Any LP investors on here?

[Gavin Tam]

I'm looking into investing in syndication deals and I wanted to see if there are any experienced passive investors on BP that would be willing to chat. PM me if you'd be interested in connecting. 

[Salem VanderStel]

@Rick S.

1. Not with a traditional multi-family, value add, secondary market play.  Teams that are doing above 8-10% would typically be over-leveraged.

2. The effect on your return will range from negligible to significant depending on how the deal is underwritten, assuming you are working with an experienced team. For example, if the property has a sub 70% LTV loan in a high cap rate market, 30-50% of your return would come from cash flow. Because so much of your return comes is derived from income - which is inherently much more stable the property values - your total IRR would still be over ~12% if you sold at peak 2009 cap rates. In practice, however, the operating team would likely choose to hold 1 or 2 more years when cap rates normalized to some degree. Conversely, if the property was underwritten more aggressively and leaned heavily on appreciation, a sale at peak 2009 rates could cut your target return significantly.

In summary, the trade off for lower cash flow can be a group that operates more conservatively with a low LTV ratio, ample cash reserves per door, underwriting to rising cap rates, and 40%+ of return deriving from NOI, all of which will mitigate the effect of a downturn on your total return.

Best,

Salem