All Forum Posts by: Abel Sng

@Michael Huang will depend on the lender and whether the debt is recourse or non-recourse. To add on to what @Michael Le said, if you go the agency debt route (FNMA/FMCC) your net worth has to be equivalent to the loan and 10% liquid of the loan amount post close. If you don't meet that requirement, you can bring on others with the net worth to help you but that typically will come at a cost.

Good luck!

Daniel it's crushing it in a good way haha! We bought it at a 7+ cap so sale price was essentially price adjusted for the assumption. I would run two scenarios get the actually yield maintenance $ amount and add it to the purchase price and see what your model looks like after placing new debt and what your model looks like if the lender will give you a supplemental. What's your exit strategy and timeline?

1. They are typically locked in. No real benefit to the lender to renegotiate.

2. It will depend on if they will be willing to issue a supplemental loan to increase proceeds. Another option is a bridge loan until the yield maintenance clears depend on how long  is left on the note.

Do you know how much the yield maintenance is? Typically the seller is discounting his price based off of that amount. Yield maintenance will depend on the interest rate and how many years are left on the note.

It's good that you are looking at both options. Typically, we also like to put new financing so we can get a couple years of I/O but we did a FNMA loan assumption early this year that has been crushing our projections.

@John Clark we use a custom one however nothing super crazy. Your analysis and back of the napkin will vary probably quite a bit depending on asset class, location, size etc. But I think @Andrew Johnson rule of thumb of 50% will get you in the general ball park. We deal typically with 100+ units. My recommendation is to start networking with brokers and getting on their lists. You'll typically get the OM, T12, and current RR which will give you enough to get started. Once you've seen a few of them you'll start getting the hang of rent comps, price per sqft, price per unit, what certain expense items should be per unit in your submarket, etc.

Additionally, your proforma most of the time should land somewhere between the actual current financials and the broker proforma. Typically, deals that will work have upside so your performance should be better than how they currently sit and the broker's proforma will always be aggressive.

Good luck!

@Dennis Johnson do you already have deals lined up and familiar with underwriting deals to weed out the good ones from the bad? In my experience investors have a shelf life. Even if you find them and line them up, without a deal to present you're pretty much dead in the water. Most new syndicators have the "chicken or egg first"/"deal or investor first" predicament. Spend all your energy to find the deal and the investors will come. Hope this helps and good luck!

@Kate Weinberg the 8-10% is your cash on cash return. Doesn't factor in your appreciation on the back end. Typically syndications should net you around 80-100% total return over a 5 year hold. So between 15-20% annualized total return. My family and in-laws both have done well for themselves through SFH investing and have both since started to liquidate their SFH and putting their funds in our syndications. When you do the math on a typical buy and hold your cash on cash isn't much better and definitely not passive.

@Mike Dymski wish I had a crystal ball to tell you that! But if I had one I would be on bigger pockets ;). However, it will all depend on the sponsors, deal structure, asset, location, etc as I'm sure you know. We only invest in strong economic markets such as DFW and ATL and typically in C+/B-ish class assets. Additionally, we put FNMA agency debt on most of our deals. If you look at the report they just came out with in August, they only had around a 1% delinquency rate through the crash in their MF holdings. Pretty good if you ask me. IMO, if there's an economic downturn everyone's returns get hit however with our business model it will definitely get hit less than most other investment vehicles! If you have any questions I can help answer please feel free to reach out!

I can vouch for @Conor Freeman. He's provided our group some solid quotes and value on our deals!

@Account Closed to lunch as he just provided you a ridiculous amount of primo multifam knowledge in just two posts!

I always suggest to "rookie" investors who get the MF investing bug to learn how to underwrite deals before you start dreaming about when you'll retire or how you'll spend all your passive income. That's how I got my start and have since sponsored (with my partners) 3 deals and just under 500 units total in the last 8 months. You'll always be able to provide value and speak educatedly when you pitch deals to potential investors or partners if you know where the numbers come from.  

As for how to gain the knowledge or get experience, practice makes perfect. Also, finding a mentor will speed up your learning curve quite drastically.

Good luck!

@Kate Weinberg depending on whether you want your cash flow to be active or passive you could become a passive investor in a MF syndication and probably fetch between 8-10% cash on cash annually. However, you typically have to be an accredited investor to participate. Message me if you have any questions! BTW, I used to live in Provo and miss Utah!

The split sounds more than reasonable. He's actually taking the bigger risk than you are because if you turn out to be a terrible "mentee" he's actually upside on his RoT (Return on Time). He's only making money if you make money. I would take him up on it since you have absolutely no risk.

Unless you sign some sort of non-compete and are not allowed to do deals outside the partnership until he recoups $500k then that would be a large potential issue.

Good luck!