All Forum Posts by: Larry Caper

@Mike Rutallie Many people will have an opinion on what's the best approach. Understand there is not a one-size-fits-all approach and you will find your way, an opportunity will present itself over time. Sidebar, if you do your research, many of the top syndicators in the space started relatively small and surprisingly with little or no coaching, for example: 

• @Greg Dickerson started as a remodeling contractor, turning a lucrative handyman job into becoming one of the respected names in the real estate game (i.e., syndication, development, you name it) 
• @Jake Stenziano and @Gino Barbaro tackled their first property (25-unit) by themselves. It took them roughly two tough years to get to that point. However, they understood the basics and took action. 
• Joe Fairless was a successful businessman (i.e., Advertising) and leveraged friends, family, flag football team, friends of the family and others totaling 12 investors and gave the broker ownership - 168 units on his first deal.

You're a midwest guy (so am I, proud Spartan #GoGreen), so you're not afraid to put in the work. One of my mentors informed me to do the following: In the evening, research and identify who you need to call by market (brokers, property management, insurance agents, etc) and during lunch call them to build rapport. However, at some point, you will need to find a way to the market to meet with them, walk properties, etc. I think it's imperative to find someone (mentor/coach/KP) you trust to assist you on the first deal (especially if you're raising capital) and compensate them with equity. Many of the deals I see range anywhere from 5 to 20%, maybe more depending on risk.  

You seem like a smart guy who is motivated. Continue to master the basics and get after it, your family with thank you for it (maybe include them). Believe in the law of the first deal! I'm right there with you.

Thank you @Amy Wan! This is one of the reasons why I'm moving forward with caution because there are so many "experts" who are all over the spectrum related to this topic. 

...shooting you a PM now. 

@Ola Dantis Thank you for the words! When listening/reading in between the lines, many of the successful operators simply took action and partnered with a trusted coach (mentor) to look over their shoulder. Shortly after they were off to the races (the power of the first deal). The goal is to K.I.S.S. along the way. 

Thank you! 

The legend @Greg Dickerson! I've listened to many of your podcasts and interviews. I enjoy your perspective and purpose-driven attitude, there is no substitute for hard work over an extended period of time.

As relates to this topic, protecting my guys (many of them pro athletes) is important to me. The Fund of Funds is a concept I want to dig into. However, with that said, I do not want to unnecessarily overcomplicate things. If I can find a great coach/mentor, someone whose values align well with the group, I have no problem doing business. To protect my reputation in the biz and the capital of my investors, having a coach on board is a MUST. 

Thank you for your wisdom!

Thank you @Alina Trigub for your insight. To be frank, if an individual does not understand their role, they are most likely going to squander the opportunity. 

As it relates to getting a broker-dealer license, I briefly thought about it during my research on the topic. However, I do not think it is necessary to receive in order to be successful in the CRE game. There are enough guys/gals from all walks of life successful in this space without licenses, certs and the like. They have simply put in the work for yours (some decades).

Even though the GP-role is what I'm leaning towards, the Fund of Funds is interesting - I will definitely look into.

Yes @Tj Hines I'm extremely clear on the need to have an additional role which is why I included "I understand my role should include more than raising the initial equity investment and continue throughout the holding period and disposition" before asking my questions. I just need more clarity on the best structure or "next best move". 

Thank you for mentioning one of the best SEC attorneys in the biz! I've listened to him speak more than a few times, he's very thorough. 

(Yes, I understand comments provided are simply educational, I will consult with an attorney before moving forward. Thanks in advance for your input!) 

Over the years, I have 1) invested heavily in education (underwriting, financing, market analysis, asset management, identifying macro/micro trends per market, etc), and 2) developed strong relationships with a network of accredited investors who are interested in diversifying and jumping into the multifamily space. The next phase of my maturation cycle is gaining "on the job experience" in the form of GP participation before attempting to take down a deal by myself. Full transparency, I have not passively invested in multifamily syndications and no experience as a GP. I am clear on our markets of interests, returns we would like to see and our risk appetite.  

However, I believe partnering with other syndicators (i.e., proven syndicators w/ track record) raise money for their deals is the next best move. However, I want to ensure I'm properly structuring deals, receiving legal and fair compensation. 

I understand there are multiple ways to legally raise money for others without tip-toeing the broker-dealer line: 

1) Consultant Fee. Become a consultant of the issuer where compensation is not tied to the amount raised.

2) Finder's Fee. Without solicitation introduce passive investors to the group (flat fee). 

3) Class B. Of class B (management) share, a percentage is given to the "capital raise" LLC. (I've seen a lot of groups choose this structure)

4) Become a part of the issuer (GP-side)

I do not want to give other syndicators access to my investor database, so Number 3 seems like the best move. I understand my role should include more than raising the initial equity investment and continue throughout the holding period and disposition.

Here are my questions:

• Is Number 3 (from above) a good idea to create anonymity for investors?
• How is the acquisition fee distributed if no compensation should be tied to the amount raised?
• Could my LLC provide bring additional credibility (i.e., loan requirements) which directly affects the amount of capital received from the bank?

Thank you in advance for thoughtful insight, pearls of wisdom and/or tips. Excuse me for any ignorant questions/assumptions, feel free to direct down the correct path to further my research.

@Michael Wayne I have not worked with any brokers in Michigan, yet. However, there are a few that have reached out and would not mind sharing with you. 

Shoot me a PM with your investment criteria and I will make the intro. 

@Michael Wayne Congrats! I'm very familiar with Oakland County, my wife and I are from Michigan.

However, the CapEx game is difficult to predict, but my two cents are extremely simple. I don't like to use the % of Gross Rent to estimate CapEx because that are not correlated. I view CapEx on a per unit basis dependent on property type, market, resident profile and an assortment of factors. Based on the information you are able to squeeze out of the broker/seller:

• Create a chart listing major capital expenditures
• Analyze the total replacement cost for that item today based on the market
• Understand the useful life of the item in the market 
• Itemize the CapEx items you will need to replace ASAP (12-18 month window)

Here is an example of what I'm referring to: https://www.biggerpockets.com/blog/wp-content/uploads/2015/03/CapEx_Aricle_TABLE_1.png

Also, set aside a decent amount for operational reserves so you're not using cash flow to fix problems after acquiring the property, maybe $250/mo/unit or $300 - $350/mo/unit if it's an older property. Those Michigan winters can be tough, so always keep that in mind. 

Once again, congrats!

@Andrew Beauchemin hit the nail on the head (multiple times)! 

I have never heard of TapCap, but they remind me of Quicken Loans who are in the business of selling convenience. Double and triple check the fee structure and ensure you understand the fine print. 

As it relates to agency debt, both Freddie and Fannie SBLs have attractive terms. If you can meet the net worth, post-close liquidity, market and experience requirements you should be good to go. If you lack in any of those areas, you can definitely build a team to meet the lender's requirements.