All Forum Posts by: David Thompson

Brian nails it and outlines best practice with no sharing active deals w/new investors for 506b deals.  At a minimum, in establishing that pre-existing relationship by slowing the process down, having that introductory call is critical to understand the investor's situations (financial, objectives, suitability, risk tolerance, experiences, etc) is an important aspect.  Sharing additional information on the issuer / firm and GP behind it with follow up emails.  Great sponsors are great educators first.  That is where trust is built.  It can't be rushed.  

You will often hear the term "cooling off period" which is not well defined but should be achievable over say a 30 day period.  By not discussing active deals, taking time to have those dialogues to establish knowing your customer and determining suitability for these types of private placements, recording these conversations (CRM tool), its a process and important for the investor as well as the sponsor, which also helps support any future regulatory reviews.

Lastly, I will note that the deals should be presented to investors from the issuer (key principals w/actual roles separate from mere marketing / selling the deals) or licensed reps of broker / dealers who can market these types of opportunities, take qualification exams and are heavily monitored, regulated.  

Where I see grey areas on BP are folks that are raising capital as part of GPs and that is all they do, are not licensed, and in posts are recommending sponsors and that is where I think folks may get confused as to what's their agenda, even if they are not disclosing a deal itself, operate around the fringes.  An enthusiastic investor is one thing, an enthusiastic investor (LP) who is also acting as a part time promotor / paid capital raiser for the (GP) is another.

506(c) deals ok.  506(b) can't share deals publicly.  

Partnering with experts.  I think you can do it much faster and w/far less risk and headache if you find a niche that interests you and see if you can gain a role on a team for doing something to add value to them w/o asking for compensation.  You just want to learn.  Then, show value, work hard and you may get a spot on the team or at a minimum, gain valuable experience to add to your credentials and go find another expert team or start your own team by pulling experts together.

Here's where my business has gone in a short 3.5 years.

https://www.biggerpockets.com/member-blogs/9145/86966-110-000-000-in-invested-capital-in-35-years

Tim,

We love out of state investing to diversify but DIY is a lot more challenging and requires more planning, relationship / team development, new knowledge, etc as others have mentioned.  I have local properties for DIY but I like syndications for out of state opportunities better.  If you are an accredited investor we like syndications in MF, storage and manufactured home parks with value add operators that can get you exposure to markets that interest you but don't require all the time and attention of trying to do this all yourself.  Let experts help create value for you as a passive investor in some markets that they know much better than you because they focus their business there.  MF Markets that we like are Texas (Dallas, Austin, San Antonio) and Florida (Tampa, Jacksonville and Orlando).

Hi David,

From a macro level, we are syndicating larger MF in Tampa, Jacksonville and Orlando.  There's 450,000 apartments units across these 3 metros.  All 3 ranked top ten for MF in U.S. Outside of Texas where we have a lot of properties, Florida appeals to us as the #2 market for in migration last 3 years according to U-Haul.  In Jacksonville, we are on the southside where we are seeing the city move out towards.  In Orlando, we're in the Winter Park area with good schools as a few submarkets examples we like.   

Hi Aram

SF and MF in Texas has been hot for some time and Dallas and Austin are probably the hottest markets.  Finding deals is challenging as its very competitive and supply is limited.  Macro environment has been very favorable to businesses relocating to Texas from other parts of the country to reduce their costs and businesses expanding within the state.  Diversified job base provides good breadth to reduce risks. Texas is business and landlord friendly.

For Austin, the Univ of Texas (50,000+ students) provides employers with local talent and a lot of high tech workers are being relocated here as well.  Growth is moving out the shift is to the north near high tech corridors near the Domain (Austin's second downtown) out towards Apple's $1B planned expansion and tech row along Parmer lane and up the I-35 corridor.  

https://www.usnews.com/info/blogs/press-room/articles/2019-04-09/austin-texas-is-the-no-1-best-place-to-live-according-to-us-news

Hi John,

I think assessing your interest, time, resources and financial status certainly is a good place to start. I shared this blog recently on benefits of active vs passive.  I'm a hybrid investor, some active and passive, so not always a one way strategy.  

https://www.biggerpockets.com/member-blogs/9145/79026-why-i-favor-passive-vs-active-investing

Here's a top 5 reasons I like to invest in large MF properties which cite scale and forced appreciation.

https://www.biggerpockets.com/member-blogs/9145/53820-why-i-like-investing-in-large-apartments

I also like large apartments since they scale better and can take advantage of forced appreciation.  Hope these two blogs help.

James,

As I worked alongside several syndicators starting with some in their emerging / ramping stage, one of the best ways that they got started is to surround themselves with experts early on instead of trying to DIY w/no brand identity.  You really don't have a brand yet and building a brand takes time.  You can accelerate that greatly by partnering with experts. 

Examples might be: experienced property manager that can manage the day to day operations of an apartment and manage / oversee the renovations.  You can also take on partners that have previous syndication experience looking for help in areas that you have strength and they don't or need more help in. 

When taking on partners, look to surround yourself w/not only experts but folks that complement the skills you feel you are strongest in and let them do what they do best.  I've participated in over 30 syndications deals and what's loud and clear is this is a "team sport", build your brand / leverage others that have that experience you want by being a key part of a team and this will greatly accelerate your brand assuming you are choosing right partners (character, ethics, smarts, experience, etc).

Hi James,

My idea is that for the time, energy and risk of investing outside of your local area, that many investors looking for stronger growth markets, different asset classes (maybe MF, storage or manufactured home properties), you may consider partnering with experts that already know these areas better than you, have the relationships built and can stay on top of these investments.  I like active local, passive outside my area.  You could be an active or passive partner.  One of the best ways to start in my opinion is participating passively in markets you like through investing with syndication partners.  That may be a great way to learn more about the market, strategies, but with little time, expense in overseeing them directly.  

There are 3 commercial real estate niches I focus on and the reason is downside protection.  That is becoming more of a topic on the world economic stage with escalating trade wars and concerns over a slowing economy.  Hands down the 3 niches are:  

- manufactured home communities

- self storage

- multi family apartments

This blog summarizes the reasons why:

https://www.biggerpockets.com/member-blogs/9145/74876-growth-with-downside-protection-3-all-weather-niches-to-invest-in