All Forum Posts by: Will Barnard

Not sure why I did, but I read all 4 pages of this thread and now my head hurts, pass the advil please.

The sky is blue. It will be sunny tomorrow. - Send me my badge when I'm correct!

There appears to be a lot of people here eager to predict a "crash". This has been going on for as long as predictions have and the vast majority of them are wrong. A broken clock is correct twice daily and if that is your play, good luck with your results.

Those who claim that the 2008 crash in RE (and stock market) can have a similar or worse result upcoming are simply ignoring the facts. FACT: Housing inventory is and remains at historic lows. Home equity is at historic highs. The fact that new housing permits continue to be well short of the housing needed for increased population is yet another factor. Loans were not given out to strippers and their cats through liar loans in the past decade+. The jobs market is strong, historically strong. Anybody willing to work (granted there are millions who would rather live off of free hand outs exist) can get a job in 5 minutes as there are a massive amount of available jobs and a shortfall of those willing to take said jobs. 

Rather than trying to win a prize for being correct with your crystal balls, why not focus on more productive tasks!

Now for my opinions: I think we are in for some RE value corrections and the market has already shown signs of retraction. More listings are having price reductions, listings are not getting 40+ over ask price offers anymore, and the interest rate hikes have placed many would be buyers out of the homeownership market and remain as renters (or add to the renter pool). This does NOT mean in my eye that a crash is imminent. It simply means things will flatten and adjust. Most have equity and even a harsh correction will not send a influx of foreclosures into the inventory pool. I am in my 3 decade of RE investing so certainly not a rookie, but will admit (and have publicly many times here) I have made many mistakes investing. One mistake I have not made is to base my decisions on peoples predictions, specifically those like Kiyosaki who make these doom predictions time and again and are rarely correct. In fact, it would probably be wise to do the exact opposite of what they say and you would be right 90+% of the time!

As you all can see from posts above, there are many reasons to stay clear of them and none to do business with them. In fact, they should be reported to the authorities for what I consider criminal behavior and at minimum for bait and switch practices and failure to properly disclose.

There are many threads here regarding NW. It is my opinion that you should stay far away from them. They hire rookie agents who haven't a clue how to evaluate a rehab property, they overprice the ARV and drastically undercut the rehab numbers. They also are not upfront or honest on the details of the property or transaction from each of my experiences with them. I never closed a deal with them because each time I was lied to and the numbers were never close to real. Your better off shopping the MLS and making offers than using NW.

Quote from @Brandon Craig:

Quote from @Will Barnard:

Quote from @John Teachout:

So unless the property management is going to be done by the deal sponsors, they're not delineating what amount is going to which... The more details that come out about the structure of this syndication the hokier it sounds to me. You seem to be committed to moving forward with it so all I can suggest is to bring this thread back to life in a few years and let everyone know what happened.

I agree with this. 10% fee, even considering PM fees in it appears to be high and neither is specified as to how much goes to each. If they are doing a 2% and 8%, then the sponsor management fee is double the norm. There have been quite a number of red flags and warnings in this thread and many of your responses tend to be, "but what about this and this is why that is" leading me to believe you have already made up your mind that moving forward is a good idea so I wont try and change your mind but again, warn you that some things in this syndication are outside the norm and the promised rates of return (STR's in the package included) are abnormally high leading me to believe that the investors will have a much higher chance of disappointment than satisfaction. A syndication should be well focused and this particular offering is all over the board. If you like the idea of investing in a syndication with STR's, then find one that focuses on that and has a good track record. If you like the apartment syndication process, then go with that. Combining so many strategies into one syndication offering is rarely a great idea.

Thanks for your response. 

I think assumptions are easy to make due to this being all text, but my mind is absolutely not made up which is why I am posting. 

i raised the concerns with my sponsors around the high IRR and fees and other points you all made and she countered with the air bnb component being the reason. I simply came back to you all with the rebuttal. 

True and fair enough. I was just taking the assumption that so many of us have warned on any sponsor offering such high returns (regardless if it includes mix of STR's) with such high fees and little to no skin in the game and you came back with the answers from the sponsor to justify them. So leaving assumptions out of the equation, I will again state a warning that if it were me as the sponsor in this deal, I would first not offer such a high return on my prospectus, rather a much lower one and then if and when the returns did come in that high, I look like a GOD! Second, I also warned that a sponsor mixing in so many different investment strategies into one syndication can be a recipe for disaster and disappointment to the investors. The fees and clarity behind them are also concerning to me.

SO my question to you is, why not look into other syndications and sponsors with long track records of solid returns and then compare there offerings side by side with this one? If you do, I think you will see what I see from afar.

Another comment above stated that you should check how much under management/ownership the sponsor has any anything sub $500k = rookie. I will disagree. Anything under $5M is rookie, not $500k.

Track record - only 10 STR's in the past (and I don't even know how long those have been owned or how they have performed) is not enough in my book to warrant such high promised returns in a totally mixed bag syndication. I really don't mean to piss all over this sponsor or their offering but I do mean to make clear how dangerous it appears to be. My only intent is to help.

Quote from @Matthew Irish-Jones:

Quote from @Jay Hinrichs:

Quote from @Matthew Irish-Jones:

@Eliott Elias how can something be guaranteed?

 U have to do a REG A to guarantee returns.. and then the guarantee is only as good as the company.. if the plan fails and the sponsor or company goes BK you still lose your money.  You can have personal Guarentee's but those by and large are worthless as well. 

Thanks Jay.   Investing and guarantee's are an oxy moron in my humble opinion. 

 Nothing humble about that, it is ACCURATE!!

I believe those who are stating above the words "guaranteed returns" are in violation of SEC rules and regs. The ONLY "guaranteed" returns are bank CD's, bank savings accounts, government bonds, and annuities. There are no real estate deals with "guaranteed" returns as stating that in writing is illegal. If anyone is telling you that they guarantee the return, be careful, perhaps run the other way.

Personal guarantees - these are only as good as the signor's performance history and the assets that back that guarantee. I have long provided personal written guarantees for all my private lenders on my flip and development projects and to date, not one single investor has ever lost a dime and that includes my publicly documented big loss projects in the 6 figures. I lost, they still got paid. That dedication to keep a perfect track record and a lifetime of building a great reputation (and the desire to retain it) is what makes that specific personal guarantee worth anything. There is a huge difference between "guaranteeing returns" and offering a signed personal guarantee, and as I have laid out, personal guarantees may or may not be worth the paper they are written on.

Lastly, posting on a public forum that you have $500k to invest is going to bring out all walks of life to attempt to get you to invest with them and in their deals. You are really opening yourself up to some risk by doing this in my opinion. As you can see from above, many posters are already offering their area and their investments. You would be better served to analyze which strategy of investing fits your needs and goals (i.e. passive, or active, residential or commercial, local or out of state, etc.) and then find the right team and/or partners to facilitate your goals. - Just my opinion.

Quote from @John Teachout:

So unless the property management is going to be done by the deal sponsors, they're not delineating what amount is going to which... The more details that come out about the structure of this syndication the hokier it sounds to me. You seem to be committed to moving forward with it so all I can suggest is to bring this thread back to life in a few years and let everyone know what happened.

I agree with this. 10% fee, even considering PM fees in it appears to be high and neither is specified as to how much goes to each. If they are doing a 2% and 8%, then the sponsor management fee is double the norm. There have been quite a number of red flags and warnings in this thread and many of your responses tend to be, "but what about this and this is why that is" leading me to believe you have already made up your mind that moving forward is a good idea so I wont try and change your mind but again, warn you that some things in this syndication are outside the norm and the promised rates of return (STR's in the package included) are abnormally high leading me to believe that the investors will have a much higher chance of disappointment than satisfaction. A syndication should be well focused and this particular offering is all over the board. If you like the idea of investing in a syndication with STR's, then find one that focuses on that and has a good track record. If you like the apartment syndication process, then go with that. Combining so many strategies into one syndication offering is rarely a great idea.

FIBI Long Beach, FIBI Manhattan Beach are two I have spoke at. Spoke with Christina several times but I have not yet spoke at her club yet.

Quote from @Brandon Craig:

Quote from @Chris Seveney:

@Brandon Craig

If they have a 40% annual return in their PPM and offering info run for the hills. If that was the case and they delivered that return they could raise $1 trillion as who wouldn’t want a 40% return….

Also find out how much of their own $ they have invested in the deal. What is the flow of funds - who gets paid first and what are the management fees

What are the lock up period

We put together a 20 question questionnaire to ask your syndicator. Let me know if you want a question

They have 0 in the deal it’s all investors 50/50 GM/LP

investors first. 
2% acquisition fee
10% asset management fee
1% capital transaction fee
10% preferred return to LPs

Year 2 refi+NOI shows 121% COC and year 7 155% on sale. In between years are 5-8%
 

I was very skeptical when reading your initial post and a few follow ups. After reading this last post, I now know my skepticism was highly warranted. 10% management fee? I would love to get that high of a fee. 50%/50% split? I would love to get that much as a sponsor! NO skin in the game for the sponsor? Not a good answer. The truth is, those numbers and terms are just not going to work. Proceed with extreme caution on this one or better yet, run. While it may work out, it sounds like a real long shot especially with the splits and fees as they are!

FIBI, which has multiple chapters, not just Pasadena, has always been my favorite in person meet up. I have been a speaker many times at these events and you get a great mix of new and seasoned investors to chat with.

Quote from @Ethan Hanes:

Quote from @Will Barnard:

I see the opposite as a distinct possibility moving forward. While interest rate hikes will hinder some buyers and some valuations, they are still below the average norm and (at least in So Cal) the housing shortage remains. When you consider how many would be buyers of homes have now been priced out of the market due to the massive value appreciations along with the higher interest rate costs, these would be buyers are forced to find a rental unit instead which should generate even more demand for rental units. Rents continue to climb which increases gross rev and in turn, covers the added costs moving forward. Values would only retract if NOI is negatively impacted and I just don't see that yet.

 Will,

This is a great perspective. It further solidifies the statement: “nobody knows the future”. I talk to about 50 different multifamily investors daily and the difference in opinions is outstanding. Some have told me that they simply can’t raise their rents because of rent control, some have told me they’d rather not raise their rents than risk vacancy, etc. The most important factor is that expenses (water, utilities, insurance, etc.) are not going to stop accelerating.

When you are unable to raise rents but your expenses are going up, how are you going to get the same cash flow you’ve been producing? 

Full transparency, I’m not an investor yet. I’m a salesperson. My job is to show people how they can do better and how we can help them. This opinion might be biased! 

 Well, every situation and every investment in each location will differ so there is no one answer to fit all. That said, there should always be a way to raise rents to keep up with costs, of course in record inflationary periods like we find ourselves, all bets are off. Improving the exterior and interior of units can help raise rental rates, offering additional services or amenities can also help. Looking for ways to add income streams like laundry services, snack machines, covered parking (for increase rental fees), billboards added to property, etc are some ways to add to your bottom line. Of course cutting costs is also a play here as well. SHopping services and products for better rates like insurance, management fees, etc can help. If inflation is outpacing your costs vs income, often we will have to ride that out and except lower returns for a period until the market shifts. Inflation will not stay as is forever and knowing this, having capital reserves to weather the storm is a necessity to stay afloat at times.