Multi-Family Syndication - Active vs Passive

[Louis Gilliam]

Hello BP community,

I'm just starting to dive into the RE investing world. As I'm learning and discovering what my "niche" will be I've really become interested in MFH. In this space I know there are active and passive investors. If there is anyone who as been on both sides of the coin in this arena (as an LP in one deal and a sponsor in a different deal) could you describe your experience from each perspective? Was there one side you preferred over the other and why? Additionally, could you provide "typical" ROI from each side? I'm curious to know how substantial are the returns as the sponsor/GP vs as an LP when the deal is through. From what I've learned the sponsor makes considerably more and that seems understandable to me since they are doing much of the legwork throughout the project. As a "hypothetical" LP, I tend to lean more conservatively in my investing. So I would likely look at a 5 year plan with a preferred rate of 8% (or lower for a higher equity) and a refi with a sale for an overall target of 20-25% annual ROI after the sell. My objective is build equity over cash flow in a deal.

Thanks for the input!

Louis

[Greg Dickerson]

Originally posted by @Louis Gilliam:

Hello BP community,

I'm just starting to dive into the RE investing world. As I'm learning and discovering what my "niche" will be I've really become interested in MFH. In this space I know there are active and passive investors. If there is anyone who as been on both sides of the coin in this arena (as an LP in one deal and a sponsor in a different deal) could you describe your experience from each perspective? Was there one side you preferred over the other and why? Additionally, could you provide "typical" ROI from each side? I'm curious to know how substantial are the returns as the sponsor/GP vs as an LP when the deal is through. From what I've learned the sponsor makes considerably more and that seems understandable to me since they are doing much of the legwork throughout the project. As a "hypothetical" LP, I tend to lean more conservatively in my investing. So I would likely look at a 5 year plan with a preferred rate of 8% (or lower for a higher equity) and a refi with a sale for an overall target of 20-25% annual ROI after the sell. My objective is build equity over cash flow in a deal.

Thanks for the input!

Louis

 You will not be able to find returns in the 20-25% range as a passive investors. Especially for conservative deal. You will have to be an active sponsor/investor of your own deal for returns like that or get into a development deal. Margins are very thin right now with all the comepetition.