All Forum Posts by: Scott Runyan

In addition to Loopnet, Crexi, and the others mentioned here, you can also sign up on the large national brokerage shops websites, sign a CA and get a lot of financials on properties. All without talking to a broker. Some off the top of my head are Marcus & Millichap, Berkadia, and CBRE.

Joe Fairless's "Best Ever Multifamily Syndication Book" is a pretty good place to start. That being said, $1.5mm purchase price might be a little small for an actual syndication. Attorney fees for documents can start adding up quick for a syndication. Assuming you put down 20% your looking at around around a $300k raise which is a good starting point for partnerships and joint ventures. 

I personally would not invest in a deal that I didn't stay in after a refinance. That shows to me that the incentives aren't aligned between the sponsor and investors. To me, that sponsor is saying they will risk your capital to stabilize a property and get cut out once the big rewards start coming in and the sponsor takes the huge upside of value-add multifamily.

My personal opinion is it was a great strategy a few years ago. The big question now is, are you able to get the projected rental increases you expect? If you can't what happens? If you get bridge debt for the purchase and renovations, what is your plan if the debt comes due, during a recession, and your value isn't there to refi?

I'm not saying these deals can't be done anymore, I'm just saying to be very careful right now. 

For a commercial loan, a 5-10 year term amortized over 20-25 years is a pretty typical loan structure. There are so many lion products for multifamily out there right now, I'd recommend you  find a commercial mortgage broker in your area and talk with them about all the options. 

One thing to remember with commercial loans, not only does the property have to perform, but generally you have to have the net worth at least equal to the loan amount most times there is some type of liquidity requirement too. This is the combined net worth of the partners, not each individual.

As @David Lilley said, I can't really see any scenario where I would invest in a deal if the sponsor plan was to refi and then I lost all equity in the deal. That's basically saying, that the GP is going to use my capital to fund the deal, take the risk, and then when the returns really kick in, get none of that upside. 

You could setup a simple waterfall structure where the normal split is 70/30 and anything over a 10% CoC is split 50/50. If the property is generating 10% CoC and cash flow remains relatively the same after the refi, returns on the remaining equity in the deal should be high enough to give you that 50/50 split for the rest of the hold period. The GP's have a higher promote, the LP's still get cash flow and have equity back to go get more deals. Everyone's happy. Of course 10% is an arbitrary number, you'd have to figure out what returns make sense for your specific deal.

@Jason A. Are you looking at the 30 units that are broken up into a 16 and 14 unit complex?

@Jason A. Forest Park is like the majority of suburbs on the south side of Atlanta. Properties can vary greatly depending on location and it can change block by block. If you're from out of state I'd definitely recommend a trip down to see the area for yourself. Good thing is, Forest Park is right by the airport! 

As an investor I'd be happy with an exit now. I'd like to have the money back and put it back to work. 

Like Brian said, you never know where the market will be in a few years and you'd feel awful if you waited and things didn't go your way. 

A 70/30 split sounds reasonable, and most syndicated deals I'm seeing are around an 8% preferred return. But Greg is right. Without someone with experience on a property like this, getting financing will be next to impossible. Also, your cap rate of 7.5%-9% seems very high for Atlanta. Most deals I see in the area are in the 5-6 range. Even for value add C deals. Not a large spread between B/C right now in Atlanta especially within a 15 min drive to the city. I'm in the area, please feel free to PM me if I can help in any way.