Multifamily newbie looking for advice

[Kamlesh Kukreja]

My first post ever !!! Please forgive me if I am repeating

1. Suggestions for a mentor for multifamily syndication?

2. Networking for MF?

3. Investor groups suggestions?

Thanks

Kamlesh

[Account Closed]

@Kamlesh Kukreja Everyone has given some amazing insights and I agree with so much of it (especially the "Patience Pills" from @Ola Dantis! SO TRUE) 

Happy to give some tips based on my experience in the Multifamily world - 

1) You don't have to start small and then build big... we went from 6 units to 173 units once we found the right mentor (and I know investors who went from 0 to 100+).  When we purchased our first 6 unit we quickly realized how challenging it becomes to scale because of...

1. a) How much you're paying a PM (Property Management Company).  You're looking at 10% - 13% for the smaller properties versus 3% or less for the larger properties
2. b) You use up a lot of funds very quickly - the same amount of money we used to buy a 6 unit could be put towards buying 100+ units (and still have very lucrative returns)

2) If you're going to hire a paid mentor, here's what's most important in my opinion (We spent $80K in mentors BEFORE we found the right one that actually helped us get our first deal across the finish line - and soon to be 2nd deal that's 200+ units)

1. a) They need to be willing to partner with you on the deal - if they agree with the underwriting, ideally in any state of your choosing.  Some mentors will only partner with you if the deal is in their home market which creates a feeding frenzy and too much competition in one area.
2. b) You need to have 1-on-1 coaching from the HEAD guy - NOT a sub-coach.  There are a lot of companies out there who are scaling too quickly and their only qualification to add someone to their group is if they can pay the cost of entry.  Then they bring on "sub-coaches" to try and keep up with the volume - turns into a churn and burn.  Many of these sub-coaches only have 1500-2000 units under their belt (red flag)
3. c) You want to make sure the group is actively doing deals - how many members are in a General Partnership? Big red flag if there's only a few people in the group doing deals
4. d) What's the culture of the group? Are their values defined and are people held accountable to them? We were a part of a group where you couldn't talk about a deal you were looking at if you weren't under contract because someone would steal it from you - it's very difficult to be successful in a group where there is no trust.  Culture starts at the top - does the leader screen people before they add them to their program? Are all members aligned in their values? 
5. e) What's their reputation with investors? Are their deals performing even in the midst of Covid? Are investors happy because deals are on track to achieve targets? What's reputation with brokers and lenders? Have they closed on on the deals they put under contract? (This is crucial to good deal flow)
6. f) Underwriting - how many hedges do they put in place to make sure the deal will perform? Are they truly conservative? (What cap rate are they using? Are they using a cap rate escalator for refi and sale? How are they projecting economic vacancy? <--should be 10% minimum for B/C assets / What type of income growth are they projecting once the property is stabilized? Are they scaling income in over time or all at once? Are they looking at cash-based T12s or accruals? There's a lot here on underwriting - it's SO IMPORTANT because you're attaching your brand to someone's name and you want to make sure that they are solid in how they buy properties - I have a couple of recordings from our mentor that can give you some more insight- message me and I can find the link and send it to you) 
7. I know there is A LOT here - I wrote more than I planned on writing haha! But these are things I really wish we had known when we started.   Cheers to your new venture!