Starting out in Multifamily Syndications

[Ashton Levarek]

So my brother/partner, @Chris Levarek, and I often get asked how can someone get into large multifamily investing? 

They love the better economies of scale, they love the tax benefits, they love the idea of not having to be an expert on it all but just being able to focus and excel in one area, while also working on a team and contributing toward a unified goal. 

But.... How do I get started in syndications for the purchase of 50, 100, 200, plus unit properties? 

So after a long talk we realized that there are 3 common ways people get started... and become successful, and we've actually used 2 of these methods... somewhat effectively. 

The three most common ways to get into large multifamily investing and apartment syndications.

1. Pay for a mentorship - Pros - get access to their network, professionals, and advice. Cons - Often a large deposit is needed, no guarantees on deals though - still have to do the work

2. Go it alone, self educate, learn through trial and error. Pros - Bigger returns possible, lessons learned are likely learned from making mistakes, and therefore will be remembered better. Cons - Higher risk of mistakes, failure, takes even more work, and slower to scale

3. Partner with an experienced team on an active deal, either as an active investor (General Partner) or a passive investor (Limited Partner). Pros - learn through their deal, earn returns while you learn, see everything develop in real time. Cons - still have to do your due diligence on the team, the market and the asset itself (but above all you MUST know and trust the team - cannot say enough about this - the numbers and market don't mean squat if the team cannot execute).

We actually started with #2 in October 2018, buying small residential multifamily deals - duplexes and quads. Then in Jan 2019 we completed (stumbled through0 our first syndication on our own. We quickly realized that partnering was going to help us scale much much faster, and allow us the benefit to learn from their experience, as well as pick an choose what we liked from their processes/system of acquiring a large property and executing such as massive business plan. So when a larger and more experienced syndicator saw what we were doing and asked us to partner on their next deal... well it just made sense. And now we're closing on a 220 unit, with another 2 lined up behind it. 

Hope that helps.

[Chris Levarek]

@John Lyszczyk You are correct. The establishment of the legal documents will take you verbalizing your intentions and business plan to the securities attorney. Here is how the process works :

Start with a free intro call, usually available with an attorney, and layout what you plan on doing. They will show the weaknesses or strengths and provide inputs. If you feel they are a good candidate, you then proceed on structuring the documents together.

For about 3-4 weeks, the attorney will work with you to customize their existing template to fit your needs. If you want a 30/70 split, they will add it. If you want a specific affiliate named as partner, they will add it. If you want a butterfly museum as an acquisition fee they will add it, maybe...

As @Ashton Levarek, these can be customized and highly detailed. 40-60 pages of a PPM are not uncommon, hence why it takes 3-4 weeks to deliver it. ...And of course then you must reread it yourself to ensure you are not missing anything...

The second go around will be easier as you have your own template in place from the first unless the structure changes dramatically.

My recommendation is either invest passively on a deal to gain access to the documents and see firsthand how they work and the process unfolds. All documents even those you will not sign should be presented to the investor as Exhibits at signing, so can really show you what these look like. 

Alternatively, you can actively run through a deal and allow yourself the extra time with a qualified securities attorney to learn, gain feedback and review the syndication agreement, operating agreement and PPM.

Third, you can join a mentorship that will share such documents from previous deals or have an amazing partner/friend/mentor who will show you one.

Interesting how those three recommendations seem to align with the recommended steps from @Ashton Levarek how one gets into multifamily ;) It's almost like we are brothers.