into place and if by being resourceful you will get it done.

@Ryan Cox mentions something that is very very important, and that is to have the money lined up before getting the deal. Of course this does not mean you need to pass on a good deal if you don't have all the capital ready to go. 

Many investors play by the "If you have a good deal, the money will come" rule, and while that might be true sometimes, it's not always the case. If you are planning to bring equity partners into the deal I suggest you not only start building the relationships but go as far as to get them committed before having a deal on your hands. This is the "Always Be Raising Money" rule.

Many new investors find this to be difficult because "How am I supposed to get an investor committed to invest with me when I don't even have a deal, hell I don't even have experience". Well, this is where the power of partnerships comes in. While you might be a new investor, there are many experienced ones that will be willing to partner with you if they believe that you can add value (Money, a deal, marketing skills, construction management skills, etc). You will be able to leverage their experience and their track record when you sit down with potential investors. Now instead of being about what "I" have done, you are a team and the word "WE" is your best friend.

There sure are many other things that you can add to your list of things to do to get "ready" and I'll let everyone else jump in and give you their advice. But just keep moving forward and be prepared to pull the trigger even if you don't "feel" ready.

Happy investing!

Jackie,

Congrats on your decision to start investing in real estate. As I always say, real estate is definitely one of the best avenues to take if you want to reach financial freedom.

The short answer to your questions is: Yes, $30K is more than enough to start. There are people that start with nothing. And when I say nothing, I mean no money. They instead bring other things to the table like knowledge, experience, marketing skills, etc.

I'm probably repeating a lot of the things that other investors have already mentioned but I believe you should first decide on what strategy you want to use and what sub-industry you want to be in within the real estate industry. 

Is it flipping, Single Family turnkey, Small multifamilies, Large apartment complexes? After educating yourself, which one will you decide to pursue and which one appears to have the components that better fit your skills and will allow you to reach your investing goals?

On the other hand, how active do you want to be? Are you going to pursue real estate investing full time, part-time or totally passive? Depending on your answer to this, you will find different opportunities within your particular niche. 

Regardless of your level of activity, the one piece of advice I would give you is to strongly consider partnering with someone that has experience and that is doing what you want to do at the highest level. As long as you bring something of value to the table, there will be people out there willing to partner up with you and teach you the ropes. Add value first, always.

"If you want to go fast, go alone. If you want to go far, go together."

AFRICAN PROVERB

That's a great goal Alex!

And kuddos to you on having two rental properties already by age 29. Go ahead and get your education going and pull the trigger when you are ready. (This might be way before you FEEL ready!) 

Feel free to reach out anytime with questions. I (and many of us in BP) would love to help you reach your investing goals.

95%. Regardless of any upcoming down cycle and the many ups and downs that all of us multifamily investors will go through in the future, I just believe we are positioned in one of the most solid assets classes there is. 

Not sure there is a better vehicle to build wealth that goes beyond one generation.

Happy investing!

I'm going to second what @Sam Grooms said. 

I would strongly consider going the syndication route. It is a great strategy that's purely based on the power of joining forces with a big (or small) group of investors, allowing for explosive growth. And given your experience and track record (Which is something many people lack) , I'm sure you'll be able to attract a lot of capital after you have educated yourself enough on the legal side of things and of course put together your team of advisors.

The particular structure of your syndication will depend only on you and the relationship you have with your investors. And of course on the deal itself. The way we structure it is with an 8% preferred return and 80/20, 75/25 or 70/30, after that, depending on the deal. But again, only you know your investor base and what they are looking for in a deal.

All the best to you Troy! Happy investing!

Originally posted by @Ranjith Marappan:

Originally posted by @Gino Barbaro:

@Ranjith Marappan

Hi Ranjith

Why are you focusing on only markets with a 9+ cap rate?

Gino

Because that seems to be  what others recommend

 Ranjith,

Will this be your first investment in commercial real estate? Or have you had some experience in the past?

If it is you first venture into large multifamily properties, I recommend you study the options you have. Do you want to be an active investor? Or have you considered going in as a Limite Partner with an experienced operator and passively get your checks every month? 

In today's market is going to be very difficult to find a good deal at a 9% Cap Rate. And many would say that if it is a 9% Cap Rate deal then that is a good deal. I would say not necessarily. A good deal is not only about the highest cap rates, a good deal should be one where you can better protect your downside and obtain better risk-adjusted returns. What qualifies as a good deal for a new investor is not the same as a good deal for an experienced multifamily operator with years of experience rehabbing and repositioning properties.

To find a true 9% cap rate deal you will probably have to look into sub-markets with typically higher crime rates. And that my friend, IF you are not experienced in those type of markets, will probably not end up well.

I'd be more than glad to answer any questions you might have.

Happy Investing!

It looks like you've already gotten great advice from some of the best in the business. So I just want to emphasize one thing: PATIENCE.

People are only going to invest with you and give you their hard earned money if they trust you, and building trust takes time. So just make sure you are in the game with a long-term mentality and build that trust patiently and by consistently adding value.

All the best!