Many questions...answers you have?

Question

Thanks for reading and hopefully you can provide some answers. Ok...here we go,

1) Does a GP that is involved in a syndication have to be an accredited investor?

2) Can you utilize DSCR for apartments as a means of finance? Up to the 75 or 80 percent?

3) If yes to question 2...what are the rates? I know that the answer to this question depends on the performance of the complex...I think.

4) Is the acquisition fee as well as other fees that are paid to the GP/GP's taken out of the LP initial investment, or are they paid to the GP/GP's at sale/refi of property?

5) Do GP/GP's usually have "skin in the game"?

6) Are there any GP's willing to take an aspiring syndicator under their guidance in exchange for the fee that the partner GP would get...I dont even know if that legal...kind of a put your money where your mouth is instead of some 20k dollar mentor class...if that makes since

Ryan Taylor · Answer

@Justin Moy...Thank you for your input Sir...valuable indeed. I too agree that an Operator should be compensated for bringing a deal to investors...as long as the percentage is within reason, a track record of syndication success has been obtained, the deal can support and justify said acquisition, etc, etc...

Again...thank you for your feedback 🤙🤙

Ryan Taylor · Answer

@Brian Adams...Thank you Sir for your input...That is precisely the answer to number 6 I was looking to see...how I can add value to a space I am a rookie in...thank you for telling me how I can add value to you...now that I know that...I will surely be on the hunt!

I see what you did there...👏👏👏👏...bravo

Ryan Taylor · Answer

@Greg Scott...Thank you Sir for you input...I find it most valuable. As for your answer to number 6...I was saying surrender your portion of the acquisition/ other fees to the other partners for their mentorship...or perhaps add value in another way, ie. find the deal, be the boots on the ground, raise capital...I guess what I'm saying is value can be added other ways...but I'm sure you are aware of this given your accomplishments...thank you to adding value to me with your answers 🤙🤙

Brian Adams · Answer

@Ryan Taylor to solve for item 6, you need to figure out what value or problem the GP has and how you can solve for it.

For me as a skilled syndicator, I have all the pieces ready, however, my challenge right now is finding quality, 200+ value add deals that pencil out. I prefer 500+ unit deals.

Other syndicators might have a challenge raising money for deals.

Make a list of the top 10 to 20 syndicators here on BP, contact them and ask what problems and challenges they have. Figure out how you can solve the problem to add value.

Good Luck

Justin Moy · Answer

@Ryan Taylor Greg did a great job of answering all the questions really well. I would disagree with 4. Syndicators work a ton to get great deals and in my opinion those fees are earned as long as the deal still works and it's also standard to see these fees anywhere from 1-3%. I think it becomes a red flag if the fees are above 3% or there is less equity for the GP and more of the payment up front, but most of the time there is a mixture. Also for item 6, most GPs might look for you to fill a role in the organization but it's tough when you're brand new. Most people who are new in my experience have gotten into their first deal by bringing investors or the deal to a syndication.

Greg Scott · Answer

1) No, although the GP will need both the net worth and the liquidity to meet the loan requirements.  If you don't have that yourself, you will need others in the GP that can.

2) Apartments are valued by the income approach, not comps.  In other words DSCR is part of almost every apartment loan sizing.  That said, these days you will be hard pressed to find a deal that can achieve 75% let alone 80% leverage

3) Depends on a lot of factors, mostly based on the loan type, not the property:  Fixed vs Floating, Yield Maintenance vs Stepdown, Length of Term, I/O period

4) I hate acquisition fees, both as an investor and as a syndicator.  They are usually paid out of partnership money at purchase.  The syndicator that says they deserve it because of all the hard work they did to find the deal, in my book, doesn't have a lot of confidence the deal will provide them the return.

5) I will never put more money in a deal than the syndicator and expect my investors to do the same.  BTW, for me "skin in the game" is net of acquisition fees.  I saw one well-known syndicator say he was putting $1M of his own money in a deal, but he got paid an $890K acquisition fee, so $110K is all he had in the game

6) How do you want to pay to learn?  You can come alongside another GP and give up your profits and hope they show you what you need or you can find well-known and respected coaching program to walk you through it.