All Forum Posts by: Lane Kawaoka

Sounds like your net worth is under 500k... if that's the case stick with turnkeys or rentals.

I did not go to syndications once I had 11 turnkeys and accredited.

Focus on being an Investor not a Landlord.

Directly investing in a turnkey rental or small MFH is a good way to start to learn and build up the war chest to go into my scaleable investments such as private placement syndications. Trouble is with Turnkeys is that good ones move up to larger developments and those who stay and build a brand name are super expensive which is why there is margin for them to have marketers sell to you.

If your net worth (income minus expenses) is under $200,000 or barely save $30,000, syndications are not for you. Stick with these Turnkey rentals despite what Gurus (who are trying to sell you their program) tell you for now. They have a little higher gains (a lot more volatility) but a syndicator who is willing to put you in a deal with more than 10-20% of your net worth is asking for trouble.

Directly investing in a turnkey rental or small MFH is a good way to start to learn and build up the war chest to go into my scaleable investments such as private placement syndications. 
If your net worth (income minus expenses) is under $200,000 or barely save $30,000, syndications are not for you. Stick with these Turnkey rentals despite what Gurus (who are trying to sell you their program) tell you for now. They have a little higher gains (a lot more volatility) but a syndicator who is willing to put you in a deal with more than 10-20% of your net worth is asking for trouble.

I've bought 11 turnkeys form 2012-2015 if you want my real opinions let me know. A lot of the players go in and out but overall turnkey ideal is solid for beginners.

Find a community of purely passive investors and go deep

We are switching to the debt side of the equation.

a) How can I trust he is putting in $1M of his own money.

When people are new (under $250m of AUM) I would want to see 10-50% of the capital required. Granted when people are new their net worth is low so they probably don't even have more than 200k to throw into the raise.

b) I have done LP deals in professionally managed syndicates by PE firms before. First time doing Tenants in common. Are there things I need to watch out for

Do you background check. I would personally not do a deal with anyone who has less than 1B in AUM unless I knew them personally, had the ability to take over the GP, and there was an big split for me coming in and giving a newbie a chance (90/10 LP GP split for example).

c) Any other things to be careful about investing with a first time syndicate

Good luck... I would not do it but hey its your money.

Check out my article about the Cons of BRRR.

https://www.biggerpockets.com/... this is coming from an Accredited investors POV who used to do turnkey rentals.

I personally would not do Remote BRRR as there is just a lot of risk with 1) risk of embezzlement with contractors 2) change orders and 3) bank doing bait and switch doing a lower appraisal and/or LTV on the refinance.

This is especially true for high paid professionals or those with a net worth of over $300,000.

IRR is the Internal Rate of Return. This can often get confused with the return on investment and cash on cash because over the period of one year, all these percentages are the same. IRR specifically takes the time value of money and calculates what the average return is over a period of time and annualizes it. Say you put that 10k in and made 7% per year for 5 years and compounded it each year that equate to a 7% IRR for those 5 years precluded that your 10k was returned to you at the end of the period. When looking at real estate we know that very seldomly does an asset perfectly return an exact percentage and typically the asset grows in value over the time period. This calculation can take that expected growth and growth in cash flows combined into one metric to look at the investment.

Personally, I don't really look at IRR because it is a highly manipulated metric. Showing an unrealistic refinance in year 2 instead of year 3-4 will likely turn a 13% IRR deal to 16-17%. Magic! The best way to explaining this is for you to download an IRR calculator spreadsheet or build your own simple one and play around with one.

For what its worth most deals I deem meeting minimal IRR standards is 13-15% but you have to dig a little deeper to uncover the real placements of cashflows and capitalization events... and then dig even deeper to verify the assumptions such as occupancy, rent increases per year, and what reversion cap rate was used.

Again I don't look for IRR cause its manipulated a lot instead I look at total return on a 5 year basis. Its like sampling a NFL players 40 yard dash but for apartment underwriting. I'm sure there are other ways to do it but weather its right or wrong... I try to be consistent and I'm just trying to go in and pick the best in the field.

BP article - https://www.biggerpockets.com/...

@Kevin Bonner a lot of fly by night turnkey companies. Make sure you vet track record with past clients.