CLOSED on a 98-unit TODAY!

[Ben Leybovich]

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.

[Alex J.]

Originally posted by @Ben Leybovich:

Originally posted by @Alex J.:

@Ben Leybovich

First off congratulations on the deal very impressive 

But I have to say This peaks my interest ..... I always thought of you as the guy who has said all the smart money has already made the big moves back in 2013 or whenever it was in your original few podcasts 

Why are you going so big this late in the cycle esp with mf which many have said is very overheated... also if there is a previous post on this I apologize for redundancy I have not read it

Maybe it’s an add value force equity play or something?  I personally don’t do large mf but I am very interested and will possibly be working with a lot more capital this time next year so I’d love to hear your thoughts 

Alex - good question.

I tend to learn in real time, and since 2013 I've seen people making money hand over fist. I mean, there I was saying - you are buying at 8 cap - what? Are you stupid?! And then, they weren't so stupid...

So I started asking myself questions, and doing research. Doing my best to get into the heads of smart folks.

I've come to several realizations:

What we experienced in 2010 - 2013 was brilliant, but also a once in a lifetime opportunity. That's likely to never, ever, ever happen again. Just based on this, if you are waiting for those conditions to occur again, you'll not be a buyer ever in your lifetime.

Additionally, the economics today are more favorable in so many ways for multifamily than ever before, from cost of new construction, to home-ownership levels, to mortgage financing, to attitudes, to pure and simple demographics.

I don't look at real estate in the same way I did in 2012. I've evolved. Am I wrong? Could be, but I don't think so, and I believe my desire to buy large-scale assets is rational.

That’s awesome!  Wishing you nothing but success 

I look forward to hopefully connecting in the future 

[Debbie W.]

Sounds like you did a great job and even better is that you are happy with the outcome. Congrats! Keep up the good work. Real Estate - It's not just a job. It's an adventure :-))

[Shiloh Lundahl]

@Ben Leybovich and @Sam Grooms that is so awesome that you guys closed on this multi-unit here in Arizona. I am looking forward to you sharing the details of your story about it at our meet up in Mesa on September 19th. https://www.biggerpockets.com/forums/521/topics/604730-investor-meet-up-in-mesa-arizona

Great job guys!

[Ned Carey]

@Account Closed who said the investors are getting crumbs? Did you see the PPM for this? 

As someone who might in the future be either a sponsor or investor in someone else' deal; I saw nothing to deter me from investing with them. Actually the opposite is true. 

the deal is highly skewed in the syndicators favor.?

Were we reading the same thread. What I saw was a lot of risk for a potential large gain. While the investors get a much safer preferred return.

Moderator Note: this was in response to a troll whose account has been closed. That is why you do not see the post I was replying to.

[Ben Leybovich]

Account closed,

I have two options here. One - to take the high road. And two - to tell you that you are an idiot. It's very hard not to walk through door number two under the circumstances...

"What i read was a owner gave away a lot. Sam n Ben jumped on it. Little risk, they know what they are doing. They sound so giddy." 

I am not sure what you mean by this. We paid lower than a 5 Cap on actuals. How does this qualify as owner giving away a lot. The owner gave away nothing, and @Sam Grooms and I will need to work like hell to get the rents up. Should we get paid for it?

"Investing is all about capital gains. This preferred return is misdirection to make investors think they come first. Cash flow is all well and good but the delicious juicy meat is the cap gains." 

In addition to the pref, the investors get 70% of the capital gains on the back end. And, by the way, if we end up light on the pref, then it gets caught up on the back end, by which diluting the general partner. 

"So are you eager to join in on the next Sam and Ben deal?" You should be :)

"I'm just saying this kind of convo should be kept among operators. No need to tell the sheep whats up." 

These people are very sophisticated investors, who've achieved financial success in their lives, hence their ability and desire to invest in a syndication such as this. Your innuendo is highly disrespectful to them. 

Now - get your trolling ars off of this forum.

[Daniel Guerra]

@Ben Leybovich

Congratulations!  Arizona is an awesome place to have an investment property.  The population and jobs in Arizona are booming!

I wish i lived there or knew somebody I can trust to invest down there.

[Ben Leybovich]

Originally posted by @Daniel Guerra:

@Ben Leybovich

Congratulations!  Arizona is an awesome place to have an investment property.  The population and jobs in Arizona are booming!

I wish i lived there or knew somebody I can trust to invest down there.

Daniel, both Sam and I are in Arizona. He has been here for 12 years, and I moved my family 2 years ago.  Absolutely loving it!

[Michael Spittler]

@Ben Leybovich congratulations ... you are an inspiration !

[Ivan Barratt]

Congrats guys! Good work on not "chasing a cap rate" and instead looking at the cap rate in year 2, 3, etc.  The property looks like a solid project! 

[Kyle Schlosser]

@Ben Leybovich @Sam Grooms Congrats. Will look forward to the occasional progress pic. Thank you for sharing all of the information that you do.

[Ben Leybovich]

Originally posted by @Michael Spittler:
@Ben Leybovich congratulations ... you are an inspiration !

 Thanks, Michael!

[Ben Leybovich]

Originally posted by @Michael Spittler:
@Ben Leybovich congratulations ... you are an inspiration !

Michel - thank you!

[Ben Leybovich]

Originally posted by @Kyle Schlosser:
@Ben Leybovich @Sam Grooms Congrats. Will look forward to the occasional progress pic. Thank you for sharing all of the information that you do.

 Thank you, Kyle!

[LaQundia Green]

@Ben Leybovich Congratulations!!!

[Andrey Y.]

Originally posted by @Account Closed:

I hope im not offending anyone.   Syndication is a legitimate tool. I just notice a lot of people(investors) go for the shiny object not actually doing their due diligence.   Oh Ben Leybovitch the guy on a podcast-  where do i send the check?

Why do you think SEC or whatever makes it so tough for operators to operate.

If i had star power id do the same thing .  Only thing  i would do different is not to congratulate oneself on an open forum.

Accredited doesnt necessarily mean intelligent.  It does mean if they lose money they  likely wont be complaining to the SEC or whomever.

 I haven't read any "congratulating oneself" anywhere. Taking a deal down like this (and executing on the reposition) takes a lot of work, it isn't easy. Where is your profile pic? So far, you have no credibility with your blank picture and your post.

[Ben Leybovich]

Originally posted by @LaQundia Green:
@Ben Leybovich Congratulations!!!

 Thank you, LaQundia!

[Sam Grooms]

Originally posted by @Account Closed:

You need to understand investing concepts. Arent you the guy hooked on syndication investing................good luck to ya.

If you are happy with your preferred return----no problemo. 

Maybe this will help.  Syndications is just another form of OPM.   If you want to be on the wrong side of OPM then im with you.

Another example is Wall Street Hedge funds.  

You do understand that the 8% pref is the baseline, not the ceiling, right? This is equity, not debt, and investors get 70% of that equity. 

[Ben Leybovich]

Originally posted by @Account Closed:

You need to understand investing concepts. Arent you the guy hooked on syndication investing................good luck to ya.

If you are happy with your preferred return----no problemo. 

Maybe this will help.  Syndications is just another form of OPM.   If you want to be on the wrong side of OPM then im with you.

HAHA You really crack me up. Before you argue with Andrey Y., lets understand something about him. Let me paint you a picture:

Andrey is successful. He is a guy who has some money, which means he is financially intelligent. He has enough money so that he has the option to choose to place more value on his time rather than hos money.

Let that sink in...

With his money, Andrey could buy a small-mid-size mutli on his own, and not get diluted by a syndicator. But, Andrey realizes that doing so would require taking calls about leaky toilets and evictions, and he makes the choice to value his time more - his financial success has earned him the right to make this choice...

Now, I don't mind telling you that personally, I'd much rather be Andrey than me. I'd rather stroke checks and receive passive returns, and never have to worry about property management, investor relations, etc. But, we all can't be Andrey - I haven't earned this right just yet, and my highest and best use happens to be to service his REI needs.

I find it superbly amusing when people who swing hammers at their rentals, take calls about leaky faucets, and show up to meet the sheriff for evictions, try to tell folks like Andrey who would rather make less return but have someone else do the work, that they are somehow less astute...

I wish you the best of luck to become Andrey - his is a nice life!

[Christopher Berggren]

Congratulations!!

[Joseph M.]

Congrats @Ben Leybovich and @Sam Grooms Thanks for sharing the details of this deal! Much success on the repositioning/value add .

[Sam Grooms]

Originally posted by @Account Closed:

Ben needs to work on his BRAND.  Get out there.   Tell your story about how you came to Anerica.

Think Grant Cardone-  does anyone really think he is out searching for peoperty.  His job is to get people to invest along side him.   It makes them feel good.

Same with Kathy Fettke.

Del with his he isnt doing it for the money he is doing it for the lifestyle schtick

Even Morris has his brand.  Not a syndicator but lots of money flows thru him.

Ben and I underwrote properties for 10 hours a day for 5 months. Don't try to imply that Ben doesn't work or that he's not out searching for property. We took our wives out to dinner on Saturday and after a toast to closing this deal, his wife asks, "So when are you getting back to underwriting?" Now, because Ben has built up his cash flow, he has a lot of freedom. But don't think for a second that he doesn't use that freedom to choose to work hard. This business is a grind. Don't be naive and think that just because you don't see the daily grind, that its not there. 

[Chris Clothier]

@Ben Leybovich and @Sam Grooms - well done gentlemen!  Like many posters on here, I wish you guys the best in this deal.  

I also hope you guys know you don't have to reply to every comment on here.  Your credibility is already built within this community and you literally have nothing to gain by going back and forth with any poster that wants to question or belittle you.  Don't take anything personally.  

Ben, you've done a great job through the years of engaging in good and thoughtful and sometimes entertaining debate and I've often been on the other side.  But responding, especially when the poster has literally shared nothing about themselves, is a waste of your time and talents and certainly not expected by any of the readers on here.

Again, I wish you guys well in this latest venture and look forward to following your updates.

[Sean McElligott]

Congratulations fellas! I don't own many properties but I enjoy reading about others successes and learning something. Actually, Im so new I had to re-read half this thread just to follow the lingo! LOL.

[Ben Leybovich]

@Chris Clothier - thank you!!!

[Joseph M.]

@Ben Leybovich  @Sam Grooms 

Was this syndication offered only to accredited investors or both accredited and non? 

Also hope to hear some updates as things progress. 

Are you looking for other deals only in Arizona or any market?