Advice on Real Estate Syndications

[Hassan Ferozpurwala]

Hey guys, I've recently been selling turkey rental investment properties to investors and have been offering property management to them. I'm looking to start a syndication to combine some of the rental single family homes under one umbrella where investors would be able to invest in lower brackets compared to purchasing the entire property. I have no prior experience with syndications. I wanted to get advice on how a deal like this can be structure and what are some of the conventions and best practices for other single family syndication deals.

Here's a brief overview:
- A 15% management fee will be applied to the gross return and deducted quarterly from rental
income.
- Management party will retain a minimum equity of 15% in the syndication for alignment of interest.
- A minimum investment of $50,000
- A lock-up period of 12 months. Afterwards, they can get their principal back within 90 days with a 2% exit fee.
- Estimated 8.6% cash-on-cash return.

[Chris Seveney]

Quote from @Jay Hinrichs:

Quote from @Chris Seveney:

Quote from @Hassan Ferozpurwala:

Hey guys, I've recently been selling turkey rental investment properties to investors and have been offering property management to them. I'm looking to start a syndication to combine some of the rental single family homes under one umbrella where investors would be able to invest in lower brackets compared to purchasing the entire property. I have no prior experience with syndications. I wanted to get advice on how a deal like this can be structure and what are some of the conventions and best practices for other single family syndication deals.

Here's a brief overview:
- A 15% management fee will be applied to the gross return and deducted quarterly from rental
income.
- Management party will retain a minimum equity of 15% in the syndication for alignment of interest.
- A minimum investment of $50,000
- A lock-up period of 12 months. Afterwards, they can get their principal back within 90 days with a 2% exit fee.
- Estimated 8.6% cash-on-cash return.

 Have you spoken with any investors or anyone about those terms? First glance they seem very steep - 15% management fee, 15% min. equity and a 2% exit fee. 

Also where you getting the funds to return after 12 months? Keeping monies aside and readily available also means its not ivnesting and sitting there doing nothing for you?

In addition you could have a run on the bank.. stick to selling the props and making money and not taking the risk on tenants..  keep a few for your self with no partners if you want to own rentals.. much easier and cleaner in my mind.. Syndication brings on a ton of liability and pressure. 

 having been in the fund space managing one for 5+ years, I can say its very different than just owning real estate - you are a company and need to have people in place like attorneys on speed dial, investor relations people to answer calls, great tax and accounting people who get stuff done on time (I have one fund that we have two assets left that we are closing but it has been a nightmare with our external accounting getting paperwork to us on time - so frustating). 

You have to be "in it" and commit to it, trying to do it as a side hustle (Which is how we started) quickly you realize you either have to do it full time or not - its no longer a side hustle but a full blown business.