All Forum Posts by: Charles LeMaire

Suggestion: Start listening to Old Capital pod casts.  Each year, mid summer I believe, they have a convention at which there will be at least 100 independent syndicators. 

There are several other events that are available, but most are affiliated with a particular mentor or group.  The above, to the best of my knowledge is "non-denominational".

I would also suggest getting on Meetup.com, select real estate and multifamily. This works well in some areas (DFW is blanketed with MF meetups), but perhaps not so well in others. You will still be inundated with BRRR and Flip meetups, but look for the multifamily. Realize that most of these are affiliated with a particular mentor or syndicator.

Regards,

Charles LeMaire

@Chris Salerno.   Please explain what benefit you think a non-RE pro gets from $50k or $500k of depreciation (bonus or not), especially on his first deal.  Most of it sits until the prop is sold.  
Regards, Charles

@Chris Salerno - You wrote:
In my opinion, I would invest the funds into multi-family syndication. You will receive huge tax benefits and larger returns depending on the syndicator you are working with. You can also invest your 401k and IRA into real estate which a lot of people don't know that.

HOLD ON!  Huge Tax Benefits?  On a MF syndication?  Note that Derek says that this is his first deal so he is clearly not a Real Estate Pro.  All of the syndicators love to present the tax benefits of cost segregation to their investors and then say "talk to your account, I'm not a professional".  After about 10 years of passive investing, I have yet to find the Huge Benefits!   Yes, the income during the deal is mostly deferred and the gain is LT Cap Gain, which I happily take, but the big benefits are only for the RE Pros.  
Invest IRA money into a syndication: This does not align with the HELOC question, but IRA money can be invested. But there is UBIT & UDFI that almost no one mentions until you've invested. In the end a portion of your gain is taxable (yes, tax in an IRA - surprise!) relative to the leveraged proportion. BTW, the Solo 401K is said to avoid this.

To be positive, I have average about 30% IRR as a passive investor in MF syndications on the 15 deals that have gone full cycle (started in 2010), so there GOLD in them there hills. The last few years have been great, it is likely to moderate for a while - I don't want to oversell this.

Regards,

Charles LeMaire

As a passive MF investor, when someone asks how many doors I have, I respond with a straight face and tell them that I have about 5500 doors*.  Then I add that in many cases, I own only the door knob or perhaps the sawdust created when the peephole was added.  

* Entered 50 MF deals since 2010, 15 have sold, so the 5500 doors are in the current 35 deals.

The folks that are asking me are attempting to gauge the value of my opinions.  I agree that is sound like boasting and is questionably accurate, but in my world of MF, it is the accepted practice.

Regards,

Charles LeMaire

Not sure what your goals are ... 

Many, perhaps most, MF syndications use SEC Reg D 506(b) which allows up to 35 sophisticated (“knowledgeable”) investors. 
Charles LeMaire

If you are planning to invest in a leveraged investment with an SDIRA, you need to look up UBIT / UDIF, taxes on prorated portion of the profits.  This is often a big surprise for SDIRA investors.

Regards,

Charles LeMaire

Also a Sumrok student.  Like Paul, I passively invest. Consider the Rat-race 2 Retirement in Hurst Nov 16 & 17. 

I am a Brad Sumrok student, have been working with him since 2010. I am an "active" passive investor. As I've not been in all the various mentor/coach programs, I can't say the others aren't good.  What I can say is that Brad's Network of students has allowed me to meet his many students both sponsors and passives and invest in many deals and make a lot of money. In the 50 deals, I have worked with about 100 sponsor and it's been their first deal for 20+ of them.  As they are Brad trained, I have a "sleep at night" confidence. 

As a passive investor getting a mentor is a cost/benefit decision: money for training, experience, access, and therefore speed.  As a sponsor, it adds credibility.  By the way, I knew nothing about RE when I started, owned my home.

The group, that is, sponsors in the group, did 50+ deals in 2018 and is trending toward 75+ this year. 

The Sumrok network is welcoming and helpful. I like the camaraderie, folks help each other with issues that arise.

It is my anecdotal observation that in some groups, folks mostly invest with the main character, who gets rich(er) and the folks make some money.  In Brad's group, he trains folks to become the rich dude and even the investors do well as the deal fees are reasonable.  Mid-2018, there were 70+ millionaire sponsors.  He didn't announce the millionaire passives.

Clearly, Brad is not a charity, he charges and has benefited from his vision!

Regards,

Charles LeMaire 

May I add one idea; most of the above is dead on.

As a passive investor, I would be a lot more interested in a future deal with you, if I thought you have some experience. I suggest you do a deal or two as a passive investor, so you have some idea of what your future investors will expect of you.

And if you can get in as a Key Principal on an agency deal, that will open that door for you in the future. 

Regards,

Charles LeMaire

The original question was about Michael Blank's Nighthawk; I have no opinion about him or his deals, though his name has come up many times.

But then someone decided to besmirch my mentor, Brad Sumrok!  So this may be a little bit defensive, I apologize.  I met Brad in 2010, me knowing near nothing about RE.  I am a engineer and had some available savings to invest.  After seeing the MF presentation, I liked the math and jumped in as an LP.  Brad provided the training to become sophisticated and the network to meet more GP than I could imagine.  This allowed me to go FAST!   There have been a few horror stories, but the training and discussion in the group have helped me work past the issues, for instance, I became the GP on a couple occasions.  

To date, I've entered 50 MF deals, 14 of those have sold and 4 have gotten supplemental loans, returning more than my initial investment - a friend pointed out, I'm playing on the house!  I continued working for about 6 years, but the alternate income was a very convenient feeling (just in case!).  I recall a discussion before learning about RE, where I said I could control my expenses, but I could not control my income; RE changed that.

In summary, Brad has made me more wealthy than I ever expected.  As my wife worked for an airline, so I phrase it "We moved from a coach retirement to a first-class retirement".  I can't say other Mentors are worse!  I can't say one has to have a mentor.  But a mentor will move you up the curve so much faster!  And it is comforting to know that Brad, having started in 2002, looks over the deals.

You have to work out the Mentor cost-benefit for your self!  Mentors are not charities!

Inside the Sumrok Network, there are hundreds of folks, who are current deal sponsors and potential deal sponsors.  The big advantage to me is that I get to meet the vast number of them and "go shopping" for leads.  I find the leads, then wait for them to send a deal and look at that.  Currently, I seem a couple deals a week.

Some random comments about MF (which are worth what you are paying for them): 

* I have attempted to create a "MF Ladder", similar to a bond ladder that old folks used to have.  Every year a few sell and I buy a few. Three have sold so far this year and three more may sell.  Two of those may push until next year.  I think MF is better than bonds!

* It is true LPs have limited control: I don't have control over the sales - very true!  I have some control on the purchase, but not much as it may slip.  If you have to be in control, be a GP or stay in SF.

* The goal "I want $10K/month passive income" cause me some pause. I'm not sure I have that from cash-on-cash (CoC) distributions (I'm close). But if I include the sales, I may see $40K/mo or thereabouts, but a lot of it in big lumps.

* The CoC may or may not happen, so think of this as vacation money, not eat'in money. On one deal we had two guys in two cars hit two buildings in a week and drive off. Most of the Sumrok group deals do not have a Preferred Return. We can have a math debate on this, but if a deal is struggling, it won't be paying.

* The investment is long-term and illiquid.  The normal Sumrok group deal is "3 to 5 years". Be sure you don't need the funds for a while.  I got into about 3 deals each year for the first five years.  It was about year 5 when the sales started.  

* Returns were about 100% in the past ($200K total returned for $100K invested), but have drifted down to an expectation of 70% to 80%.  As I have seen 180% when the expected was 100%, I have hope that I will still see some home-runs.

* Total return is the sum of CoC and the pop at the end. So for $100K invested and 10% CoC on a 5 year deal with 80% total return, the deal is saying you should expect $10K each year (likey $2.5/quarter) and about $30K at the end, in addition to your $100K returned.

* I like to consider IRR, the measurement that takes time value of money into account. Money returned sooner is more valuable. The IRR is effectively the annualized rate of return. I look at it getting in, but I like to use it as a figure of merit after the deal to which deals were the better deals.

To be clear, I do NOT work for Brad.  I do volunteer at many of his events - if you should come, say hi!

Regards,

Charles LeMaire