All Forum Posts by: Steeve Breton

@Ashley Wilson Congrats on your success partnering with strong/experienced GPs. That's a critical step. Also congrats on the progress you've already made with the people who know, like and trust you.
As I was reading through this post I had so much to say but I'm a few days late to the party and it seems it's all been said. Great advice here.  On my first deal I had about 20 individual conversations (coffee/lunch) with friends and about half of them invested.  Many of the others just needed to see my success before they joined me in the next deal.

The only thing I'll add is to always put your investor's interests ahead of your own.  Be genuine when "selling" the deal and communicate often and honestly throughout the hold period.  Best of luck!

@Ivan Barratt  @Omar Khan great points regarding track record required for crowd funding and broker dealers.  I think the model you chose at least partly depends on where you are in your career.  If just starting out then it's certainly best to bring in a GP with substantial experience.  They will not only help you raise capital but also help with your underwriting, due diligence, operations, etc. to ensure the project's success.  As you take down larger properties, say 200 or 300 units, you'll likely need a GP (or two) to help satisfy agency debt requirements (experience, net worth, liquidity) and you probably still want that experienced GP by your side.  Then as your track record grows, so too does your ability to, and your options for, raising capital.

@Randal Remon I also should mention that, as with all things worth doing, this is a process.  It will take time.  Setting an unreasonable goal isn't a bad thing if it inspires you to take the massive action that it would require to achieve it.  This is the idea behind Grant Cardone's 10X rule.  Even if it takes you 5 years to achieve your $2,500 per month, you'd still be way ahead of the game.  In the meantime come to terms, and be happy/fulfilled, with where you are now.  If you wait till you have reached your goal to be happy you will never achieve happiness/fulfillment... and may not achieve the goal either.  Check out this video about taking consistent action over the long term.  

https://www.youtube.com/watch?v=qDxDCtZ9UkE&feature=youtu.be

@Michael Le may have the best advice here.  Its the same advice I give all of the newbs at our local meetups who come and ask how to get into real estate but haven't done enough to get their personal finances in order.  #1 Make Money.  #2 Save Money.  #3 Invest.  You definitely need to find a way to make more $.  Either a better job or a 2nd job.  You can combine #2 and #3 with a duplex BRR but that also takes money and I'm not sure you have enough for a down payment never-mind an emergency fund or the funding required to do renovations.  The second stream of income could be wholesaling for flippers in your area but that may also be difficult for you to break into at this point (but not impossible if that's really what you want to do).  You may need to cut expenses to <50% of your income in order to save up a reserve.... Do today what others won't so tomorrow you can do what others can't.          @David Thompson has a good idea but it would require that you are well connected to people with money.  You're first time raising capital will likely be from friends and family who can put up $250k or $500k... this would also assume that you are well versed in Multifamily & Syndication so you don't end up working with a sub-par sponsor and put your network's equity at risk.

Certainly from the perspective of doing my own due diligence on their deal and asking a lot of questions regarding their assumptions (rent growth, exit cap, expense items, etc.) and overall business plan as well as their experience both in and outside of real estate and their team.  However, a good deal of it still depends on my gut feeling which is based on conversations with them, how they answer questions, their attitude, outlook on life, etc.  If I don't feel a deeper connection than what I would with a used car salesman, then I move on no matter how good the deal is.

@Michael Wang My general thought on that Sponsor is that he's a marketing machine and those returns are a bit low. 

I suspect you would do OK with them but I know a couple of the names you mentioned at the top of this post personally and I know they are focused and will keep their eye on the ball.  Better returns too.  Also unlikely that you'd ever get GC on the phone for a personal discussion regarding how your investment is doing.

I also like @Paul B. 's advice to meet local Syndicators.  I invested in 13 deals across 5 syndicators before I sponsored a deal.  I saw first hand the differences between good and not-so-good sponsors/deals.  The big guys aren't always the best.

Deal structure top priority for me.  I've seen deals with unusually high front loaded (acquisition fees) or asset management fees tied to the overall capitalized value of the deal rather than being tied to the ongoing operations (income).  In these situations it seems the sponsor is more interested in getting paid early and less interested ensuring the project's success over the hold period.

@Brian Burke makes excellent points as to why sponsors often do not invest in their own deals.  What was left unsaid is that their parents, siblings, friends may be investing in the deal and overall reputation is of far greater importance.

As to @Brian Burke's comment: "But I get it—if you are investing with a first time sponsor (why would you?)".  There are many reasons to invest in less experienced sponsors and their projects.  Maybe you feel they're more responsive.  Maybe they happen to have a great deal.  Maybe they're investing locally and that make you feel more comfortable.  Maybe you want to help a trusted friend succeed... and/or many other valid reasons.  Just be sure that they're interests are aligned (deal structure and $ in the deal), that they are well educated in the asset class and syndication, that they have a strong team/support structure in place (securities attorney, property management, sponsor/coach, etc.)  

When investing in a syndication as a limited partner I only work with the most experienced sponsors with whom I've been investing with for several years or if they can substantiate a proven track record.  However as a Syndicator I'm happy to work with newer, less experienced, folks who have some experience and education under their belts.  I've brought experience, net worth and liquidity to deals and will do it again for the people who I find to be educated, motivated and of strong character.