What are typical apartment syndication returns for an investor?

[Jeff L.]

What CoC returns do you typically see as an investor who puts money into a syndication deal for apartments? (As a passive investor, not the person who puts the deal together).

How does it compare to investing in your own SFRs? Is it more or less lucrative, or about the same?

It seems to me like most syndicated deals are about buy -> improve -> sell. Are there deals where the owners hold indefinitely to reap the cash flow? If I'm looking to hold long term for the cash flow, are syndicated deals a good option?

[Brian Burke]

@Jean G., by "return OF capital" I mean exactly that...getting their investment back, which, oddly enough, can be defined in more than one way.

I tend to define return OF capital in such a way as the investor is receiving a capital distribution of their initial investment through either a sale or refinance.  Some sponsors define it such that every distribution made, including that of preferred return and surplus profits during the hold period, count as return OF capital.  There is nothing wrong with that and certain deal structures and strategies warrant it (you just have to model it each way and see how the numbers look).  It just has to be spelled out in the operating agreement and PPM which method you are using.

So doing it my way, let's say that we have $1MM from investors and we do a refinance and net out $900K in capital.  The investors get 100% of that $900K.  They still have $100K in the deal, although if they have been distributed $100K from cash flow by that point some operating agreements would treat it as though they have no capital in the deal.

As to your question about whether investors retain their ownership after they have been cashed out...in my offerings they do.  I have heard of other sponsors that exit their investors out via a refinance.  That strategy puzzles me...why would your investors want to relinquish their ownership just as the deal turns from good to great?  I say give them their money back, keep the ownership just as it was, and they'll happily re-invest the proceeds from the liquidity event in your next deal.  You get two investors for one, and the investor gets two deals for one.  Everyone wins.  If you take them out, only the sponsor wins.  How does the saying go?  Bulls make money, bears make money, hogs get slaughtered...