All Forum Posts by: Steeve Breton

@Sanjoy V. You can go find yourself a turn key SFR. There are some good outfits (and many not so good). I think you'll find the returns, even with the good guys, aren't so great in the end (despite what they promise). A true turnkey will be hands off, but if you're going to do that, then I think you'll find better returns and less stress with other passive investments. You can also get 1 SFR and self manage it, or even manage a local property manager, but again it seems to me you don't have the time.

You can also consider that we often hear about so many that have made the jump from SFR to MF but you'll never hear about someone going from MF to SFR. Maybe house hacking a turnkey duplex is a better option for you.

@Danny Randazzo, good point about "have investors that want to learn the process of owning/managing investment property".  I'm part of a few different mentor/mastermind groups.  I could see this working if a few of them had enough $ to invest.  In that case I'd have 4 to 5 GPs, all with some level of multifamily and syndication competence.

@Bill F.  Yep, "share the opportunity with your network [OF PEOPLE WITH WHOM YOU HAVE A PRIOR RELATIONSHIP] to secure investors

@Brian Adams  that's how I'm reading this as well. 

@Danny Randazzo  syndication docs often only cost $10k-$15k particularly if using the same securities attorney for multiple deals.  I can see how the above might work if you are looking at projects with a total capitalized value <= $1M ... in that case you may only have a few GPs to manage and the deal size may not support the cost of a private placement memorandum.  However, in larger deals I'd avoid using this approach for the following reasons:

• First, syndication docs are there to protect everyone involved.  It just comes with the territory
• The SEC is likely to believe that some of your investors are actually passive and relying on you're expertise
• If you setup an Asset Management LLC to make decisions, the investors look like they are Active in name only
• If you have 5, 10, or more GPs it will likely cause substantial noise and delays in decision making
• Most investors won't know enough to make such decisions, or even want to
• Most investors won't want to sign on a multimillion dollar loan

@Sanjoy V.  Hope you took some time to ponder the above responses over the weekend.  It is VERY important not to rush this decision.  Maybe set a goal to further educate yourself for a couple of months while at the same time getting clarity on what you want to achieve.  Do not invest in anything until you are very clear on what your goals are and you've learned about the possible ways to get there.  From your posts in this thread it seems to me that crowd funding or syndications are the best fit.  They are the most hands off after you do your initial due diligence.  But we can't truly understand what is driving you.  Only you can do that.

It's great that you recognize that pride is effecting you decision making process.  Once you are clear on your goal (e.g. make > 12% returns on my hard earned money with the least amount of effort .... or build a portfolio that I control and manage and eventually leave my job) then your pride is less likely to be a factor.

@Michael Swan & @Mike Krieg excellent advice.

@Ray Li  Diversifying across 2 or 3 sponsors would be good from a diversification perspective but as an investor I've always learned what good (and bad) looks like with every deal.  As Michael mentioned, they should be willing to share their underwriting and answer detailed questions.  Given you're financial position I'm guessing you'll have no problem finding someone who's willing to work closely with you.  You can get started by interviewing a few of the Pros on this and other similar threads.  Check out their websites, ask them about prior deals, etc.  

@Anwar Abdul-Hadi  I've invested in other people's deals for many years. Looking at your question it seems to me you are looking to invest in a syndication rather than getting into the syndication business yourself.  So with that in mind my tip is to do a thorough job of evaluating syndication sponsors.  There's a saying that goes something like this: "If you have a great deal with a bad sponsor you'll have a lot of problems but if you have a great sponsor with a deal that goes bad you'll probably still be OK". 

Below are a few things you can do to get started.  

• Check out the websites in the signatures of the people who respond to this and similar posts. You'll learn a lot about them and their investment model.
• Setup time to speak to a few of them to learn more about their model and get a feel for how they answer your questions, how they treat you during the call.
• Be prepared to share your net worth, income, and investment history with them if you want move forward.
• For the ones you like (after speaking with them), maybe have them send you example investor communications on prior deals so you can see how they communicate to keep investors informed.
• Once you've narrowed it down you'll want to further evaluate the sponsor
  • Track record, references, etc.
  • Have them present a past deal in detail to try to understand their assumptions, are they conservative, etc.
  • You can use the BP Tenant Screening tool to get criminal and credit history. I wouldn't invest with anyone who's not willing to do make this info available.

You probably also want to get educated in how syndication works. The above steps will actually inform you quite a bit.  If you're serious about investing $50k or more in apartment deals then you may also want to purchase Michael Blanks's Syndicated Deal Analyzer.  It comes with some videos that teach you how to analyze a deal.  That would give a much better understanding of how to evaluate a deal before you invest in it.

I'm happy to connect any time to further discuss.

@Torey Chumbley OMG!  at 2.3% it's practically free money.  DO NOT PAY IT OFF!  Of course not all debt is created equal.  But in this case it's a no-brainer.  To become more comfortable do some research on "Inflation induced debt destruction" whereby debt is constantly being debased by inflation.

Also, sounds like you've put a good dent in your mortgage and have solid LTV. If so you're far less likely to default and lose your home so that shouldn't be much of a concern... worst case you can refi (even at a higher interest rate) and reduce your payments. But if you invest wisely your cash flow should help cover much of that mortgage payment ... and quality cash flow (on C class/ workforce apartments) doesn't evaporate during a melt down. People don't just stop paying rent to the degree that a 50, 100, or 200 unit property won't cash flow (if purchased and financed right.

@Jay Hinrichs Regarding "08 meltdown took no prisoners all asset class's had their troubles" ... This may be true but MF had far less trouble.  Freddie Mac reported MF mortgage delinquency was less than .5% nationwide while single family was about 4% nationwide.  Even so, I am currently taking a cautious approach and only investing in C class projects with value-add opportunities to force appreciation.  Also choosing to put 10 year debt on our commercial purchases to give us a higher probability of riding out the next downturn.

To All, Fantastic debate here.  By no means do I believe my way is the best way since everyone has a unique situation (income, expenses, risk tolerance, lift stage, etc).  I enjoy the different perspectives as even my own thoughts on this continue to evolve. 

@Yonah Weiss, yes, varies by market but generally the more expensive apartments will experience higher vacancies during a protracted recession because the class A renter can chose to live in a class B property.  Class C renters are generally more blue collar and perhaps less likely to be laid off... and if they do leave the Class C property they are backfilled by Class B renters.  The Class A building has nobody to backfill vacancies. 

@Warren Currier,  I stopped buying in MA a few years ago.  Last purchase was in TX and recently underwriting deals in Atlanta, TN, OH, NC.

Wow BJ.  Seems everyone is shying way from this question.

Unfortunately you may already be violating SEC rules by taking money from passive investors.  Passive meaning they are doing nothing in the project and expecting you (the sponsor) to deliver a return.  Probably worth a call to Lisa Taylor, Gene Trowbridge or any other syndication attorney.  It's less of an issue if you're using taking the money in as a loan and paying out interest... but some attorneys will tell you that's also a security.