North Hollywood, CA · Member since 2012 · 34 posts · 3 votes
Hi BP Community:
First order of business, my apologies as I'm not trying to act naive but I'm wondering why everyone is talking about apartment investing syndication as the best way to enter the multifamily unit space? I do get that under a syndication larger deals (i.e., number of units and high price listings) can be taken down but what I'm wondering is how profitable is this once everyone takes their share? I read and listen to different sources that of course talk about syndication for 150 +, 200 + and get how one individual unless your exceedingly wealthy can't do those deals alone. But what if an individual just single-handedly takes down the smaller apartment buildings say 20-40 units?
I have some money set aside and have been monitoring the 20-40 unit apartment space but it seems that the new buzz word is syndication. Am I missing the obvious?
Investor · Indianapolis, IN · Member since 2015 · 764 posts · 953 votes
7y
@Gustavo Gonzalez Great Question! I started with small mfam and scaled from there. I have owned duplexes, 6 units, 15 units, 30, 35, 60, etc and I have sold nearly all of it. Now I own 12 site managed communities that are 160 units to 314 units via syndication (where my partner and I are the sponsors). We own a vertically integrated real estate firm with 80 employees and will surpass 200 million in assets under management by the end of this year.
If you want to do what I do absolutely start small and use your own money before taking others' capital. If you don't want to lose money along the way and be truly passive; find someone else's platform where you can reap more consistent returns. From there focus on what you do well and get paid for and funnel as much of those funds into income property run by someone else. :)
Rental Property Investor · Doylestown, PA · Member since 2008 · 1k+ posts · 1k+ votes
7y
@Gustavo Gonzalez I think most syndicate deals have the syndicator putting in little to zero of their own money....potentially even getting paid for finding the deal and managing it. So not only are you getting bigger deals you can do infinite deals. Make sense? I haven't done any syndication deals yet. I've taken on equity partners but only 1 or 2 per deal (when they are above $1 million). We just form an LLC and an operating agreement that lays out everyone's responsibilities.
Specialist · Plainville, CT · Member since 2015 · 478 posts · 389 votes
7y
The big thing you are overlooking is that when you buy something in that range of 20-40 units you will struggle with finding quality property management, which is why people go after 100+ unit deals.
Investor / Syndicator · Austin, TX · Member since 2015 · 367 posts · 220 votes
7y
Chris is right, I spent some time on smaller deals and didn't like what I saw. I hurried into the bigger deals as fast as I could and teamed up with others. BUT, smaller deals can be had, and they're out there. I just think they're really tough.
1 major reason (among others this isn't an all conclusive reason) everyone is talking about apartment investing via syndication as the best way to enter the multifamily space, in addition to taking advantage of economies of scale is....,
It's a team sport AND if you're just getting started (you stated "enter") you want a team that consist of good operators that have experience.
It IS still very profitable (tax benefits, cash flow, and profit) AND assures the investment will thrive and survive.
Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
7y
Buying 100+ units is much more of a business model. These properties are large enough to have the best professional management companies, have on-site maintenance and leasing staff and have quality amenities. If you plan on buying 20 unit buildings, then be sure you have a good manager and a few back ups for when that one fails or plan on managing it yourself.
I think some of it depends on your personal preference. I have not done any syndication deals. I'm probably too skeptical of others. That is probably one of my many shortcomings. I like the 20-40 unit space. I manage my own properties so they have to be in relative proximity to me. I have 4 such properties. The key is finding good people to help with showing units, maintenance etc. Once you get up around 80-100 units you can hire your own people to do maintenance etc. if necessary. Good luck. I think you can find success either way, you just need to find what works best for you.
A lot depends on your personal goals. Many people take a common route of naturally starting out with either SFH or residential MFH and then gradually moving into larger properties. The key here is the word "gradually". And then comes a point when you decide whether you want to scale up or you're comfortable with your achieved state. In addition, for some folks it's a matter of being comfortable of taking on partners/investors. Not everyone wants this responsibility.
Bottom line, you want to ask yourself, "Where do YOU want to be when you grow up?!" Your end RE goal will drive your answer to the question.
Rental Property Investor · Tampa, FL · Member since 2015 · 1k+ posts · 969 votes
7y
Advantages of syndication
Much higher ROI to GP: They usually invest in the deal, so the ROI based on their fees is much higher than the ROI you would receive by purchasing a 20 unit with your own capital)
Ability to acquire larger properties
Cons (sort of) of syndication
Higher barrier of entry: need enough experience and track record for others to trust you with their money
More responsibility: you are using other people's money, and not just your own capital
For those who are able to save more than $30k a year or have substantial liquidity (over 200k), being a landlord and especially flipping is a lot of work. If you like it cool/good for you... but not a scaleble way of building wealth.
Do the math here… you with 300 dollars per property (2 months of work to buy a turnkey rental) you are going to need 20-40 of these to replace your income. I have 10 of these and have systems in place but have 1-2 evictions a year and 3-4 big things that happen. Image if I had 30, just 3 x those numbers.
Directly investing in a turnkey rental or small MFH is a good way to start to learn and build up the war chest to go into my scaleable investments such as private placement syndications. Whatever you do, try to be as close to the investment as possible. This is the fundamental problem I have with Wall Street who takes too much fees off the hard-working efforts of the middle class.
Investor · Indianapolis, IN · Member since 2015 · 764 posts · 953 votes
7y
@Gustavo Gonzalez Great Question! I started with small mfam and scaled from there. I have owned duplexes, 6 units, 15 units, 30, 35, 60, etc and I have sold nearly all of it. Now I own 12 site managed communities that are 160 units to 314 units via syndication (where my partner and I are the sponsors). We own a vertically integrated real estate firm with 80 employees and will surpass 200 million in assets under management by the end of this year.
If you want to do what I do absolutely start small and use your own money before taking others' capital. If you don't want to lose money along the way and be truly passive; find someone else's platform where you can reap more consistent returns. From there focus on what you do well and get paid for and funnel as much of those funds into income property run by someone else. :)