All Forum Posts by: Sam Grooms

 Small world. Part of my wife's family is from Monroe, and I'm there a couples times a year. In fact, I was just there last month. 

The cap rate of 8.73% implies NOI of $67,745. On GPR of $98,000, OpEx would be $30,255. That's 31% of topline. If you don't have a T12, I would assume OpEx to be 50% minimum. That bumps your trailing cap rate down to 6.31%.

With NOI of $49,000, is that enough to pay your mortgage/land lease? (Note that insurance and property taxes are included in OpEx). How much is left over after you pay the mortgage? Take that cash flow and divide it by your $100K down payment (plus any improvements you want to make), and that will be your very basic cash on cash return.

I would also take out additional CapEx reserves from my cash flow, similar to what you'd have if you were bank financing.

What type of investment is this for? Large multifamily syndication? Is this for debt or equity? Are you registering this as a security? If not, what exemption are you using? 

Cold calling for investors seems very risky, depending on your answers to those questions.  

@Jay Hinrichs is right, you would still have to pay taxes on that income, even if you never "received" it. Even if you have depreciation to offset it, you'll likely still have some self-employment tax. 

A GP doesn't participate in capital calls. However, if the GP is an investor, that investment is likely as an LP, in which case he would be expected to participate. Every operating agreement and PPM is different, but generally, you can't be forced to participate. If you decided to not participate, you would just be diluted. 

As for LPs getting together and initiating the capital call, I've never heard of that happening or seen agreements that allow that. You would likely have to be voted out as the manager for that to happen. Having said that, if your LPs are initiating a capital call before the GP does, I would imagine the GP is severely lacking in their duties and would probably be voted out before it came to that. 

You should reach out to @Ben Leybovich and see if he'll mentor you. 

Yes, you can. However, savvy investors will look at your investment, minus your upfront fees. Like you mentioned, this is more closely looked at for new sponsors. 

I'm not sure where you're going with the title or a bridge loan. You would just raise less money. Say you need $3M to close on the property. You have another $500K in reserves. And your acquisition fee is $100K. Your total raise would be $3.6M. Now if you are just investing your $100K, you simply don't pay yourself and raise less. You raise $3.5M from outside investors, close with $3.0M of that, and have your $500K in reserves. You fill out a subscription agreement along with your investors, for your $100K investment. 

Absolutely, there are many ways to double your money faster than investing in value-add multifamily. Heck, I can double my money in less than a year through SFR flips. The distinction is how involved and active you want to be.

@Ben Leybovich and I are here is to shed some significant light on the ins and outs of successful multifamily underwriting and deal structure.

We will share with you a blue print to how we do things. No up sell. No pitching. No running to the back of the room. Concrete education to take your investing and real estate career to the next level. Most of the day will be spent with our heads buried in spreadsheets, teaching you what a deal looks like today, not 3-5 years ago. 

This is a paid event. But, as always, we will deliver the best education anywhere!

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Hi @Rafael Esteves. First, I doubt many GP's are "guaranteeing" a return. Most of them are equity syndications, and that would be illegal. 

Second, most of the current multifamily syndications aren't buy and hold projects. They're value-add 3-5 yr deals. Basically, it's a multifamily flip. You wouldn't ever compare SFR rental returns to an SFR flip. Same logic would apply here.

Even for the syndications that are buy and hold, they're driving their returns through a refinance. In that sense, you'd have to compare it to the BRRR strategy, not a pure buy a hold. Your returns are driven up by not have much cash invested in the deal after the renovation.