All Forum Posts by: Danny L.

Quote from @Chris Seveney:

@Danny L.

Have you invested the past year or in the sponsor you mentioned as there are posts on BP regarding it from those who have invested

@Chris

Yes, I've invested in multiple offers the past year with various sponsors. I haven't invested with ODC or their current TX offering. I'm still reviewing the details. 

I came across ODC as the deal is a partnership with another sponsor I was researching at the time. I will look into the posts about them on BP you've mentioned. Thanks

I think Brandon has a deal in San Antonio. Look up Open Door Capital.

Regarding losing money and capital calls, I don't think it's as much of an issue if you invested within the last year or now.  The deals that went bad were done years ago before anyone could anticipate interest rates will go that high.

Quote from @Roschelle McCoy:

Quote from @Danny L.:

Quote from @Roschelle McCoy:

Syndications are a great option for completely passive investments.  I'm a limited partner in a few syndications as well as a general partner.  I also own some smaller rentals and short terms that are property managed.  None of those are truly passive because at the end of the day/week/month, etc, there are still decisions to be made, maintenance requests to handle and bills to pay.  Being a limited partner in a syndication is the most hands-off investing there is.  And for me, there's nothing more freeing than knowing my money is working for me while I'm enjoying li

@Roschelle McCoy

Would you still focus on acquiring SFH and STR rentals after your experience with syndications?

Or do you feel the return and benefits of syndication provides (financially and passive benefits) make buying your own rentals no longer attractive?

Would love your insight as an investor. Thanks!

 @Danny L. - I am still acquiring STRs because of the incredible cash flow, but no longer investing in SFHs. Too much work for small returns and it doesn't scale like multifamily. One vacancy on your SFH kills 100% of your revenue. One vacancy in a multifamily is a tiny dip in the overall revenue. There's a reason you don't hear people talk about passive investing in SFHs - - because it doesn't exist. :)

Thanks Rochelle for sharing your experience. I decided to go with syndications as well. The scaling issue for SFH you mentioned was what deterred me from them. Syndications was a more efficient way to reach my goals given my personal situation and timeframe. 

Quote from @Roschelle McCoy:

Syndications are a great option for completely passive investments.  I'm a limited partner in a few syndications as well as a general partner.  I also own some smaller rentals and short terms that are property managed.  None of those are truly passive because at the end of the day/week/month, etc, there are still decisions to be made, maintenance requests to handle and bills to pay.  Being a limited partner in a syndication is the most hands-off investing there is.  And for me, there's nothing more freeing than knowing my money is working for me while I'm enjoying li

@Roschelle McCoy

Would you still focus on acquiring SFH and STR rentals after your experience with syndications?

Or do you feel the return and benefits of syndication provides (financially and passive benefits) make buying your own rentals no longer attractive?

Would love your insight as an investor. Thanks!

@Brian Burke Thank you so much for taking the time to look into this. You gave so much information here and it looks like I need to work on gaining a deeper understanding of the language used in syndications & PPMs to evaluate them properly. I hope others can used this information as well if they are considering syndication deals. I appreciate you sharing your expertise with me.

Quote from @Brian Burke:

@Danny L., not enough information here to answer.

First, what do you mean by “deal was based on Return on Capital or Return of Capital”? Are you asking if distributions are first return OF or return ON?

Also, notice that the words “Preferred Return” and “Preferred Return Balance” are capitalized. This means that somewhere else in the agreement you should find the definitions of these terms, usually in a definitions section at the beginning of the agreement.  Can you paste those definitions here?

Hello Brian,

Small world...I'm in the middle of listening to your book "The Hands-Off Investor". It was you who presented this concept as I caught this bit while I was driving in my car and made a mental note that I must check every future deal on this.

Yes, I was asking if distributions are Return on Capital or Return of Capital. I did find the definitions for “Preferred Return” and “Preferred Return Balance” below.

“Preferred Return” means, (i) as to each Class A Member, a sum equal to 9%; (ii) as to each Class B Member, a sum
equal to 7%; (iii) as to each Class C Member, a sum equal to 8%; (iv) as to each Class D Member, a sum equal to 9%,
and (v) as to each Class E Member, a sum equal to 10%, in each case per annum non-compounded times the amount of
the Net Capital Contributions of such Member calculated quarterly. The quarterly calculation to begin on the first day of
the month following the completion of the first quarter after the purchase of the first Property, to be paid to the extent that
(i) the Company has sufficient Net Distributable Cash to pay such Preferred Return, and (ii) the Manager elects, in its sole
discretion, to make such payment or defer such payment to a later date. The Preferred Return is retired as to each Member
once he, she, or it achieves a Capital Return. Distributions of the Preferred Return do not reduce a Member’s Capital
Account. Any funds received in a Capital Call that are not deployed in the purchase of a Property (“Non-Deployed
Funds”) shall not accrue the Preferred Return, but rather, shall bear interest at a rate of 2% per annum non-compounding,
accruing from the date of when funds are deployed (“Deployed Funds”) from such Capital Call until such time as the
Company deploys the Non-Deployed Funds into a subsequent Property.

“Preferred Return Balance” means amounts owed under the Preferred Return, including amounts accrued but not
distributed.

Quote from @Luke Grieshop:

I could see where you're drawing that interpretation from the language shared here. 

Probably a dumb question, but did you ask the sponsor? If you have a feeling they'd lie about it, may not be a good investment in the first place :/ 

Hi Luke,

I will be asking the sponsor to see what they say. I was just checking if it was something that I missed because I'm new to syndication and someone who has done multiple deals may be able to recognize from the verbiage if distributions was "Return on" vs "Return of" capital.

I don't think the sponsor will lie about it as that wasn't my reason to post here but ideally I would like to learn enough to scan through multiple PPMs from different syndicators and determine if distributions are "Return on" vs "Return of" capital without waiting to connect with the sponsor for answers. : )

Hello all,

I'm currently looking at a potential MF syndication deal. I started investing in syndication this year and have been learning through books, online, and various podcasts. One of the things I came across was determining if the deal was based on Return on Capital or Return of Capital.

Looking at the PPM for this deal, I couldn't figure out which method they were using. I searched the document for either phrase and came up with nothing.

The closest section I've found is this:

(i) Net Distributable Cash shall be distributed quarterly on the following basis:
a. First, to Class A Members, a 9% Preferred Return,
b. Second, pari passu to Class B Members, a 7% Preferred Return, to Class C Members, an 8% Preferred
Return, to Class D Members, a 9% Preferred Return, and to Class E Members, a 10% Preferred Return,
in each case in proportion to each Member’s respective Preferred Return Balances until each such
Member’s Preferred Return Balance is reduced to zero;

My guess is "until each such Member’s Preferred Return Balance is reduced to zero" would indicate distributions are based on Return of Capital.

I'll appreciate if someone with experience on this topic can confirm if my interpretation is correct.

Thank you.