All Forum Posts by: Daniel Brown

Hello Everyone!

We are looking for an experienced syndicator to mentor us and possibly partner with us on future deals.  My wife and I have started our real estate investment company and have spent the last 2 years investing in our multifamily education and building our team around us.  We have established a great team so far, but the area that we are lacking in is credibility with passive investors and/or raising money because we "don't have a track record, and have never done it before". 

We are eager, excited, and willing to help any current syndicator in any way we can, in exchange for helping us with our credibility problem.  We have had to pass on properties in the past because we weren't able to raise the capital needed for the deal.  That was devastating....and didn't help us with the credibility issue either. 

Unfortunately, we chose to pay for an education program that didn't have an eco-system of potential investors once we finished the program.  We thought that paying for an education/coaching program would add to our credibility; but unfortunately, it really didn't make that much of difference. 

We refuse to throw in the towel, but we definitely need to try something new because what we've been doing hasn't worked.  We welcome any advice and constructive criticism.  Thank you in advance! 

Respectfully,

Travis

@Brent Coombs Thank you for your feedback. 

I wanted to get some feedback on what seasoned investors would do given the below mentioned projections offered in a 65-unit syndication:

65 units recently remodeled/upgraded insides built in 1992 – 2000 (Class C)

Tertiary Market 3min from a medium size university (~11,000 students)

New roofs, New siding, New parking lots, Some new HVACs

4% Vacancy Rate due to units finishing remodeling

Listed Cap Rate 8%

Value Add: Rents are 20 – 25% below market

Projected returns:

Exit Strategy no more than 5 years

65/35 Equity Split

8% Preferred Return

17 – 18% Annual Average Return

15 – 16% Internal Rate of Return

10.9% Average Cash on Cash Return

87% Overall Return on Investment

@Abel Sng That's great! It's always better to beat what your projections are than to have to go back to investors and tell them bad news. I will go back and relook the projections, but initially the projections are providing the investors a 9.1% Cash on Cash, 18% Average Annual Return, and a 15% IRR. Exit will be in Yr 5. At this point in the evaluation, I am not sure if we would be able to refi in the first 2yrs or not, but if we do we will definitely have to consider the prepayment penalty.

@Conor Freeman Thanks for the info.  I didn't see anything in the loan docs that talks about negotiation after a certain period.  Just saw the prepayment penalty section that has a penalty from year 5 to year 20.  That's the biggest concern I had with it. The interest rate is okay, but would see about a longer term as well. 

@Abel Sng Thank you for the information.  I was kind of thinking that they probably wouldn't be willing to negotiate any of the terms.  I think the yield maintenance is 5%.  So the FNMA that you mentioned...is it crushing your projections in a good way or bad way....?

I have a deal that I'm looking at that has a $10M non-recourse assumable loan with a mid 4% interest rate for 20yr term.  I normally look at just getting new financing at purchase, but wanted to consider this option to assume current loan to see if it would be worth it.  The current lender is an insurance company, and I'm not sure how hard they are to deal with.  I do have the following questions:

1. With dealing with this type of lender are these loan terms usually locked in, or can they be re-negotiated by the buyer? (i.e. pre-payment penalty percentage, length of term remaining, interest rate, etc.)

2. With the assumption of the existing loan, the lender is wanting 30%-35% equity. Is the difference between the current loan balance and the sale price minus the down payment wrapped into the old loan, or will we need to come up with the difference from investors?

The seller is offering a discount if we assume the current loan versus getting new financing.  At the end of the day, I just want to make sure that I am getting the best deal for investors.  Any advice or constructive criticism is greatly appreciated! Thanks in advance,

Travis

@Zachery Buffin I'm good with Pinewood at 1pm

Count me in.  I'm in Clarksville, TN but would definitely enjoy meeting up in Nashville on a Saturday.

@Account Closed it seems like our strategy is pretty much in line with what you are saying.  One thing that we are seeing, especially in such a hot market, is that investors are wanting a shorter term investment (1-3yrs).  With our strategy of refinance in year 3-5 with exit strategy around year 7-10, it makes it harder to find investors that want a longer term before they get their capital back.

We offer a good rate of return for our investors, striving for 14-16% average annual return until capital is returned, and with a cash on cash return of 10%. Refi split and sale profit is split anywhere between 60/40 to 80/20 depending on the property. We are open to providing a preferred rate 5-8% with a lower split percentage, and based on the initial property projections.

One thing that we are looking to incorporate is to be able to give a portion of our percentage of the profit to a charity. The charity of choice would be voted upon by the investors. This would completely come out of the our percentage (sponsor's), not the investors; however, the investors would get the benefit of voting on which charity we would donate to, and receive their percentage of the added tax benefit for the donation. We are very thankful and appreciative for everything we have in life and feel that we should give back to people who are less fortunate.