All Forum Posts by: Forest Wu

@Forest Wu, I will make this 3 for 3 in terms of people that work in the syndication space responding.  I will note, personally, I am a passive investor, as well.

I would generally agree with your assessment.  There are A LOT of syndicators out there.  And many do not have any marketing department of budget.  It is purely friends and family.  I would not purely assume that because someone is out there marketing they are a bad operator.  They may be an emerging manager that is a great operator, but simply haven't been around very long, or it could be a very experienced manager with more acquisitions connections (and presumably good deal flow) than investor contacts, so needs to market to build that network to capitalize on the good deals they are finding.

That being said, these "off market syndicators", as you call them, are like "off market houses".  They are harder to find.  It often comes down to how you know.  I am on some email lists through former coworkers that have spun off to start their own funds.  I have done Edgar searches for Form Ds that list Real Estate in their filing.  I have driven past properties that sort of fit my general investment box, then google "who owns XYZ" and the market name.  Normally you can find a press release.  I read industry magazines like Multifamily Executive, The Real Deal, etc and see who is buying, then google that company.

Again, I don't want to imply this is a steadfast rule, but often times, when I find groups that have long track records, consistently good returns through multiple economic cycles (definitely experience through Financial Crisis, and ideally dating back to 90's), I will get on calls with their team to find out that they are QP only offerings, and/or have $150k+ minimums.  Again, not always, but in my experiences, this has been pretty typical.  

All that being said, it takes time, and isn't guaranteed to get you anything better than you can get from the groups that start showing up as sponsored listings on google, paid FB and IG ads, etc.  At the end of the day, you need to do your own due diligence.  

And like Chris notes, if you start getting added to a dozen syndicator lists, all of whom are buying large-scale, Class B, Value-Add Multifamily deals in the suburbs of major metros, and 2-3 are projecting 30% returns, 2-3 projecting 20% return, and the remainder are in the mid-teens, I would really dig hard as to what is going into those 20-30% projections.  Chances are they are actually lower end properties in higher crime areas, heavier value-add, higher leverage, aggressive assumptions, etc.  Because all else being equal, if you are assessing two very similar deals in similar markets from similarly capable operators, the returns will be pretty similar at the end of the day.

I would be careful at this stage of the cycle touching anything that's syndicated. Some great advice here to do your own underwriting and focus on the experience of management. Another option is to consider is Blackstone's BREIT though that went through a sketchy period with redemption requests.

https://www.breit.com/

Other groups to join (if you are an investor and not a GP) are 506 Investor Group and Private Investor Club. Both of those and have good deals and due diligence from LPs (not GPs) and both are free but you have to go through a process to be accepted to avoid GP infiltrators. All three of these groups sometimes get special deals on certain syndications (lower fees and better promote). 506IG does not allow GPs. Private Investor Club is mostly restricted to LPs as well. I like this because it allows more honest discussions without people trying to push something. 

I have been studying this space over the last few months and a lot of GPs rely on the ignorance of investors (about their failures, inexperience, unrealistic underwriting assumptions or their unreasonable fees) to take more people's money. 

Buy a variety of asset class/ unit count properties. Either buy all cash and do a cash purchase refi immediately and move the funds to the next purchase. Or use the $300k as the typical 20% down, would give you $1.50 million in buying power. The mortgages and closing expense can be written off to eliminate the taxes as you want 

Thanks so much for this information. We built an ADU on the 2nd level of our home in San Diego, and I captured all of the costs that went into the construction of the ADU. Would a cost seg study still be needed if I captured all of the costs during the construction of the ADU? Thanks so much!

Hey @Shiloh Lundahl

Do you know if the ADU is permitted? If so, she shouldn't have any issue. Happy to recommend a few lenders who have done ADU loans for my clients in the past.