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Updated over 4 years ago, 05/19/2020
CLOSED on a 98-unit TODAY!
So, we had another thread going for a couple of weeks here. And this is not yet a success story, since a lot of work needs to be done to make it a success.
But, today, @Sam Grooms and I closed on this 98-unit in Phoenix.
This is a syndicated private placement acquisition. @Jillian Sidoti and her firm, whom I highly recommend, helped with the PPM-related docs.
The unit mix includes studio, 1x1, 2x1, and 2x2 lay-outs. The asset was constructed in 1984, and has by and large been un-touched on the interior of the units. However, the bones are very good, the unit sizes are attractive within the sub-market, and the location is experiencing very significant gentrification.
This was a mom-an-pop owned property. Rents are low even for as-is condition. Our Cap Rate on the way in is a bit under 5%. Our expected Cap Rate after the re-positioning in Y3 is 8.3%. Obviously we feel that there is a lot of upside on the rents.
We have a $1.4M renovation budget, which includes complete reno of the interiors, as well as close to $500,000 in the common areas.
I could talk for hours, but I won't. I have a feeling me talking for hours might happen on the blog :)
But, feel free to ask questions - I won't tell you everything, but I'll do my best to paint the bug picture.
Originally posted by @David Grinly:
This is very exciting. I'm just starting out in RE and am interested in the whole aspect of syndications, finding deals, and getting a group together.
I am just about to finish college and am wondering... what is the best way to start towards this kind of process?
I am not saying in reference to lock up deal like this (although a dream!) but, how can one start the foundation to get to where you guys are?
I am currently starting to familiarize myself with vocab and their importance in RE. What would you say are some steps someone beginner can take.
Thank you both and awesome property!
What are you studying in college? Do you already have a job lined up?
If you want to eventually do commercial real estate, I'd go into commercial real estate right out of college. Whether that's underwriting for a bank, an analyst for a services company like Cushman & Wakefield, or even a broker. All of those will help build knowledge, confidence, and credibility.
Originally posted by @David Grinly:
This is very exciting. I'm just starting out in RE and am interested in the whole aspect of syndications, finding deals, and getting a group together.
I am just about to finish college and am wondering... what is the best way to start towards this kind of process?
I am not saying in reference to lock up deal like this (although a dream!) but, how can one start the foundation to get to where you guys are?
I am currently starting to familiarize myself with vocab and their importance in RE. What would you say are some steps someone beginner can take.
Thank you both and awesome property!
This is an interesting question you pose. In one way, Sam is right - your current college studies can either help in your REI quest or not. However, as Sam has alluded to earlier in this thread, he and I come from utterly different backgrounds, being that he is a CPA and I am a violinist. And yet, both of us were able to find and succeed in REI.
So - whichever side of this equation your education satisfies, you can succeed. Not only that, but you can find a partner to compliment you perfectly in all of your areas of weakness.
One way or the other, success is more a function of persistence than anything else.
Good Luck!
Originally posted by @Stephen Jeffers:
Hahah That's funny! Thank you so much, Stephen :)
Originally posted by @Richellon Belk:
Congratulations! I would love to hear more about your lessons learned.
Thanks!
Budget to hire professionals, they can be worth every penny.
For the offering, get an attorney that specializes in securities, not just one who has or can do it. We used Jillian Sidoti, and she was great.
You'll also need a real estate attorney. We had a few last minute items come up from the lender, and we never could have closed on time without a great real estate attorney. I've seen deals fall apart because they weren't able to close on time. Which brings me to my next piece of advice.
Hire a due diligence team. This can usually be done by your property manager. If they don't offer that service, you might want a larger property management company. You'll still walk each unit with them, but their experience is invaluable.
Put extensions in your contracts. We didn't need it (we closed early), but we had a 15 day extension built in to the contract. It would have cost us $50K in nonrefundable earnest money, but if it saves the deal, it's definitely worth it.
Use a mortgage broker. They might seem expensive (probably the most expensive professional you'll hire, depending on the size of your loan), but its their job to make sure that loan closes. In today's environment when you usually don't have a specific finance contingency, just think of this cost as extra insurance.
Get your financing figured out between the LOI being accepted and the PSA being signed, if possible. We spent the first week after the PSA being signed still figuring out which lender we wanted to go with. By the time the application was in and they got started, we were two weeks from contingencies going away and our money going hard.
You can see that 4 of my 6 lessons deal with hiring professionals. Just factor their cost in to your numbers.
I'm sure @Ben Leybovich also has some good lessons.
Originally posted by @Richellon Belk:
Congratulations! I would love to hear more about your lessons learned.
Thank you, Richellon!
I just submitted the first article to Allison. It should be out on the blog within a few days. My take on teaching, though, is less about giving folks answers and more about encouraging thought...
Originally posted by @ROGER RAMIREZ:
Wow amazing job!!!! One day I hope to close a nice multi like this in the near future!!!
"Nothing in this world can take the place of persistence. Talent will not: nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not: the world is full of educated derelicts. Persistence and determination alone are omnipotent."
Calvin Coolidge
@Ben Leybovich and @Sam Grooms You both worked very hard on this, and I am glad to be a part of it.
I am an investor with Ben, one of his students, and I consider him to be a friend. Take note that Ben offers a class called Cash Flow Freedom University. From there he offers one on one advanced coaching where he explains his methods in further detail to you over the phone while you share a computer screen. Its all reasonably priced and it is time well spent.
I look forward to the day when I have the opportunity to work with Ben and Sam on a general partner level.
Originally posted by @Mark Forest:
@Ben Leybovich and @Sam Grooms You both worked very hard on this, and I am glad to be a part of it.
I am an investor with Ben, one of his students, and I consider him to be a friend. Take note that Ben offers a class called Cash Flow Freedom University. From there he offers one on one advanced coaching where he explains his methods in further detail to you over the phone while you share a computer screen. Its all reasonably priced and it is time well spent.
I look forward to the day when I have the opportunity to work with Ben and Sam on a general partner level.
Mark - thank you! This was not requested but is very much appreciated. You've known me for quite a few years now...
Yes, Ben did not ask me to mention his course, but I thought others on this thread would benefit from his wisdom, knowledge, and experience.
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#1 New Member Introductions Contributor
- Solo 401k Expert
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Congratulations @Ben Leybovich and @Sam Grooms, sound like great investment opportunity. Glad I was able to help some of your investors to unlock their IRAs to invest in this project with you!
Wishing you success with this one and more to come!
- Dmitriy Fomichenko
- (949) 228-9393
Originally posted by @Dmitriy Fomichenko:
Congratulations @Ben Leybovich and @Sam Grooms, sound like great investment opportunity. Glad I was able to help some of your investors to unlock their IRAs to invest in this project with you!
Wishing you success with this one and more to come!
Thanks for your help, Dmitriy!
So, many of you had asked for this, and now this thread will basically become an update vehicle for Silver Tree. It's not going to stay Silver Tree for too much longer, as we are changing the name and re-branding the community as part of our business plan.
In the first 2 weeks, we are busy collecting contractor bids. From communications with the Vice-President of Construction at the PM, I am gathering that exterior paint and landscaping buds are all coming in under budget. We've priced out kitchen/bath cabinets and everything seems in line at about $700 per door in materials cost.
The lender released the first draw of $400,000 toward the CapEx. We are tacking the exterior first, and lots of big decisions will be made early next week.
In the first week of ownership, however, there have already been a few big decisions. Most notably, this is a 1986 asset, and there were about 20 HVAC systems that were original. We've budgeted about $120,000 for HVAC replacements in our stack. This cost reflects the replacement of the entire system, compressor, exchanger, etc., and is based on about $2,400 per unit.
Sure enough, got a message 4 days into our ownership that one of the original units passed away a slow death. We decided to deploy about half of our budget to replace 100% of the original units, plus a few more. The scope is about 50% of the quote, so our cost per units went up by $200. Basically, we decided to pay $5,000 for the privilege of keeping about 50% of our HVAC budget liquid - not a large price to pay. Since the newer systems have enough life in them to be maintained for quite a few years ti come, I think this is the correct approach.
More is coming...
Our exterior paint quotes came in $15-$20k under budget, so that'll help offset the possible increase in HVAC costs.
Congrats @Ben Leybovich and @Sam Grooms. This was an inspirational post with fantastic timing since I just posted about my 44-unit syndication in Kenosha, WI. As you eluded to, the process seems very straightforward with a basic recipe to follow, but I think many aspiring syndicators underestimate the trials and tribulations we are faced with on a daily basis up until closing. Ben, your Calvin Coolidge quote so appropriately reminds us these challenges must be met with persistence and determination as talent, genius, and education alone will not lead to success.
I'm still only 75% subscribed to my syndication as we just got it under contract, but I already have my sights set on a 100+ unit like your gem next. Congrats, guys, and thanks for providing quality content and extracting all the details out of this deal.
Ben & Sam thanks for the continuing updates. This will be a great learning tool, so please post any detail you can.
First off, congratulations @Ben Leybovich. That's something I would love to get involved in after learning the ropes. I know that a lot of people specialize in certain arenas of investing and business but diversifying is the key to added protection and profit. It's really interesting to read these comments and see the differing opinions. A lot of great material here. Maybe you'll be adding syndication to your CFFU course down the road?
Originally posted by @Joey Tuckey:
First off, congratulations @Ben Leybovich. That's something I would love to get involved in after learning the ropes. I know that a lot of people specialize in certain arenas of investing and business but diversifying is the key to added protection and profit. It's really interesting to read these comments and see the differing opinions. A lot of great material here. Maybe you'll be adding syndication to your CFFU course down the road?
Can't really teach syndication in a course. Too many moving parts. Has to be live. Sam and I are thinking about doing a weekend workshop in Phoenix... Otherwise, I've started doing one-on-one with folks. There is just too much content to be viable for a course.