All Forum Posts by: Peter Schuyler

One thing I like about syndications is my $50K contribution does not carry direct closing costs, and fees, yes the property does, but the scale for me wipes that out. Also assuming my $50K, say is one unit out of 100 units, in theory my "unit" can be vacant for the term of the project (5 years) and I still receive CoC and an equity bump at the end.

A stock that goes to zero over a five year period for dividends and a sale at the end at zero would hurt me for sure. 

Yes diversification in smaller chunks across a deal works well, a few syndicators I'm working with a doing 5-10 asset funds with is basic diversification and helps them raise capital for an a quick purchase which makes my overall contribution in the fund even better.  

These instruments are not perfect, none of there real estate I ever have invested has been perfect, but my stock portfolio is up and down like a whack a mole party.  Tired of that

Nothing unusual per see, but I need to unwrap my thinking that a syndication will produce any meaningful return in Year 1 and possibly two, and your trust is in the payoff either through refi or sale down the road.  Some syndications offered a fixed pref in exchange for a equity bump, which basically raised you up in the stack for payment, the bank, or major lender is usually number 1 in distributions since they hold most of the equity of course.  Being a "bank" usually payoff in the long run, the best returns I still have gotten in on Mortgage notes (assuming they goes well) 

I have built a simple tracker to look at my Syndication Investments, I'm sharing with the spirit of learning and have masked out the Sponsors names. 

Lesson Learned  - One thing that never gets reported directly it seems like is CoC return vs. projections. (if you study the financials you can try to pull that out)

Lesson Learned - The sponsor holding period if too long after initial funding (wire) can really skew Year 1 returns as you can see in my chart. The time I release money its stop earning interest from the previous source until the first distribution of course. I have one sponsor who waited 6 months before first distribution to "season" the property. To be honest that seems like an excuse given they should have a NOI in the first month or two to start the distribution to projection.

Lesson Learned - Use Google maps to track your investments visually like some of the sponsor do, it really helps when having new discussions.

I have invested as an LP for three years now, across 4 different syndicators, one thing that frustrates me is the lack of basic reporting to the projections of CoC and IRR. So many are required to send income statements, rent rolls, and property related detail, but basic preferred return of year 1 (8%) and is the return on target or not, and then a few bullets why would be so helpful. "We are short on income, expenses are higher, or renovations are off track" to explain the deviation. Resetting the budget every year or worse every quarter to match actuals is not reporting to initial projections. Im my eyes, this is an investment first, report to the investors on return, then tell me about the underlying property second. Just my 2 cents.

An update, my experience with Norada went very well, it has been a few years owing Memphis properties.  The one big thing I learned which you do not get on any tour, or see on any bus visit, is the back end property management team, their software, thier processes to collect rent, deal with late tenants, and now evictions.  2020 was a strange year for all, all four of my Memphis properties went from positive cash for to negative most of the year.  Some have caught up, but I have one rental that did not pay the $1400 rent for 7 months, went bankrupt because of covid, and they are working it out, but the 7-8K loss might not be seen in cash anytime soon.

I have no issue with the turnkey process, the buy, renovate, and flip to me at retail price, but as other have said over and over, the cash flow, which is why we get into this is greatly effected by the boots on the ground.  The Property Management team can make or break a long term investment if not done right.  PM is a thankless business, and is the main reason I went from self managed to turnkey to begin with.

What would I do differently, is be more involved in lease verification, 3x income, background check verification, credit score verification, I use to hand pick my tenants, which sometimes ended up in one month extra vacancy as I vetted, but at least if something went wrong I could only blame myself.  For upcoming lease renewals I want to be more involved, especially since Covid has driven different behavior, some tenants took big advantage of local authorities announcing no evictions, some did not.

I have two rentals in Memphis with Section 8, they have not been the best experience, I was told the MHA went through a software, IT system upgrade and since then I have not received consist rent for my two rentals, now this might be a PM accounting issue or a MHA issue, but I have not figured that out just yet.

I wonder if others have had problems recently with MHA not paying.

I was a member when I lived locally to Dallas, and like most of the warnings, its an upsell opportunity, a friend stuck with in the multi -family space, like $20K class and I think did well.  Like any education, you have to compare time versus value.  I always divide my time into acquisition versus operations, and to be honest acquisitions is not that hard, but operations (management, collections, etc) can really be a pain in real estate, and your on your own in that area.

I have consolidated my Memphis properties with another turnkey provider, but the experience has not really improved.  All the books, posts, forums, and investors I talk to, still point to Investors deals can make or break with the Property Management, it's not that hard to flip houses (Day 1), yes supply can dry up, but Day 2 operations is the key.  I work for a company that is world known for its operations, so I'm not a stranger to a operational process done well.  Covid-19 has only made this harder, missed rent, late rent, etc.  Im focusing on other regions where I can be closer to the PM staff, and build solid trust so I can scale, not close to the properties per se, but I spend way too much time chasing PM's.

@Brock Mogensen

What is the book?

@Daniel Torres

I have also noticed most good general partners and operators rarely syndicate residential SFHs. MHP, MFH, and self storage seems to be the direction. Maybe they know something we don’t.