All Forum Posts by: Joseph Bramante

1) are those existing or proforma rents at 2500? 2) are you sure your math is correct? 3) what does the OM say? Is it described as a value add? 4) what is the area like? Is it a land play where the land is worth more than the property? 5) how much do town homes sell for in the area? Can you buy it, scrap it, build town homes then sell for a profit?

For our multifamily syndications, we operate under a GP/LP agreement. The gp has all the rights and the LP is just providing capital with minimal rights. There is a separate agreement between the GP's called the partnership agreement that states our indivisible responsibilities. This later agreement is equally important. When having an attorney draft the partnership agreement , imagine you are in the future and your partner did something very stupid that cost you money. What would you wish it said that would allow you to get rid of them and/or claim damages? That is how you should approach it. Like a prenuptial agreement.

I see this is a very old post but for what its worth....

@Lane Kawaoka, I agree with @Charlie DiLisio and have accepted millions from investors in our syndication through self directed IRAs. I haven't personally done it, but I find many investors, especially those who are corporate employees or retired, are doing it this way. Although, like @Scott Dixon, I did borrow money from my former 401K as a down payment for my first multifamily property. 

Oh, and regardless of what scenario you go, find you a quality syndicator in your market. Somebody with a track record and testimonials. You don't want to buy a small MF property. Those are the hardest to operate. 

Assuming you can get the Co-op leveraged up like you would want, the cash flow would be crap under the new loan. Why not just sell it? If you are able to get a loan, I would bet your leverage would only be 50-60%, so you are looking at 150k -250k. net of fees. I would sell. 

@Mark Robertson Ok buddy. Maybe I misunderstood your website. 

Of course you have to watch for the vultures. But it is much easier for the average investor to sort out a good or bad syndication than it is to sort out a good or bad investment. With a syndication, there is a partner agreement and PPM that provides some protection. If they do it on their own, there is no protection. I learned so much on my first MF purchase and nearly lost a lot of money before i turned it around for a 207% return. But many of the lessons I was learning could have been learned safely as a passive investor while somebody else was in charge. I was running when I never learned to walk. Luckily I'm a fast learner :) 

@Ingrid J. Qualifications include

• 10+ years experience in the market you are interested in investing in. 
• Experience doing the type of investment proposed (value add, yield play, new development, etc), 
• capacity to grow (you don't want a 1 man show with several properties. Your investment may not get the attention it needs, or if something happens at another property, your will suffer from decreased oversight),
• Performance based compensation structure. Usually based on IRR with a hurdle rate of 8% for shorter term holds and waterfall for longer term holds. Profit sharing of 20-40% over water fall. Ive seen other, simpler models with a simple return 25%/75% split after return of capital. Easy to understand but not best for investor. especially if it take a long time to return capital. Research IRR if not already familiar.
• 5-10% investment in the deal by syndicator. They need skin in the game. 
• Property management in-house. Not required but it helps a lot of the management co and the sponsor are the same company. Lots of synergies.

Other things to watch out for

• Anybody who is given equity up front for syndicating the deal. Do not do this since they have no incentive to perform for you. 
• Large cash payments upfront. I'm talking anything over 3-4% of the deal value. we charge a 1% acquisition fee up front which is market rate. 
• Guarantor or Bad Boy carve out signer on loan. Try to do deals where the syndicator is big enough to cover it, but if you are signing as a Key Principal in the deal, at least make sure you are getting compensated for it. 1-2% of the amount you are guaranteeing 

Thank you @David Thompson. I was waiting for somebody to explain multifamily syndications. 100% agree, as a novice investor with a large sum to invest, a qualified syndicator is your best investment. Pools your money with many others, thus spreading the risk and liability. Able to buy much larger properties with better returns and operability due to their economy of scale. We typically cash our investors out for a min of 100% every 2-3 years so they get to keep the original investment and invest in a new syndication which doubles their cash flow. In 2-3 more years, rinse and repeat. So in roughly 6 years, you could have 3 streams of cashflow from the single lump sum.

@Mark Robertson, for somebody who gets paid to provide a due diligence review of properties with no investment to lose if their wrong, telling a novice investor to find their own deals and figure it out for themselves isn't very good advice. They are much better off investing as a passive investor with a vetted syndicator their first few times while they learn the ropes. All it takes is 1 bad deal in this business to end your career and deals are won at the closing table. So if a novice investor over pays or buys a lemon, no amount of mentoring or advice will help them recover. Just have to sell it for a loss. As long as a syndicator is investing along side them, so both parties have something to lose, there should be no issue. I'm sure there is a forum on here about best practices for passive investors when it comes to syndicator compensation. Or atleast there should be to protect investors and provide some good knowledge. 

@Mike Dymski Of course you can determine expected returns on a case by case bases. But you can't make a blanket assumption for all markets during a downturn. That was my point. Tertiary markets tend to be less volatile during a down turn however there may be less upside as well.

I do. My first deal (26 units) purchased in 2011 refi'ed in 2014 for 207% return. 3rd deal (101 units) purchased in 2015 selling next year for net return of 270%, excluding cap gain tax. 4th deal (137 units) purchased last sept currently will be north of 150% on refi next year. Increased rents over $200 w minimal rehab. The 2nd deal (61 units) is not listed because we over paid a bit for it and only refi'ed for 80% after 3 years but it's located on the light rail and has huge upside w land value. Should we sell, would produce another 170% return, but we are holding and redeveloping into a mid rise when the area improves.