First experimnet with syndication.

[Scott McGrath]

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Deltona.

Purchase price: $385,000
Cash invested: $130,000

Worked with 4 friends to buy a poorly managed quad in a stable area.

What made you interested in investing in this type of deal?

I wanted to syndicate a deal, and felt it best to start small. I wanted something slightly larger but the market area has little available. Everything seems to be small or huge one the I-4 corridor.

How did you find this deal and how did you negotiate it?

A friend brought the deal to my attention and I used him as my buyers agent. It was listed at $450,000 but clearly needed work. The negotiations took about 45 days, the home inspection came back worse than we thought and negotiated down from the original offer of $420k to $385K.

How did you finance this deal?

We raised $135,000 in capitol for down payment and immediate repairs. The raise was not an even split, investors put in anywhere from $10,000 to $35,000 each and own a percentage based on initial investment. We financed with a credit union, put about 27% down and completed $40,000 in repairs in the first 60 days. This included putting the residents up in a hotel for 3 nights while the electric panels were replaced and treated for bed bug and German roach infestations.

How did you add value to the deal?

Treated for bugs, replaced the interior and exterior "Zinsco" Breaker and service panels ($10,500), remodeled 2 bathrooms, replaced 3 of 5 water heaters, smoke detectors, added kitchen and bathroom GFCIs, 1 AC unit, 1 new dryer, replaced 2 windows, repaired several more windows.

What was the outcome?

The property has been doing well, and should appraise for about $470,000 now.

Lessons learned? Challenges?

I would have raised more money for repairs upfront. we had planned to do health, safety and welfare items upfront and other repairs as cash flow became available. In hind site, I would have raised another $20,000 and replace all the ac units (all 9-10 years old) and front doors as well.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I worked with Mike Palombi with Coldwell Bankers in Lake Mary, FL. Mike is very knowledgeable and all around good guy.