All Forum Posts by: Steve S.

@Kristen Savino I'm happy to let you know about my experience as a passive investor with various syndicators. DM me. 

Tonight (6/28) at 7 pm EST we are hosting Tim McCleary, Vice President of Investor Relations with Western Wealth Capital, on our monthly Zoom meeting for Left Field Investors. Western Wealth is a powerhouse in the multifamily syndication space that has completed over $2.3 billion in real estate transactions. They have bought 75 apartment complexes and have gone full cycle with 31 of them. Tim will share his perspectives on markets and his approach to investing.

There are a lot of syndication mentoring groups for those wanting to be sponsors. For starters, you may want to attend a long weekend syndication meeting like Brad Sumrok's or The Real Estate Guys Radio's Secrets to Successful Syndication Seminar before paying someone thousands of dollars to mentor you. I went to both and realized that with my full-time job that I don't have time to be an active syndicator. But it opened my eyes to the passive syndication investing world.

Here is a short list of mentoring programs for budding syndicators (I have not gone through them so I can't give you an opinion either way):
Brad Sumrok
Lifestyles Unlimited
Jake and Gino Wheelbarrow Profits
Think Multifamily
Michael Blank
The Real Estate Guys
Joe Fairless

@Brittney WIlliams Sounds like you are pretty busy and already have some active investments that are doing well. I stopped doing active real estate and have gone to the passive side by investing in commercial syndications. After vetting the sponsor, the location, and the deal, I wire my money and look for the next good syndication. I am able to diversify by asset class (multifamily, self-storage, MHPs, etc.), by sponsors, by geographic location, and by yield play vs. value add.

There are some great passive investing books: The Hands-Off Investor (Brian Burke) and Passive Investing in Commercial Real Estate (James Kandasamy). Here are some podcasts that can help you get started, find sponsors, and hear from experienced passive investors: Passive Wealth Strategies for Busy Professionals, The Real Estate Syndication Show with Whitney Sewell, and Passive Investing From Left Field.

@Nicole W. I am now completely passive in my real estate investing. You are correct in that many syndicators will have add-on co-GPs who essentially raise capital for their deals. As you know, there definitely is an advantage to being a co-GP as your income would much higher than as an LP. It does become harder to vet all the sponsors when there are 8 vs. 2 people. I have invested in some syndications that have this setup and have been happy with them so far. But I try to steer away from deals with too many GPs.

I also like the tax benefits, especially the bonus depreciation, and the reduced liability risk since we are passive/LP investors.

We are excited about our meeting next Monday, May 24th at 7 pm EST with guest speaker Eric Sussman, an apartment syndicator and business professor. Eric will present Investment Markets & Opportunities in Uncertain Times and
discuss the biggest risks to financial and real estate markets, the supply and demand imbalance, and much more - including plenty of amazing charts and graphs. You will not want to miss it!

Eric is a Founding Partner of Clear Capital, LLC, overseeing the firm's capital, equity, and debt departments and strategic planning functions. He provides leadership to the firm in the areas of private equity, joint ventures, and fund formations.

In addition to his position at Clear Capital, Eric has been an Adjunct Professor with UCLA’s Anderson Graduate School of Management since 1995 where he has been voted “Outstanding Professor” 16 times by MBA students. Additionally, he has been named as one of the top ten most popular business professors by Bloomberg BusinessWeek, and one of the 20 most influential professors alive today by “Top Business Degrees.”

If you want to receive our weekly newsletter and announcements for our free monthly Zoom meetings, please go to LeftFieldInvestors.com to sign up.

When you are a busy W-2 professional, you don't want to have another "job". I had some small residential units, but it was still a hassle with 3rd party management. I have found investing in private syndications with reputable sponsors to be the best investing avenue for me. I get all the tax benefits too. I am still in traditional Wall Street investments through my 401K but all of my other money goes to these "alternative" passive investments. 

@Mike Bianchi I would diversify it this way since you are young.

1) $300,000 into a variety of private real estate syndications more weighted towards multifamily but also including self-storage, industrial, and maybe mobile home parks.

2) $100,000 into a debt/note fund(s) where you would get a more fixed return. You should be able to find 10% returns. 

3) $50,000 into Bitcoin

4) $25,000 into a variety of start-ups on a platform like Republic.

5) $25,000 into gold

From a passive investor standpoint, I look at multiple things to assess the risk of a syndication. It goes without saying that a deal with an inexperienced sponsor with little-to-no track record may be riskier. A value-add deal has more inherent risk than a core investment. Location-wise, if a property is located in a smaller city that relies heavily on one industry for employment, that should be a red flag.

I also get more granular on the pro forma data. For rent growth, I like to see no more a 2-3% increase per year. Even though the banks like to see a DSCR of 1.25% or more, I like the cushion of at least 1.5%. Breakeven occupancy is often not stated in the documents. My maximum for multifamily is 75-80%. It should be less for self-storage. Exit cap rates on the pro forma should not be less than entrance cap rates. I like to see IRR scenarios based on an exit cap of 0.5%+ greater than the entry cap. IRR partitioning can be determined by plugging in the yearly cash-on-cash and exit proceeds into a spreadsheet. This will help you determine how the proceeds are weighted - either from cash flow from operations (i.e. rent) or from sale proceeds. Most of the more sound multifamily assets that I have vetted have a range of 25-30%+ of cash flows from rent and 70-75% from sale proceeds. Cash flow from rents is going to be more predictable than proceeds from a sale 5-7 years from now. The faster your money is returned to you, the less risky the deal.