Syndications and Passive investing

[LaRhonda M]

What are you thoughts of investing passively through sydications and how exactly do they work, or how does the investor profit?

I have a potential deal for a 80 unit apartment complex.. $25,000 min investment... 10% cash on cash (Quarterly payout)... 18-24 month hold period...minimum return at exit 25%.... target 2X return.

Is this a normal/good syndication deal?? Is the money primarily being made off of my initial invest, not necessarily property performance? what happens after the 2 years are we no longer invested? Or is does the CashFlow continue?

[Brian Burke]

My suggestion is to run, not walk, from this deal.  It is obvious that this offering is being put forth by someone that doesn’t know what they are doing, and seeking investors that don’t know what they are doing to fund the poorly-underwritten venture.

In today's market, finding a deal that throws off 10% cash on cash return is extraordinarily rare, and nearly impossible to find one that throws off that high of a return day one. With only a two year hold being projected, this would literally require 10% CoC right out of the gate. Not going to happen.

Second, they are forecasting a 25% return and a 2x multiple in two years.  Getting a 2x multiple in 2 years would require a return just under 50% when considering the effects of compounding.  A 25% return over 2 years would produce a multiple just north of 1.5x.  Not to even get into how rare it is to see 25% returns and 2x multiples in 2 years....

If the simplest of things don’t add up, which they do not here, how can you trust the way more complex stuff that goes behind these outlandish projections?  This just reeks of an attempt to get the blind to lead the blind.