All Forum Posts by: John Nachtigall

I think I can do 1 better.   I found a deal in Colorado Springs on 2 4plex next to each other and the seller would provide neither a walkthough (even the common areas) or the financials until they had an accepted offer.   Keep in mind these are technically residential properties so condition and comparable are the standard for setting the price.  The agent (working for me no less) said this was standard and there was no choice..my agent not even the sellers agent.   When I mentioned that it was not possible to make an intelligent offer without 1 or the other (or both) he told me that was just the way it had to be.

So I walked.

On the original question, lying (in any form) is wrong.   I don't care how stupid the agent is or how earnest and well meaning you are, if you have to lie you are wrong.  Who cares if it is illegal.

Just to give you an example of how far off your expectations are.    There is a self storage fund up for syndication on the CrowdStreet platform at the moment, 10 Federal Self Storage.

• Sponsor has done 175 million in previous self storage transactions
• They are contributing 2.5% of the capital
• 8% preferred return...yearly.
• 70/30 (investor/sponsor) for all remaining monies....forever both operating income and selling of properties.
• They have a proprietary set of technologies to convert the acquisitions over to more efficient running.   And they have done 1 as a proof of concept already.  So they have technical expertise also.  

Why would I, as an accredited investor, give you any money

• You have no track record
• You are contributing no capital
• After I get my capital back to take the lion's share of all the returns.   
• You gave no indication you have ever run a self storage.

I would suggest (not in a mean way) that you do not understand the "capital stack" and  how to "respect the money".   I have not seen a single syndication deal where the sponsor takes more than the investor at any stage in the deal.   I have only seen 2 deals (out of more than 100) where they split 50/50 and that is only after the 1st 20+% of returns.

Simply put, no one is giving you capital so you can own 70% of a property with no skin in the game.  Finding a deal is not as valuable as having the money and there returns need to reflect that.   You are trying to treat them like lenders without paying interest.  

I would suggest you look at syndication deals in this area (self-storage) or even better contact experienced sydicators to invest in or work with them to lean how it actually works.  

@Lee Fahy

In 20 years you will have found the drug money....clutched in the skeleton of a one eyed pirate with a mummified parrot.   

Oh and do something about your Facebook Live Camera...the resolution is terrible.

Congratulations Lee....not on buying the brothel, but on marrying above your station.   She puts up with your sense of humor, does light to medium construction work, and has the balance to walk on 5 gallon buckets....quite the keeper.    :-)

Good Luck on the drug money hunt...be sure to check the vents.   It will at least add to your mouse collection even if you don't find cash.    In 20 years, after much success just think about how much you will have embellished this story.    Even if you break even it will have been worth it for a story you can tell for a lifetime.   

Good Luck and Gods Speed

PS.   I dont know how you pass up the black light in the basement....it is a once in a lifetime opportunity...just saying.   

@Jillian Sidoti @Andrew Johnson @David Thompson

Thanks for the replies.   I am by nature a passive investor.   I hold only 1 individual stock (Berkshire Hathaway bought in 2003), everything else is in index funds, I am happy to match the market given than 99.9+% of the people who think they can beat it are wrong.   And so you are right, syndications are right up my alley.

I would not call my desire for direct ownership emotional as much as curiosity and challenge.   When I started looking at this 6 months ago I had forgotten how fun it was to learn about something new.   Maybe this is my mid-life crisis (I am 46) but it has been really energizing to learn about something completely different from scratch.   So the challenge of direct ownership seems appealing, but I don't think that I can beat the returns I can get in private placements.   And I REALLY dont think I can beat the returns as a function of effort.   The biggest drawback to placements I see are the hold periods, as Andrew mentioned.   The office I invested in has a 10 year horizon, but the vast majority are 3-5 years.    In every webinar for every deal the same thing happens

Them:   So we bought it at 90% of market value and at 60% to replacement cost

Me:  Super

Them: And we are going to fix it up and raise rent 25%, we have done this wil 10,000 previous units and we know everything about doing this.

Me: Super x 2

Them: And we have received tax abatements for revitalization that reduce the amount needed by 3 million dollars and we are installing the property manager we have used in 20 previous deals.

Me: Let me write you a check

Them: and in 3 years...right when we have it fixed...and we are earning 10% cash on cash return....we are going to sell it

Me:   DOH!!!!   You just got it to where you want it.   Warren Buffett said if someone will give you 10% on his money he never wanted the principle back....stop that.   

But given that there always seems to be plenty of deals, I suppose it is not that big of an issue.   I guess syndications are my best way to participate in real estate.    There are plenty of different ones.   I didnt mention it before, but I took my Las Vegas vacation money and instead invested it in an oil well syndication (energyfunders.com).   Total flyer, I considered it just like putting it up at the craps table.   So far it has been a total blast.   I get regular updates, they even interview the Authentic Texas Oilman (tm).  And I was lucky enough to get the well that hit oil, so it is actually paying off.  Super fun

Thanks again     

Hi, I am looking for some opinions.

I am about 6 months into my journey in real estate, when I stated I was looking to diversify my portfolio and put about 20% of my wealth in real estate.   I have worked hard in my career and I qualify as an "accredited" investor.   So I began this by looking at syndicated deals on sites like RealCrowd and CrowdStreet.   I came across BiggerPockets when I was educating myself about real estate and it has been quite useful.   

So far I have invested in 4 syndications.   All 4 are different commercial real estate, 1 multi-family, 1 self storage,  1 office, and a part of a 150 Million private fund that invests in various assets in various areas).   Generally they last 3-5 years with 0-10% cash flow and 2-2.5X total return.   There are an abundance of deals on these sites, all professionally vetted, and a diversity of objectives.   Some are cash flow deals, 8-12% return a year, some maximize total return, it is a variety

So I am down to my last bit to invest, about 100k, and I find myself torn.   Do I invest in 1-2 more syndication or do I try direct investment into a small multifamily.   Having been bitten by the bug I have been trolling the normal sites looking for possible investments.   I should add that I have 4 other friends and family members in my home town that are interested in direct investment and would go in on a deal allowing us to buy a small apartment building or MHP.  

Syndication, however, is hard to beat.   100% passive investment with some of the same tax benefits but none of the heavy (or light) lifting.   All great properties run by (or turned around by) people with decades of investment experience.    I can even invest in Direct money lending (which I consider just like syndication) where it is about 8-10% return and all about the cash.  But there is something about actually owning the building outright (or with a small group).     I would add the group I would work with does have 32 doors (8 4plex) under ownership and 2 of the 5 are civil engineers with construction experience, so it is not without its resources and experience.   

It is a good situation to be in for sure.   So I am turning to the internet and this forum for what the internet (and forums) do best, provide opinions for free.

Syndication or Direct Investment...which one and why?

I have no experience in any of the things you are asking for, but I wanted to throw this out to you to see if it resonates.   Your question was "Why wont they take even a small risk?"   Now put yourself in the lenders shoes

- If you are successful they get paid + interest

- if you are unsuccessful they get 3 large under performing apartment buildings they have to deal with.   Not worth it unless they get them for a screaming deal (hence the 50% offers)

- Your pitch for being successful (at least in this post) is that you have a gut feeling.  You have no experience in turning around apartment buildings.

- reading between the lines you dont have any capital (or a low amount) to put into the deal (hence the partnership with the seller)

So I have 3 million dollars to invest.   Do I give it to the guy with a deal and a dream, or to an experienced person with a moderate deal.   Risk...reward.    My risk with you is higher (lack of experience, turnaround, etc) but my reward is the same (principle + interest).   So any logical person would pick the lowest risk for the same reward.   You may be 100% right that you can turn this around, but why would a lender take that chance....they get nothing for taking an increased risk.  

You need to partner with an experienced syndicator or apartment investor.  Then the risk reward equation changes.   If it turns around, they get more benefit.  And they know how to do it and have credibility with the lender.

Just a thought.

@Isiah Ferguson

Yeah that is why people do cash for keys, just to avoid the delay even though it seems wrong to bribe someone to leave your own house.    You are past the hard part now, congrats.  Just knowing you have done it now will make it very much less scary the next time.  Good luck on finding the next tenet.  

@Isiah Ferguson

How does the process?

An interesting thing I heard on a podcast is corporate short term housing.   It combines the airbnb model with longer (and therefore more lucrative) stays.    I have no personal experience with it at all, but here is the podcast

http://morrisinvest.com/podcast/2017/3/30/ep140-ho...

The person was Kimberly Smith, the CEO of AvenueWest and Corporate Housing by Owner. To me it seemed like a way to address the biggest drawback of airbnb which is turnover.   You might want to consider it.

Good Luck.