All Forum Posts by: Damian Leonard

@Francois Frigon We should talk. We are in a similar situation with ML! They are horrible! I pulled control of my IRA from them to SD IRA it in an apartment deal, and sold most of our Joint Investments a year ago for 4 more deals. My wife thinks that since they are the pros she'd let them keep control of her IRA. They are down over 10% in her account in a year, even after I told them the market was turning in June, and to get defensive! I took control of the rest and am up double digits outside the market and slightly up inside the market, because I went mostly cash before the August drop. Also put lots of that cash towards the apartments over the last year. The wife's IRA, is her call, so I've just been trying to get her to make the call to ML, and go cash or change to SD IRA or go back to Fidelity. She is ten years away from avoiding the penalty, but shoot it might be worth paying the penalty, like you said. I considered that myself, but didn't do it. I know several that have gotten out of their IRA's and put that money in apartments and are doing great! I totally agree with you on the market crashing even further than it has, and keeping control. We will win in 5 years! Cheers!

Damian

@D.Y. LeeI'm a local MF investor and would be glad to meet up sometime to discuss your goals. Send me a message if you are interested. I can help put you in contact with the main people in the apartment investing industry, especially for a new mf investor. 

Best Regards,

Damian

If you keep that purchase price below $160k, you'll most likely get that 1%. Anything much higher is pushing it in most areas. 

@Gino BarbaroIt is a capital intensive business, so at some point soon I'll have to pause, and let some of that capital turn back to me, from either refi's or sales of assets. The group I network with is based here in TX, and there are a bunch of super focused and dedicated investors that are taking what the mentor teaches and takes action. I've ridden coat tails of some more experienced investors, so that is the key. Finding a big group of like minded folks, that understand group purchases, and how to find deals where we can all make double digit returns, and hopefully double our money every five years or so. Send me a pm and I'd be happy to discuss more about it. 

Regards, 

Damian

@Jeff GreenbergI understand and agree with you to a point, I don't fret over deal sponsor compensations so much. If I saw a deal like your example come across, I'd consider that a home run, but something that sounds more risky, and I'd want to know more about that deal sponsor, and what percent voting rights each person had, in case something went wrong. I'm assuming you have a great relationship with this sponsor. But I wouldn't assume that all of the passive investor out there that are getting into the business have that same kind of relationship established yet. 

These syndications I'm involved with, have 5-40 investors per deal. Each investor does need to determine what and who they are comfortable with investing in. Part of my reason for personally not wanting anybody in a deal to have more than 20%, has to do with SEC Rule 506, "Bad Actor Disqualification" instances. If we have a sponsor, and he doesn't perform, we want to be able to vote him out as the asset manager. I've seen a case where the lead sponsor, mis-managed the asset, and put the asset in danger of foreclosure, when the bank called the other KP's and let them know. Luckily they were able to vote him out as the asset manager, and save the property, ultimately selling the assets and making the investors returns. I'd have to be super comfortable with a sponsor taking 50% if they had more voting rights than the other investors. I'm no lawyer, but this is some things they bring up to me. 

I've not seen any apartment deals come across yet, where they are projecting such high returns in 18 months. Not to say they aren't out there, but I have only been investing in MF for one year. Each market is different.

I'm working on getting my own deal, putting out offers currently and will be leading a deal someday soon hopefully. I'm still fairly new to apartment investing, just over a year into it and have been a passive or Key Partner in 5 deals, in three states, and 633 doors. I'm still a newbie I guess though. Still have lots to learn. Cheers!

@Michael S.The Arlington market is a pretty good one to achieve greater than 1% rents. The closer you get to the hot markets in Dallas, and Collin County, the harder it will be to achieve that 1% rent ratio. It will just depend on the pockets and neighborhoods you look in. To try and pinpoint a certain area from out of state will be hard to do. I see rent ratios greater than 1% in Arlington, Irving, Garland, Grand Prairie, Little Elm, The Colony, Saginaw, Haslet, N. Fort Worth, Keller, Wylie, and some others. Mostly going to be older 70's - some early 2000's. Look up Tom Wilson, who used to do a lot of turn key rentals like what you are looking for in the area, it isn't as easy as it used to be to get that 1% in SF. Which is why I am in MF. 

Damian

@Shabyna StillmanI've looked at several deals in San Antonio, and the timing just wasn't right on one that just closed down there. I would have been on that deal, if I wasn't already Key Partner on one that was closing the same month. I have a contact that owns several down there, and I'd love to get one in SA. There are a few for sale, just not sure if they were what I was looking for. If you know of anything interesting for sale in SA, let me know. If you are interested in buying or partnering, I'd be happy to discuss with you. 

Regards, 

Damian

@Account ClosedI agree with what these guys above are saying. I'd add that there are many other ways I've seen deals structured, from less experienced leads. Like they said, the more experience the deal sponsor is the higher their take is usually. I've seen deals, where the sponsor only takes 10-15% of the CF, no preferred rate, and no big acquisition fee. I don't think I have seen any above 3%. They usually are taking a .75-1.5% asset management fee, paid out of the cash flow. For my first deal as a lead sponsor, I wouldn't take above 15% and I don't like investing with experienced guys that take more than 20-25%, plus all of the extras that they can take. A deal sponsor that comes across as greedy, probably has a harder time raising funds than one that is more equitable to their investors. 

@Edwin GachingaI don't even know any Californians that want to invest in apartments in CA. The cap rates are so much less there. I'm into cash flow from the get go, and the debt service coverage ratio is just so much better in other places than in CA. There are some folks that do well there, but not a state I really want to put my money in. I don't like to pay more in taxes than I need to either! I want to invest in markets that are landlord friendly, where if they don't pay they can't stay! You'll see after doing some research, you probably don't want to be a landlord in CA, unless it is a submarket that isn't overblown like the Bay Area. Anybody from CA, can chime in and agree or disagree with my thoughts on this. 

Cheers!

@Glenn TracyI think you may need to dig deeper into the possibilities of what you can do with your Self Directed IRA. Like @Brian Eastmanmentioned, and the way I understand it, you must be a passive investor with self directed IRA funds, and cannot be a key partner in the deal, from everything I have learned. It is the arms length distance from the deal, that keeps you safe or could get you in trouble with the IRS. 

Make sure you talk to several self direct IRA experts, so you know what you can and cannot do. I used Quest IRA in Houston, but there are many of them out there. Do your diligence on all aspects, especially the self direct IRA method. I prefer to go the hard equity route, but will see what the CPA and the IRS say in a year or so with my SD-IRA investments.

Thank you all for the kind words, I do appreciate it. Credit goes out to the lead investors, mentors, and all the guys that do podcasts and write books to open my mind to what the possibilities are.