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All Forum Posts by: Brian Burke

Brian Burke has started 16 posts and replied 2266 times.

Post: Have you lost money in a real estate syndication?

Brian Burke
#1 Multi-Family and Apartment Investing Contributor
Posted
  • Investor
  • Santa Rosa, CA
  • Posts 2,314
  • Votes 6,975

Very true words. The people behind anything, is everything!

Post: Have you lost money in a real estate syndication?

Brian Burke
#1 Multi-Family and Apartment Investing Contributor
Posted
  • Investor
  • Santa Rosa, CA
  • Posts 2,314
  • Votes 6,975
Quote from @Gregory Schwartz:

I've been searching for solid data on this. It seems like everyone knows someone losing money on a syndication or hears about apartments selling at a loss. But is this truly a growing trend, or are banks still propping up struggling operators? And beyond that, who is facing the biggest challenges?

I suspect we’ve only seen the tip of the iceberg.  Maturity defaults and loan defaults are only now beginning to rise.  Almost $1T maturing this year. At the first hint of market improvement lenders will stop kicking the can and start forcing moves. 

Post: Have you lost money in a real estate syndication?

Brian Burke
#1 Multi-Family and Apartment Investing Contributor
Posted
  • Investor
  • Santa Rosa, CA
  • Posts 2,314
  • Votes 6,975

@Arn Cenedella I suspect you're right and that's in line with what I expected too.  I might add inexperienced sponsors, preferred equity, and partnership breakups to that list, too.

@Robert Rixer come to the summit!  Easy trip from Miami to Columbus.  :)  

Post: 506(b) vs. 506(c): Which Syndication Model Is Getting More Investors?

Brian Burke
#1 Multi-Family and Apartment Investing Contributor
Posted
  • Investor
  • Santa Rosa, CA
  • Posts 2,314
  • Votes 6,975

I took a 3-1/2 year break from raising capital for investments because raising money for multifamily, our core business, made no sense in a rapidly declining market.  But I just launched a new fund last week, so it's good to be back in the saddle.  But it's not for multifamily--I still think that sector is almost un-investable and just has a bit more of a struggle before recovery.  Maybe next year...

I always used 506(b) up until 2020.  In 2020 I switched to 506(c) not because I had any plans to advertise, but because my book was published by BiggerPockets and I wanted to eliminate any risk that the SEC could interpret my book launch to be a general solicitation and find me in violation of 506(b) guardrails (even though I think my book is really more of the opposite of a solicitation!).  

Fast forward to 2025 and I think enough time has passed for me to safely go back to 506(b)--but I'm not.  I still have no plans to generally solicit, but I might change my mind and now I'm able to do so.  Plus, I'm somewhat well known and have a presence on BP and 506(c) allows me to be a little less careful about what I say.

What do I give up in exchange?  Two things.  1. I have to verify accreditation of my investors.  That's not hard, and most of my repeat investors will be exempt because of the 5-year rule.  2. I give up the ability to raise from non-accredited investors.  OK--I'm limited to 35 in a 506(b) offering anyway, and if every non-accredited investor committed to $100K that's a max of $3.5 million.  In a $50 million fund, that's not significant enough to move the needle, and if I were to generally solicit I could likely raise much more than the $3.5 million I traded out.

As to your question on splits, prefs and target returns: I think right now investors want four things: 1. Highly competent sponsors. 2. Simplicity--meaning not 100 different categories of fees and hurdle tiers. 3. No financial engineering to manufacture outsized returns. 4. High cash-on-cash returns--meaning none of this 1% cash-on-cash yet 20% IRR stuff where all of the return is speculation on appreciation that never comes. Give investors high CoC day one and throughout the hold. Our fund is targeting 15-16% IRRs but 12-13% cash-on-cash. Only a sliver is speculation-driven IRR. I'm using an 8% pref and 70/30 split--doesn't get much simpler than that.

Finally, to your question about how do I stay competitive while still making deals pencil--that's also easy.  I'm not doing multifamily.  This nonsense of buying 4 caps and financing at a 6 is not rational investing.  If you can't get deals to pencil, it might be your strategy, not your structure...

Post: Have you lost money in a real estate syndication?

Brian Burke
#1 Multi-Family and Apartment Investing Contributor
Posted
  • Investor
  • Santa Rosa, CA
  • Posts 2,314
  • Votes 6,975

No one likes to talk about deals that don't go according to plan, but one thing we can do is learn from them.

At the upcoming PassivePockets summit I'm hosting a workshop on sponsor/investment selection. In preparation for this, I'm researching syndicate failures and investigating clues that could potentially help other investors avoid losses.

I'm seeking marketing decks, proformas, and so on for syndicates that have resulted in total or partial principal loss. I have a few, but I would like to have more.

If you've experienced a syndication failure, I'd be grateful if you'd share some information with me via direct message. No judgment, no names, and complete confidentiality. I'm not seeking to name names, just identifying warning signs and trends to help fellow investors.

Thank you in advance!

Post: If you had one question for a professional Syndicator, what would it be??

Brian Burke
#1 Multi-Family and Apartment Investing Contributor
Posted
  • Investor
  • Santa Rosa, CA
  • Posts 2,314
  • Votes 6,975

@Kyle Vogeler I’d say it’s a mixture, but has all boiled down to word-of-mouth and referrals.  That’s a slow road to growth, but it works.  Another avenue is podcast appearances and speaking engagements at conferences.

Post: Syndication opportunity vetting

Brian Burke
#1 Multi-Family and Apartment Investing Contributor
Posted
  • Investor
  • Santa Rosa, CA
  • Posts 2,314
  • Votes 6,975

Some RE lawyers have securities experience, if you find one, sure.  Otherwise you’d be better off with an attorney that specializes in securities work. Better yet, one who has a lot experience specifically in real estate offerings.

Then there is the question of whether you want attorney review at all.  It’s unlikely that you’ll be able to negotiate the terms of the deal so all the lawyer will be able to do is point out what they see and then it’s up to you to decide to accept the terms of the deal or pass.

A good securities lawyer will run you somewhere in the neighborhood of $500/hour.  It can take at least a couple hours to read an operating agreement, then you have a subscription agreement and PPM, plus drafting an opinion…my guess is a review runs you $2,500 to $5K.  If you are investing $1M this is a de minimis cost.  If you are investing $25K, the calculus changes.

You can do your own review if you know what to look for. Start by reading The Hands-Off Investor, and check out the PassivePockets podcast—there is a recent episode with passive investor Jeremy Roll and securities attorney Mauricio Rauld that discusses this exact topic.

Post: Recession-Resistant Property Types Worth Considering:

Brian Burke
#1 Multi-Family and Apartment Investing Contributor
Posted
  • Investor
  • Santa Rosa, CA
  • Posts 2,314
  • Votes 6,975

I've seen mixed results from these asset classes over the last several market cycles.

MHPs do seem to have some resistance to recessions and some stability, in part due to the reasons you gave.  They do have some risks, however--such as big-ticket capital improvements like water/sewer systems and roadways.  This can be mitigated to some extent by thorough due diligence, but for long-term ownership you'll probably get hit with these eventually.  This can be especially painful when the cost of labor and materials is high--as is the case now.

Self Storage has seen rent declines in the last couple of years.  I'm not sure that this is recession-related because we haven't been in an recession (officially?).  I think it has more to do with over-building, which can be just as bad as a recession.

I agree with your thesis on medical office, however I've noticed a lot of doctor consolidation in my area with doctors either leaving the area due to high costs or partnering up with other doctors and/or larger medical groups.  Our class A medical office seems to be doing quite well but I see a lot of vacant B&C class medical office that wasn't vacant a few years ago.

My addition to this list is senior housing, specifically assisted living, memory care, and skilled nursing facilities.  I believe in it enough that I'm about to launch a fund for acquiring just that, and have ten assets in contract already.  This is a needs-based use, so it has recession resiliency, but many states also have development restrictions so you don't see the over-building problem like we've recently seen in self storage and multifamily.  The downside here is you need specific industry knowledge and relationships to make this strategy successful, so it's out of reach for a lot of sponsors.

Post: If you had one question for a professional Syndicator, what would it be??

Brian Burke
#1 Multi-Family and Apartment Investing Contributor
Posted
  • Investor
  • Santa Rosa, CA
  • Posts 2,314
  • Votes 6,975
Quote from @Alex S.:
do you have a recommended reading list or any books/case studies on underwriting, investing and portfolio management That you’d assign to a class of graduate students. Thank you 

I don't read a lot of books so I don't have a great answer for you. But I did hear from one of my investors who is a Princeton grad--he read my book in draft form to give me feedback on the content and he said that it should be required reading for anyone in a graduate or post-graduate real estate program. I can't think of a higher compliment.

www.biggerpockets.com/syndicationbook

Post: WYOMING LLC REGISTERED IN CALIFORNIA

Brian Burke
#1 Multi-Family and Apartment Investing Contributor
Posted
  • Investor
  • Santa Rosa, CA
  • Posts 2,314
  • Votes 6,975
Quote from @Robert D.:
what do you use for those 700+? Liability insurance? Trusts?

They were acquired across 7 different LLCs, but not because of liability segregation—it was for investor segregation.  And yes, always liability insurance.