Does This Exist? The Dream Multi-Family Investment Scenario.

Question

I think I've found the ultimate investing combination, but does it exist? Here is what it would consist of, I'd love it if anyone has done this or knows of a place where we can invest in a project like this. It would essentially be a BBBR, Buy & Hold, Multi-Family, Syndication Platform combo.

Multi-Family (40 units and up)

Leveraged (Investors put up max 25%, Bank finances the rest)

Value-Add (Finding ways to increase property value and rent)

Cashflow Positive (Cashflow positive once stabilized)

Refinance & Hold (The ability to pull out 50-100% of our initial capital while keeping the property)

Skin the Game (Enough so they're not just gambling with other people's money)

The above seems doable so far by going through a syndicator, although I haven't seen many who want to buy and hold the properties for cash flow and allow investors to pull out their initial investments after a few years. (Maybe Cardone Capital, as that's what he preaches, but I don't know the details of his actual deals. Any insights?)

Online Platform (The ability to invest remotely and track finances through an online dashboard)

This might be the biggest road block, so if anyone knows of the perfect place to find deals like this that aren't online, please point me to them. But ideally I'd like to invest into deals like this through some type of online platform such as FundRise, RealtyMogul, etc, because I live 90% of the time outside of the USA and do everything virtually online. It's much easier to login to a dashboard and do bank transfers online than deal with things in person or paper.

The other benefits of an online platform would be 3rd party vetting since these platforms also have a reputation to protect, and the ability to easily scale by allowing a bunch of $10,000 investors into a deal, instead of having $100,000 minimums.

Question - Does this real estate investing unicorn exist and if not, why doesn't it? Is there something that makes this unlikely or impossible to offer? If it does exist, can someone please point me into a direction on how to find and invest in a deal like this? The closest thing I've found and invested in so far is the Growth eREIT with Fundrise and the MogulREIT II but it seems like the plan of exit is to liquidate after 5 years for a windfall.

Ideal Situation, Ideal Life - Basically what I'm looking for, and I'm sure a lot of other people in the world is a way to put in $XX,000 amount of capital, have that money be used to buy a value add multi-family, stabilize it, start collecting a bit of cashflow as well as having the tenants pay down our mortgage, refinance after a few years to take back out 70-100% of our initial investment, (which we can then use to buy another deal like this), while keeping the property to cashflow, and eventually after 15-30 years owning the property free and clear for higher cashflow.

Does this exist? It really seems like the dream situation for me and I'm sure a lot of other hands off investors? Thanks for any insights, thoughts or suggestions.

Ian Ippolito · Answer

@Johnny Chen,  most of that is not hard to find and actually pretty common.

But first, let me start with your requirement for “being online” since you are overseas and not wanting to deal with subscribing to deals in person or with paper.  While there are plenty of completely online platforms, you don’t actually need that  to do what you’re looking for.   Even the old-school syndications, today almost all  will send you the pitch  information by email, you  sign paperwork via DocuSign or equivalent, the money is wired from your bank to their’s via your online bank account, etc.. So even if it may not be in a completely seamless process, it’s all still online and not in person.

On some of your other requirements: value-added cash flowing, multi family properties over 40 units and with aggressive leverage of 75%: that pretty much describes 90% of Crowdfunding/syndication  deals, so there are plenty to choose from. Fundrise and Realty Mogul are probably not the best source because both have switched to focus on  non-accredited offerings  with much larger fees, and sponsors that don’t have full cycle experience, almost no skin in the game, etc.  so I would recommend looking at other sites such as CrowdStreet., RealCrowd  and other similar sites.  With a tiny bit of filtering, you may find that 50 to 60% of what you find will also have decent skin in the game.

The hardest criteria is that you want to refinance out and get your cash back sooner.   That’s not what I would consider to be in my ideal investment, but I am also conservative (so for me it’s a pain to pull it out from one investment and now have to put it into another one, except I’m much later in the cycle and probably can’t get as good of a deal. I would rather just keep it in the original ).  But assuming you are more aggressive and  wanting to take  chips off the table, it may make sense for you. In that case, again you can do some very simple filtering and will find out probably about 15% of the deals will allow you to do this.

Todd Dexheimer · Answer

I agree with @Ian Ippolito. Most of what you are looking for exists in private syndication and crowdfunding portals, with the one exception being the quick refi. In our offering we often will refinance, but pulling out 50-100% of the capital is difficult if you want to stay conservative and protect your investment.

I would caution that the crowdfunding platforms are vetting the sponsors properly. Personally, I would not let a crowdfunding portal do my homework for me. I think it is just as important to vet a sponsor on a portal as it is a sponsor not using a portal.

Ian Ippolito · Answer

You're welcome @Johnny Chen.

I'm also a fan of buy-and-hold on my privately owned real estate investments. But one of the big reasons why many syndications/crowdfunding deal don't do it is because the depreciation benefits on a real estate deal start declining pretty quickly after about 5 to 7 years and then eventually disappear completely. When depreciation is in full effect, the investor might avoid paying taxes on 50% to 100% of the income, so when it runs out, most people don't like that. That's why typically most deals will sell the property and then the investor can move into a new property where they can get fresh depreciation. Longer deals exist, but they are harder to find.

Deal analysis of the Barcelona apartment deal in crowdstreet: I looked at that deal myself a little bit (along with a few other investors in a private investor club I'm in). However, the Barcelona sponsor's nondisclosure agreement technically prohibits us from discussing the details of it in a public forum like this (where others may not be considered privy to it because they are non-accredited, etc). If you PM me privately, I can send you more info.

Johnny Chen · Answer

Hi everyone, thanks for all of the answers and the leads so far. Big thanks to @Ian Ippolito for the insights.

Crowd Sites - I checked out both Real Crowd and Crowd Street and really like the filtering options on Crowd Street.

Buy and Hold - It doesn't seem like any of the platforms are focused on long term buy and hold. I'm assuming it's easier and more appealing for most investors to have a 5-7 year exit strategy than to have a property forever. But one of the reasons why I like the idea of the BRRR model so much is being able to refinance your initial cash out, while keeping the property to build equity and cashflow.

BRRR for Multi-Family - Does this model exist? If so can someone point me to an online or offline syndicator, platform or deal that does this?

Deal Analysis - Out of the deals on the above platforms I looked at so far, the Barcelona Apartment Deal on CrowdStreet looks most appealing as it's a A 127-unit value-add multifamily with 10% sponsor co-investment. Any thoughts on why you would or wouldn't invest in this deal?

Does This Exist? The Dream Multi-Family Investment Scenario.

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