Anyone have experience working with Simm Capital?

Question

They are offering a syndication fund for section 8 housing paying 9% dividends and 60% annual profit sharing of cash flowing properties in the portfolio.  Trying to do some more due diligence here.

Lane Kawaoka · Answer

It's pretty amusing how I fell for that type of deal back in 2013 during my first investment. They were offering around nine or 10% dividends, and there was also some 50-50 split on the backend. Again looked really similar.. who knows what the outcome will be. But, looking back, I've learned to be extremely cautious about such opportunities. There are so many scammers out there, especially dealing with single-family home investments.

By the way, I doubt you'll get much response on this platform because there are countless capital groups promoting similar deals. The one I was involved with in the past eventually disappeared, just like hundreds of others doing the same thing.

I'd strongly recommend seeking out other purely passive accredited investors and focus on building real relationships. Put effort into getting to know people beyond online forms – that's the key to successful investments is finding other LPs.

Evan Polaski · Answer

@Mike Zitomer, no experience with Simm.  I will say, that assuming their experience on their website/linkedin is in the same type of industry, they have been around longer than most any other syndicator you will find on these forums.  But I would confirm what they were doing in 2008, since I have heard some syndicators talk about "I started investing in real estate in 2004..." which, when you dive into it, they mean "I bought my first primary residence in 2004", which is vastly different than doing large scale investments.

Regarding syndications, only accredited offerings, etc: I tend to disagree.  There are very strong operators that do non-accredited funds.  For instance, I worked for a company who was more focused on running successful deals than they were marketing.  So they raised money when they needed to from friends and family, referral network, etc, then got back to running deals.  For these groups, there is no need to run an "accredited investor" only fund.  Or the same can be said about a group going public with a great track record for their successful IPO.  I know I am splitting hairs here, but accredited only offerings do not make someone better or worse than doing non-accredited offerings.

Onto a part that I can speak to: Section 8 properties take more work than market rate offerings.  Before I jumped into this type of offering, I would strongly vet their prior experiences in this area, who is doing the day to day management, what type of relationships they already have with Cleveland MHA since that is a target market.

And lastly, I would be monitoring the progress of the Stop Predatory Investing Act.  While this legislation is proposed nationally, its lead sponsor is Sherrod Brown who is from Mansfield, not far from Cleveland.  If passed, this legislation would create major issues for SFR funds like this.  And even if not passed, there have been some less than positive press on funds to acquire large numbers of SFR in certain markets, and local governments are becoming less accepting of them.

Paul Azad · Answer

Hi Melanie, depends on 10 yr note, could continue to go up slowly for next 30-40 yrs as it has done between 45-82 or 1890-1920, or down for 30+ yrs like 1920-1945 or 1982 until 4 yrs ago, if they have 25% down and long term fixed rate debt ( just got a 10 yr loan at 6.95%) and Cap rate >150 Bp above debt rate, they should do fine-assuming good local market, even if value drops 20% short term, it will recover longer term and should be ok. My family bought SFRs in early 80's w mortgage rates >18%, but high inflation drove rents higher than debt expenses so they all cash flowed

also look at USFR, paying 5.37%, holds 8 week Tbill floating rate notes only, not as good obviously as buying Tbill directly at the top of the curve (i bought a 26weeker in late Sept at 5.6%) but much easier to transact, i suspect 10yr will fall over next 2 yrs (FED cycle) then slowly rise over next 30-35yrs (long us debt-deleveraging cycle)

Melanie P. · Answer

Their website says "Leverage - Use $25M to buy $100M."

Does this seem like a great time to get involved in real estate projects with a planned 75% leverage? You can get over 5% on a 26 week TBill on treasury direct while you wait for opportunities to emerge as interest rates continue to correct the market.

Be safe out there.

Karen Halle · Answer

Did you invest with SIMM Capital?  I am currently looking into their syndication.

Rachana Prabhakar · Answer

HI Mike?

Did you invest with them Simm Capital? I am also looking at their offering. Please let me know your experience.

John Fortes · Answer

Hi Mike, I see you're local to me. It's nice to meet you.

What Lane and Evan have responded with sums it up for me. Like many on this forum do, not only do I respect their professional opinion, I value their experience on the matter as well.

Chris Seveney · Answer

Have not worked with them or heard of them but that does not mean its not a good offering. Do your due diligence on them and ask a lot of questions. There are 1000 funds out there to invest in and it can be overwhelming. For a section 8 fund also ask about there experience in owning and managing section 8 housing as if it is not very hands on, it will not end well.

Anyone have experience working with Simm Capital?

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