All Forum Posts by: LaRhonda M

@LaRhonda M As a full disclosure before I answer this question, I am a syndicator.

Investing passively through syndication deals is a great strategy if you're looking to invest passively (some people are and some people aren't), assuming that you're investing with a good operator.  The syndicator (operator) finds the deal, does all of the due diligence, and operates the property after acquisition all the way through sale.  The passive investors simply put their money into the deal and get an equity stake in exchange for that.

Most syndicators give investors a combination of cash flow and part of the profits from the eventual sale or refinance, but it does vary from deal to deal.  Cash flow distributions are made either monthly or quarterly in most cases.  Again, this varies from deal to deal.  It's also very common for syndicators to offer investors a preferred return, meaning that the investors get that return before the syndicator takes their portion of it.  The investors don't have responsibility for the operation of the property.  The syndicator handles all of that.  The investors simply receive a return.

The returns that you detailed sound very enticing.  My biggest concern is making sure that the projections are realistic.  Being that it's so late in the cycle, I'd be a bit skeptical about such great returns.  I'd say make sure that you feel confident in the syndicator because the success or failure of the deal will largely depend on their ability to operate it properly.

From having looked at hundreds of deals over the last three years, I'd say that this is a very good deal if the projections are realistic and if you feel confident in the syndicator.  The money is made off of the successful operation of the property and the eventual sale or refinance of it, which then returns the initial investment to the investor(s).  To know what happens after the two (2) year period, you'll need to read through the offering documents because it varies from deal to deal.  It could be possible that the plan is to sell the property or to refinance it and potentially change the structure of it after the investors receive their initial investment back.

Keep in mind that this is still investing, so there is an element of risk.  It won't give you the same sense of security that keeping liquid cash will, but if it's a good deal in a good area with a good operator, then you do have a high probability of getting your money back with a nice return.

Use several of the methods above to get an estimation on value. Document what you do and put together a package to support your estimation. If you go through with the deal, give that to the appraiser when you refinance. With a lack of comps, a lot of times appraisers will just take a stab in the dark. Most times they will not take the time to research like you will. So if you give them a case supporting a higher value they are very likely to appraise closer to that value. 

@LaRhonda M How exciting! Sounds like there are some great numbers here.  My concern is you mentioned that the neighborhood is run down and you are paying all cash.  You can't move the property when you close.  And just because you rehab it nicely, doesn't mean you will get a high-quality tenant.  I challenge is your all-cash investment will be preserved over the long run.  Is the neighborhood coming back?  Does the city have plans to make improvements in the next 5 years?  Would you be in the path of progress?  If yes, to this questions... then maybe.  Just my two cents.

Hi LaRhonda, Thats exciting you have a possible Quad "deal". nice buying 4 at a time! Lots of ways to look at all the info here. Here are a few random thoughts and ideas...One way on looking at value is to just compare using a cost per "door" approach ,if you can see/find any apartment prices. So if a duplex was $25K per door, then yours would be work $100K with 4 doors. Try to find any duplexes and/or small multi family also to compare? If not, just compare to small similar houses to get a ballpark. Sometimes there is published HUD housing data showing average allowable rents in county or city as a benchmark also? You said you got the average rent some where... so see how those are priced? If you can pay cash, you may only want to worry about the profit if you can hold a while? I would run profit potential based on actual "current" rents you get now vs future "maybe" rent, so higher rents are all upside.

You can also try rentometer.com to see if it shows average rents in area? You may not be able to get the higher rent even if you fix them up, so maybe start out by getting all units in good "rentable" condition, to test the market, and then migrate up on rent over time, to start out easy. Lots of options here. The ballpark numbers look good on purchase. If you can get close to $2K+ in total rents per month on an $85K price, that should be a winner! I would ask why other units not rented/on market? You may want to call local appraisers or ask your bank/lender how they would come up with a price when ready to get a loan on it? Some lenders may only lend on the purchase price vs the ARV, until after 12 months, so maybe you want to get a loan up front vs hoping you can get a loan in future. Then use some cash on the fix ups and reserves. Also engage a property manager to access the potential rents and demands or renters in the area? Let others do the research for you? Maybe property managers can get higher rents for you? Good luck!!!