All Forum Posts by: Ryan DiCanio

HI @Ryan DiCanio! I recommend you buy the latest version of Gene Trowbridge's book It's a Whole New Business. This book explains syndication, and all kinds of terminology you will need to know. And it will help you understand the mechanics of investing in commercial real estate.

You may also want to join Jim Pfeifer's Left Field Investors group. This is a group of like-minded investors who can offer a lot of value.

Happy investing!

Hey Paul, thanks for the education tips! Do you know where I can go to join the investors group you mentioned?

0 Votes

Chicago, Illinois

Quote from @John Warren:

@Ryan DiCanio you only need to worry about a preferred return if you do a syndication structure pretty much. Are you planning to purchase this yourself? Will you use a JV partnership? when you make the jump to these mid-sized multifamily buildings there is a lot to learn. If you end up trying to put together a small syndication deal, just know that the costs eat up a lot of cash for a smaller deal. The attorney paperwork is around 9-12k for the initial setup, and then you still have all your other closing costs.

John I have been looking into a 19 unit commercial property and planning on getting investors to finance the deal. It is a 1.75MM deal so I would not be able to finance it myself.

1 Vote

Chicago, Illinois

Quote from @Greg Scott:

A preferred return is one of many different flavors of profits offered by syndicators. Some also call this a waterfall return.

In a preferred return scenario the passive investor (aka limited partner) is told they get a certain % return before the syndicator gets any profits. This scheme appears to work well with investors that are primarily used to stock investing. A syndicator will typically offer a 8 or 9% preferred return. Uneducated investors will see this as a "sure thing", because they will make more than they did in the stock market, with some potential upside beyond their preferred return. These investors believe they are getting paid first.

In reality, most syndicators make a ton off of operational fees before any preferred returns are paid to the passive investors. If the deal sucks, the syndicator is going to make money off of almost zero net investment in the deal and the passive investor won't make much on their investment, even though they had all the financial risk. If the deal is a home run, the passive investor will do well, but the syndicator will make a killing. (It is critical to fully read the operating agreement and actually do the math on how returns are paid before investing)

As a syndicator and also a passive investor myself, I never invest as a limited partner in any deal that offers a preferred return. I only invest in deals with limited fees and a straight percentage share between the syndicator and the passive investors.

Some will hate me for posting this. Bring it on!

That helps explain it clearly to me! Thank you - so its safe to say you only like to invest in deals when all partners are invested financially in them?

2 Votes

Chicago, Illinois

Hi BP Community,

I am currently looking into a 19-unit apartment complex in Chicago and after speaking with other investors, the term "preferred return" kept popping up. Can someone provide a simple example as to how this works? How does it affect the cash flow per month and then when it comes time to sell the property?

Thanks!

5 Votes

Chicago, Illinois

Originally posted by @Man Le:

@Ryan DiCanio congrats for your 1st deal, what area of Aurora you landed this property ? which contractor did you use for your rehab ?

Thank you! It was near North Aurora, right off of 88. I didn't use a contractor as I know what I wanted to get done and the rehab wasn't extensive enough to bring a contractor on.

0 Votes

Originally posted by @Dmitriy Fomichenko:

Congratulations on this investment @Ryan DiCanio !

Thank you, I appreciate the support!

0 Votes

Originally posted by @J Scott:

Quote from @Ryan DiCanio:

What factors impact the decision to invest in updates for a property, versus saving capital for other investments?

I am currently house hacking a duplex in the Aurora area. The side I am living in is very outdated (20 years at least). I have added a fresh layer of paint and have ripped out all the carpet in and old tile on the first level, replacing it with Lifeproof Vinyl Flooring.

There are a couple of other duplexes in my neighborhood; on the exterior, one of them looks similar to mine and a couple of the other ones are more up to date. I have not had the opportunity to see what the interior looks like.

When making the decision to either invest into my current property versus saving money to invest into other properties, what factors should I be keeping in mind?

If anyone can provide some insights I would greatly appreciate it!

All other things being equal, invest the money where you're going to make money.

Investing money in the side that you're living in now isn't going to generate any greater return, so the ROI on that "investment" is zero.

So unless your goal isn't to make money on the investment -- for example, if you just want a nicer place to live -- I don't see Any financial benefit in spending money there. At least not until you're ready to rent that side out.

That is a great point! So until I either want to rent this side out or sell the entire property, my money would be working better if I put into other investment opportunities that will start making me money now. Thanks for the tip!

0 Votes

What factors impact the decision to invest in updates for a property, versus saving capital for other investments?

When making the decision to either invest into my current property versus saving money to invest into other properties, what factors should I be keeping in mind?

If anyone can provide some insights I would greatly appreciate it!

1 Vote

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $266,000
Cash invested: $15,000

My goal of 2021 was to obtain my first investment property and I can successfully say I have done that with this duplex in Aurora! I have updated the following to the property:
- Ripped out carpeting and installed Vinyl Flooring
- Refinished all bathtubs and sinks from a deep green to a bright white finish
I have learned so much from this first property that I wouldn't have learned without the experience of just jumping in! I can't wait to see where my real estate investment journey takes me.

What made you interested in investing in this type of deal?

It was in the area I liked and the numbers worked out very well for my first deal!

How did you find this deal and how did you negotiate it?

I found this deal from Real Estate investor on the MLS.

How did you finance this deal?

FHA Financing with the help of gaining a sellers credit.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I would highly recommend using Paul de Luca as he is a superb realtor, as well as Cross Country Mortgage for a primetime lender! They helped with making this whole process easy for me!

0 Votes

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $266,000
Cash invested: $15,000

My goal of 2021 was to obtain my first investment property and I can successfully say I have done that with this duplex in Aurora! I have updated the following to the property:

- Ripped out carpeting and installed Vinyl Flooring
- Refinished all bathtubs and sinks from a deep green to a bright white finish

I have learned so much from this first property that I wouldn't have learned without the experience of just jumping in! I can't wait to see where my real estate investment journey takes me.

What made you interested in investing in this type of deal?

It was in the area I liked and the numbers worked out very well for my first deal!

How did you find this deal and how did you negotiate it?

I found this deal from Real Estate investor on the MLS.

How did you finance this deal?

FHA Financing with the help of gaining a sellers credit.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I would highly recommend using Paul de Luca as he is a superb realtor, as well as Cross Country Mortgage for a primetime lender! They helped with making this whole process easy for me!

0 Votes

All Forum Posts by: Ryan DiCanio

Ryan DiCanio has started 9 posts and replied 43 times.

Post: How does a preferred return work?

Post: How does a preferred return work?

Post: How does a preferred return work?

Post: How does a preferred return work?

Post: New Investment in Aurora, IL

Post: New Investment in Aurora, IL

Post: Updating Current Property vs. Saving Capital

Post: Updating Current Property vs. Saving Capital

Post: New Investment in Aurora, IL

Post: New Investment in Aurora, IL