Ex-Multifamily fund analyst looking to create a first syndication, how do I start?

[Dan Bowe]

So a bit of professional background about me:

• Bachelors in finance, top of my class - I have deep understanding in debt, equities, cashflows, business operations etc

• Worked for a year as an acquisition analyst at small fund that invests in multifamily deals. Doing mainly $50M-$300M JVs with local PMs. I had my fare share of financial modeling and asset management and can say I know how to analyze deals and asset manage very well.
But, I was not too involved in the closing phases of the deals (lawyers, reports, debt placement, contract negotiations, parts of the DD...) so I lack knowledge in those parts, which I make up for in reading ton of materials and listening to podcasts.

• After that I worked for three years as a management consultant at McKinsey where I sharpened my business acumen, problem-solving, storytelling, and presentation skills. And also engaged with institutional investors on a regular basis.

I'm highly entrepreneurial and figured out that what I really want to do in my professional career is US multifamily investments.

What I've done so far is selecting the markets I'm interested in (in TX), building a comprehensive financial model to analyze deals, and creating a very detailed due diligence list. I also have an investment strategy in place (core/core+ investments, minimal to no rehab, aiming for 8%-12% IRR over a long holding period).
I even have some friends and family that want to invest with me. Together with my personal funds I can pull around $600K of equity for the first deal.

The thing is, I was never involved in the entire closing process on a property, from A-Z, myself. Not even on a SFH. I feel like I don't know what I don't know, and I feel that jumping straight to an investor-backed leveraged multifamily deal as a first timer might be a bit too much.
Yet, I see no other way to enter the multifamily space as the entrance barrier is high, and cheaper deals in tertiary markets are often cheap for a reason.

Would love to hear your thoughts on whether jumping straight to a multifamily syndication is reasonable, and if so, what would be the best path for me  to make a deal happen in the coming months?

P.S, I'm not a US citizen/resident, don't have a credit score, and plan to manage my operations remotely if that matters.

[Andrew Freed]

@Dan Bowe - The truth it, you need real life experience prior to taking other people's money. It's a big responsibility and currently with your level of expertise, I would be hesitant to you give money on the LP side. Why can't you start with some smaller residential or small multifamily commercial properties to get your feet wet, show proof of concept and possibly try to take on larger deals.

Or possibly find a local syndication group and become an employee under them learning the trade and finding a mentor in the space. I personally think it is a HUGE responsibility to take other people's money and you really need to estabalish credibility and real life experience before moving into larger deals in my humble opinion. Househack some properties, JV on some commercial and build up that knowledge before exploring OPM.

[Chris Seveney]

Quote from @Dan Bowe:

So a bit of professional background about me:

• Bachelors in finance, top of my class - I have deep understanding in debt, equities, cashflows, business operations etc

• Worked for a year as an acquisition analyst at small fund that invests in multifamily deals. Doing mainly $50M-$300M JVs with local PMs. I had my fare share of financial modeling and asset management and can say I know how to analyze deals and asset manage very well.
But, I was not too involved in the closing phases of the deals (lawyers, reports, debt placement, contract negotiations, parts of the DD...) so I lack knowledge in those parts, which I make up for in reading ton of materials and listening to podcasts.

• After that I worked for three years as a management consultant at McKinsey where I sharpened my business acumen, problem-solving, storytelling, and presentation skills. And also engaged with institutional investors on a regular basis.

I'm highly entrepreneurial and figured out that what I really want to do in my professional career is US multifamily investments.

What I've done so far is selecting the markets I'm interested in (in TX), building a comprehensive financial model to analyze deals, and creating a very detailed due diligence list. I also have an investment strategy in place (core/core+ investments, minimal to no rehab, aiming for 8%-12% IRR over a long holding period).
I even have some friends and family that want to invest with me. Together with my personal funds I can pull around $600K of equity for the first deal.

The thing is, I was never involved in the entire closing process on a property, from A-Z, myself. Not even on a SFH. I feel like I don't know what I don't know, and I feel that jumping straight to an investor-backed leveraged multifamily deal as a first timer might be a bit too much.
Yet, I see no other way to enter the multifamily space as the entrance barrier is high, and cheaper deals in tertiary markets are often cheap for a reason.

Would love to hear your thoughts on whether jumping straight to a multifamily syndication is reasonable, and if so, what would be the best path for me  to make a deal happen in the coming months?

P.S, I'm not a US citizen/resident, don't have a credit score, and plan to manage my operations remotely if that matters.

 Speaking pretty bluntly here, but the cards are completely stacked against you. Why:

1. You are not in the US

2. You have never bought real estate in the US

I know you mentioned you make up for your short comings in reading ton of materials and listening to podcasts. That is great, but that is not experience. Look at your analyst days, if someone read some books and listened to podcasts do you think they would be a great analyst if they had no experience? 

Now all hope is not lost, what you could do is bring on a co-gp in the US to partner with where you bring the money and some analyst experience and they bring the other piece of the puzzle that you are missing. That is what I would be offering to people.

[Brock Mogensen]

My suggestion would be to partner with another GP that is a strong operator and has a presence in your target market. Your finance/PE background is something lots of syndicators are looking for in a partner. If you can bring that "Institutional Quality" to a partnership, that holds a lot of value.

[Dan Bowe]

Quote from @Andrew Freed:

@Dan Bowe - The truth it, you need real life experience prior to taking other people's money. It's a big responsibility and currently with your level of expertise, I would be hesitant to you give money on the LP side. Why can't you start with some smaller residential or small multifamily commercial properties to get your feet wet, show proof of concept and possibly try to take on larger deals.

Or possibly find a local syndication group and become an employee under them learning the trade and finding a mentor in the space. I personally think it is a HUGE responsibility to take other people's money and you really need to estabalish credibility and real life experience before moving into larger deals in my humble opinion. Househack some properties, JV on some commercial and build up that knowledge before exploring OPM.

 Thanks Andrew.

How can I realistically start with smaller residential or small multifamily commercial properties? are we talking 2-4 units? Basically because I'm foreign I don't qualify for residential mortgages and it would be much easier getting an asset-based debt.
Or do you mean buying in cheaper tertiary markets?

[Dan Bowe]

Quote from @Chris Seveney:

 Speaking pretty bluntly here, but the cards are completely stacked against you. Why:

1. You are not in the US

2. You have never bought real estate in the US

I know you mentioned you make up for your short comings in reading ton of materials and listening to podcasts. That is great, but that is not experience. Look at your analyst days, if someone read some books and listened to podcasts do you think they would be a great analyst if they had no experience? 

Now all hope is not lost, what you could do is bring on a co-gp in the US to partner with where you bring the money and some analyst experience and they bring the other piece of the puzzle that you are missing. That is what I would be offering to people. 

Thanks Chris, appreciate your opinion. What would you say be the best way to find a such a co-gp these days?

[Dan Bowe]

Quote from @Brock Mogensen:

My suggestion would be to partner with another GP that is a strong operator and has a presence in your target market. Your finance/PE background is something lots of syndicators are looking for in a partner. If you can bring that "Institutional Quality" to a partnership, that holds a lot of value.

 Thanks Brook, appreciated. What would be the best way to find such partners?

[Todd Dexheimer]

My suggestions: 

1. Raise money and do your own deal, but be sure that those investing with you know that you don't have experience. Find excellent property management, mortgage broker, attorneys, contractors, CPA's, etc. Better yet, find a boots on the ground partner. The type of property you're targeting is lower risk and your return expectations are low.

2. Purchase a smaller multifamily that you can get into for $1.5-$2.5mm. Use your money for a down payment and learn the ropes a bit. I would purchase something that needs some light renovation, like paint and flooring, so you can experience some renovation. 

3. Find a GP doing deals in your desired market and partner with them. Make sure they're letting you take a role in the business. 

[Gino Barbaro]

@Dan Bowe

There are groups out there that would like to have your skill set. You can join a syndication group and help with various roles, such as asset mgmt, underwriting, and you do have capital to invest as well

Good Luck

Gino