All Forum Posts by: Melanie McDaniel

@Holly Hudson I think a savvy retail should be able to help you with 5-8 properties, but it does take some extra knowledge beyond 1-4 units. I think your closing attorney will help a lot. Make sure you get all of the leases, I feel like that has always been a hurdle with mom and pop operations. T-12 and rent roll are a minimum, but utility bills, insurance details, contact services (trash, coin op) and assume higher taxes. You may want to find a mentor to help you through. Get an inspection! Don’t be afraid to go into every unit. Check how long leases have been in place—new ones raise flags because they could have placed bad tenants just to get occupancy up.

@Roe Miller I wish I knew, so following! I met a group at Joe Fairless’s event last weekend, BEC20, who does some international stuff, small, but cool concept. LifeAfar if you want to Google them. Definitely not what you are asking for, but they are a good start.

@Glen S. I learned through Michael Blank's syndicated deal analyzer (SDA) tool. He has a course or you can buy the SDA and watch a couple of videos. This is for syndication deals only, not for JV or individual purchase.

@Lynne Marquez this would be an excellent question for the mortgage lender you want to use for your personal home. Typically on an income-producing property, the income will be taken into consideration, at least a portion of it. I have had past clients get qualified for both properties at the same time. If that doesn’t work for you, your lender should direct you. I wish I had a better answer for you, but it is going to be very specific to your situation.

Good luck!

@Amy Hietala If you are looking for passive income, I think being a Limited Partner in an apartment syndication in an excellent market, with a professional operator, with a great value-add deal is still the most passive and lucrative investment. Sometimes I think LPs fare better than the operators when you calculate all work they put in. I put all my extra money into syndications. To diversify, pick different markets and different operators.

@Lukas Loveland large apartment complexes require a bit more relationship-focus than the smaller stuff for sure. I had a 24-unit fall into my lap when a seller responded to a letter when I was looking for quads. What size are you looking for? I think it gets harder as you go up in size.

Melanie here! Based in Phoenix, but I spend a lot of time traveling abroad.

Turnkey rental options are one of the biggest competitors for apartment syndication, because both claim to be passive investments with great returns. Buying a rental property through a turnkey company is a great way to acquire single family real estate as long as you are still doing your due diligence on the operator, market, and on the specific property. Run all of the numbers yourself! I have looked at some offerings; my mom was about to buy three in one market with one operator that I actually introduced her to. I met them at an event and I liked them, so I thought they would be a good company to go with. When I looked at the numbers I saw that the turnkey provider took a lot of meat off the bone. Although the numbers still look decent, turnkey providers make money at least four ways—one on the purchase, one on the flip because they typically own the contracting company, then the forced appreciation when they sell it to the investor, then they are usually the property manager as well. I just felt like if they're making income four ways, they could have been a little bit better with the price. It seemed to me like my Mom was going to be paying market value, or even a little more.

If you are looking for truly passive income, turnkey is less passive than investing in an apartment syndication as a Limited Partner. Turnkey rentals are pretty passive, but you need to make sure you're paying your taxes, insurance, utility bills (this can creep up on you if your tenant stops paying the bills), and managing the property manager. I went through an eviction with a turnkey rental, and I will say that took a lot of work on my part. No one is going to manage your house better than you, especially if the property manager isn’t getting paid because there is no rent coming in. If you buy a turnkey rental in different market, you are putting your whole investment in the hands of the property manager. Alternatively, you are putting your investment in the hands of an operator with an apartment syndication, but the company managing a large apartment complex is a professional organization managing potentially thousands of units. Property managers of single family homes may or may not be as professional or sophisticated with in-house maintenance and on-site management like an apartment property manager would.

In general, investing in an apartment syndication is very passive as a Limited Partner. During due diligence for the operator, market, and deal, you will be somewhat active, but after wiring your money and closing on the property, it is so passive that you really don't need to do anything. I highly suggest reading your emails when you get the updates and making sure your ACH transfer is hitting your bank account monthly or quarterly, whatever it is scheduled for. Make sure you're getting paid and then when it is tax time, make sure you're waiting for your K-1 so you can file it with your taxes. Other than that, there's no activity that you are required to do. You really don't do anything, you are truly a Limited Partner or passive investor.

The General Partners are professionals. They have done many deals and rest assured, the bank trusts them, and you know there is at least some level of underwriting by the bank. You are partnering with a professional team. When you have a 100+ unit property and they hire a property manager, they aren't their only client. They hire a professional management company that the bank also vets.

With turn-key rentals, it is more likely you will get a call for a broken toilet or other issue if the tenant can’t reach the property manager. You are the owner and it is your responsibility at the end of the day to abide by all of the landlord tenant laws, so if your property manager isn't doing a good job, you get stuck holding the bag. You will never get a call in the middle of the night for a broken toilet or some maintenance issue as a passive investor in an apartment syndication. You are much more hands-off with apartment syndication because someone elseis paying that tax bills, mortgage, utilities, and managing tenants.

Turnkey rentals and investing in apartment syndication are backed by real estate, so I’m supportive of both. If you must do a turnkey rental, fine, but I still think the superior investment is something professionally operated and managed and truly passive with all the benefits of real estate. My two cents.

For those of you who were at BEC20, you would have heard from experts like Neal Bawa and Jillian Helman, Jamie Smith, and John Sebree. They had some pretty strong opinions on this topic. For the base-hit, value-add C and B multifamily in excellent markets, keep buying with conservative underwriting. Consider keeping some "dry powder" so you can buy in the dip. Kathy Fettke added, "Sell overvalued, underperforming properties and exchange for undervalued, high performing assets." The key here is conservative underwriting and make sure it cash flows at purchase.

I think it will depend on how they structure it, but finding the deal should be about 1% of the purchase price. If you do a bunch of work on due diligence or you get it under contract, that could earn you more. Will they be paying you a finder's fee? That may be the cleanest way unless you are a licensed agent. Or you can ask for a 1% equity position if you don't need the fee now--less taxes and more upside : ) They would need to roll you into the deal, so that would look different depending on if you are a General or Limited Partner. Lots of options!