Money Needed For Fund/Syndication

[Jordan Santiago]

Hey BP,

In your opinion, how much should you have in the bank when starting a Multifamily syndication/fund?

[Brandon Wong]

The amount would be a function of the size of properties you are acquiring. There are a number of hard costs to purchasing one assuming you are doing a single purpose entity (close ended single property offering) including:

-Paying an SEC attorney 15-20K to draft the PPM documents. 

-Earnest money (often non refundable day one) between 100-200K depending on the deal size. 

-DD which could be 10-20K depending on scope and size. 

The good news is that multifamily is a team sport and this doesn't need to be all you. In fact I've met several investors that offer to be loan guarantors and put up "risk capital" like the EMD, etc.. in exchange for a fee and/or percentage of the deal.

Starting an open ended fund, while it sounds attractive, can come with it's own set of problems and associated costs/management and is not typically a place to start if you haven't purchased any multifamily before as you would be asking investors to wire money based on a vision of the future rather than a hard asset. 

Hope this helps you.