All Forum Posts by: Ryan Enk

Hey guys, I thought I'd post this to give you an idea of how I structure my partnerships, why to partner, and to get feedback from others who have structured partnerships on how they are setting up there partnerships.

I set a goal to buy 1000 apartments in the next year and took on a partner to do so. (62 down, 938 to go, 50 under contract, 300 under LOI)

There are two reasons to partner in my opinion:

1) When you don't have something someone else has: money, credit, time, skills, resources.

2) When the partnership will help you hit your goal faster and easier.

Number 2 is why I partnered with Preston for the 1000 Door project.  We structured it 50/50.

In single family homes, if I take on a partner for a flip, then I typically structure it in a 50/50 LLC. 50 is the money, and the other 50 is the sweat equity.

If it is a single family hold, then instead of doing an equity split, I just offer them 6% to 12% interest only on their money until I sell the property.

Apartments are a little more complex, but still not hard to accomplish.  I split apartments up between LP and GP.  Limited Parters are the passive income cash investor, and the GP are the ones doing the work and putting the deal together.  Typical equity percentages between LP and GP are 50 to 80% equity for the LP, and 50 to 20% for the GP, depending on the deal.  I also typically offer investors a 4 to 10% preferred return on the cash flow before those splits take place.

Then on the GP side there may be one or more partner, and here is how I split the equity based on the tasks performed:

1) Finding, Sourcing, Underwriting, Contract, Due Diligence Tasks- 5% of GP

2) Risk Capital- Earnest Money Deposit and Due Diligence- 5% of GP

3) Money Raiser- 40%

4) Balance Sheet Guarantor- 10%

5) Asset management- 40%

For those of you who have put together deals with partnerships, what are your structures?

@Austin Works, full disclosure. I'm a mentor. But the answer is yes, you can learn syndication without one. You can learn anything without a mentor. The reason you get a mentor is to avoid costly mistakes, and to pay for speed, support and accountability. Additionally, some mentorship programs have partnership opportunities and plug you into an investing network or a rolodex of team players that you can use to execute your deals. So, you really just need to evaluate the reasons for going with a mentor verse not going with a mentor, but you absolutely can do it without one. Mentorship should be the same as any real estate investment- Whats the ROI?

Thanks @Russell Brazil.  To provide some context, I already have a big real estate portfolio and have been doing it for 15 years.  The challenge I'm giving myself is based on syndicated apartment investing.  It's definitely realistic, but will be challenging.  62 Doors down and only 938 to go! Lol

I'm mainly looking for a collection of advice from people who have "been there done that" to give to new real estate investors.  I give advice all the time but my experience with my wife is very different from what most people experience.

Awesome @Brent Paul a lot of it is the fear of the unknown.  So the simple solution is to KNOW.  Great advice!  Break it down into numbers to ease the fear and make a decision based off the facts.  

Many people get excited about getting started with real estate and then they talk to their spouse about it, and it totally deflates them.  There are many reasons why spouses don't support the endeavor, but FEAR has got to be on the top of the list.  My wife has never made decisions based on fear, but I want to know some tips and tricks from married veterans who have helped their spouse overcome fear, and how they did it.

My personal point of view is this: If it's not good for both of you, it's not good for EITHER of you.  And if your spouse doesn't support your real estate goals, it will be VERY HARD to accomplish them.

My wife doesn't make fear based decisions, BUT, she DOES want to remain a PRIORITY in my life and sometimes my new ventures make her worry that she will get less time from me.  So my personal tip for anyone in that situation is to make first things first.

The first thing I do in the morning is get up early (5ish) and spend time with my wife.  We do something called a T.R.I.P.  The T stands for Thankful where we say what we are grateful for.  This is my personal favorite because the focus first thing in the morning isn't the toilet seat I left up or the dirty socks on the floor.  It causes the mind to focus on gratitude instead.  The R stands for reflection where we read something from the Bible or watch one of my entrepreneur type videos or books and then reflect on it.  The I stands for Intentions.  We pray for people and things in our life.  And the P stands for Planning so we can both be on the same page throughout the day.

To be honest, sometimes the TRIP becomes a (TR...) because we have 5 kids and get interrupted.  Nevertheless, this routine has blessed my marriage and helped me whenever I want to pursue something major that requires time and investment.

My advice above, however, only addresses the issue of not feeling prioritized.  But the #1 issue from spouses is fear.  What are your tips to address fear with a spouse?

When talking to investors do you use big words or talk like you're in 5th grade?

I'm curious to see if anyone else has had the same experience.

In my experience, most accredited investors are not sophisticated investors.  They are obviously highly intelligent, but they don't necessarily have the time or desire to learn the real estate investor lingo.  So it's a fine line for them between making a smart investing decision, and not wanting to take a 40 hour course to understand everything about the investment.

On my last 62 unit apartment deal, I had to raise $1.5 million in investor funds. My experience was that when I used words like pref, IRR, ROI, Cap Rate, or NOI, the investors eyes would glaze over. So I tried to change my approach because a confused mind doesn't make investment decisions. When I transitioned into explaining the investment the same way I would my 5th grade son, it became much easier to raise the capital.

That being said, are there any wholesalers or syndicators out there that are having more success in getting investors with advanced lingo?

@Philippe Busque  @Account Closed thats a great question about my experience prior to doing this.  I hesitate to answer this because I'm afraid people who want to get involved in this kind of investing might say, "oh...THATS how..."  So I'll answer honestly but with a caveat.

The truth is that I've got a ton of experience.  I've got a great real estate portfolio both in single family and multifamily, I've written a best selling book, I have my own podcast, and I even have my own mentorship program with over 500 students.  But before someone thinks they would have to have ALL of that before pulling off a deal, let me just tell you a quick story.

About 15 years ago, I had a dream of opening up an indoor sports arena.  It was going to cost me about 2.3 million dollars and I would need roughly $600,000 in investor funds.  I had nothing but overdraft fees in my bank account. I had jack all for experience other than I liked soccer and football.  I was previously a teacher and at the time of deciding to pursue it, I was an about to get fired copier salesman. AND with 3 kids (I have 5 now), I had little time.  I got told no and/or laughed out of the office of every bank and investor I gave my business plan to.

So I said, the one thing I'm really missing here is experience.  I had to get some, even if it was minor.  Then I took out a home equity loan and bought a child development franchise called SoccerTots, which was the daytime business for a soccer arena.  This opened up partnership opportunities with two other businessmen.  I sold my business to the indoor sports company we formed together for equity, and together we raised $600,000 and built the multi million dollar sports arena 3 years later.

The point is, whenever you don't have something: money, time, resume, net worth, experience, then you go find someone who does or you develop the skill on your own.  So back to the apartment deal.  Say I didn't have all of the experience I listed above, I probably STILL would have pulled it off.  I just might have received less equity.

So for anyone that wants to get started, I would suggest thinking of a real estate deal with this kind of structure:

Sourcing, Contract, Due Diligence, Underwriting, and Closing- 5% equity

Risk Capital (EMD & DD Expenses)-5% Equity

Money Raiser- 40% equity

Balance Sheet Guarantor- 10% Equity

Asset Management- 40% Equity

ANYONE can fit into any of those equity percentages.  The easiest place to start is to develop the skill of sourcing and underwriting deals.  Even if that means you only have 5% on the first deal, you can still put a major deal on your resume and hold it up to complete the next 1000 deals.  Hope that helps encourage some folks to start their pursuit.  Because the partnerships and deals happen IN PURSUIT of them, not BEFORE they start.

Hey @Jay Hinrichs every lending agency is different for their requirements, but with the "agency" debt, meaning Fannie Mae, we didn't have to PG it.  I don't remember them having net worth requirements for this deal, although they could have had them, and I did submit my net worth statement.  I just don't remember them or what they were. I will tell you though, that if my net worth didn't meet their requirements, I would have invited an investor into an equity percentage of the General Partnership to get it done.  I've done $1 of equity for every $4 to $6 dollars guaranteed of equity in past deals

Hey @Dante Foreman thanks! Yes, you can definitely do the BRRR. In the apartment world, its called the VALUE PLAY MODEL. Basically, you buy an apartment that is like a Class C or B and needs some sort of value. Then you increase the rents and refinance with the bank and pay all the investors back. So on our 62 unit for example, we bought it at about a 6 cap. After making some value improvements to the property, we intend to bring the rents up about $150 per unit. That will increase the NOI buy ($150 x 62 units x 12 months) = $111,600. $111,600 at a 6 cap is a $1,860,000 increase in value to the property. Once we do that we will refinance and pay our investors back the majority of their capital, while they still have the equity in the project and enjoy the rental cashflows.

@Caleb Heimsoth We have reserves built in to the project, both for maintenance, capex, insurance deductible, and emergency.  But of course, we did not want to tap into those reserves to get to the closing, hence the extra capital raise.