All Forum Posts by: Michael Orlando

@Charles Seaman Has some great recommendations!! I would focus on numbers 3 and 4 from above..

We're doing our first syndication now and realizing raising the money is harder than expected. Our network is smaller due to a smaller track record, and many of the investors we do have, just want to "dip their toes in". Start raising money as soon as possible! We'd like to find someone who can assist us in raising capital, so that could be a starting place as well - find a partner who has a strong network and ability to raise capital. 

In general, finding GOOD partners is very important as well. The last thing you need is to deal with partnership drama while you're trying to get deals done. And to Charles' point, it will give the investors confidence to see a competent group instead of just one guy. 

@Steve R Chamberlain The structure can be relatively simple, or more complex. Just depends on the deal. But, we tend to go with a straight split or a reduced split after a hurdle such as a refinance. We're syndicating our first deal right now, but the structure is pretty easy to figure out once you know what you need and what your investors need. 

Raising money has been the biggest challenge for us! Our network is on the smaller side right now and many just want to "dip their toes in" first so raising a large sum has been tough. We want to partner with someone who has the ability to raise the capital or a large portion of it, and that might be a good avenue to look at for yourself as well if your network is small and you're a newer investor.

Bruce Peterson's "Syndicating is a B*tch" is a great read!

I feel like it's best to let them meet when it happens and honestly if they don't interact that much overall, it'd probably be best just in case. Probably less headaches for you too if they see each other minimally in case any disagreements arise, things get dramatic, etc.. 

Yeah if the property is 100% occupied, what I'd do and what we do personally, is schedule out the leases in an excel spreadsheet with their start and end dates. Map out when the units are coming due and when you'll renovate them. Use this to come up with a renovation schedule and you can add some formulas to get an idea of what your income will be like during those times as well. It's kind of tough to explain, but if you'd like an example of what we do I'm happy to show you as well. The renovations will really affect the income the first couple years so it's important to get a good handle on how they will really affect the numbers. 

If you can move tenants into renovated units, that's great IMO. We try to do this if possible, but I wouldn't bank on it. When we schedule out the renovations, we usually assume the unit will be down for two months - one month to renovate and one month to get it leased up. We feel like this is relatively conservative and also if we exceed this, we'll hit higher returns for our investors. 

Definitely have an attorney draft the actual purchase agreement! You could do an LOI which isn't really binding just to get your terms on paper and have the seller somewhat commit to them. During that time, you can start some of your DD and have the attorney draw up the actual purchase agreement. Make sure you work with an experienced real estate attorney (preferably one that has experience in the property type you're putting an offer on and has done quite a few deals).

I didn't take the time to really pencil this all out, but sounds like the COC is pretty low. I wouldn't do a deal at 5% COC, but as long as you're personally okay with that metric, then that is totally up to you. Sounds like you aren't taking on investors, but usually investors will want to see 8%+. There could be a miscalculation in there somewhere though if your COC is really that low. I would say for the cash you're looking to invest, you could place it elsewhere and expect a much better return. Again, I did not pencil this all out though so I'm assuming your calculations are all correct and there is no error causing your COC to be lower than expected.

@Jobin V. We're raising about 1.3M right now for 2 separate deals. Lots of stuff in the pipeline though, so will need to keep it coming!!

If you have a strong network, you may already be able to bring value from the capital raise / investor relations side. If you'd prefer to take on another role, then I would definitely start underwriting larger deals as practice as well as looking at financials to get into the asset mgmt side of things :)

We're going through our first syndication right now! Definitely been a great learning experience. We have very solid deal flow since we do a lot of direct to owner marketing, but we're figuring out that the biggest challenge for us is raising capital for these deals. Our track record is pretty short, so we could really use someone who has a great network and access to capital. I think you should definitely focus a ton of time on building those relationships as well as the upfront education at this point. The other stuff you can definitely figure out pretty quickly!

I would agree overall with @Greg Dickerson. COC and IRR are the most common metrics passive investors will be looking at. Another angle to this is, what do your investors want?? I know some investors that are totally fine with 8% COC throughout a 5-7 yr hold. I know some that want an average of 10% COC and preferably, a return of capital from a refinance. There are some investors that just park money into barely cash-flowing assets for appreciation (although I truly do not believe this is as common or attractive). But I think overall, ask what kind of COC and IRR your investors prefer? And then, do you cashflow yourself on the GP side of the deal if they hit those metrics? That's what I'd be thinking about.