All Forum Posts by: Steve Chan

@Shelon Hutchinson I closed on my first multifamily syndication in August, 2020 and kept a daily journal the final 30 days to close. I kept this journal so that I can help people in my network that are about to go through their first close and accurately remember the details day-by-day.  

I have an apartment complex under contract in Augusta. I'm happy to hop on the phone with anyone that's interested in the market. Rising tides raise all ships. 

Does anyone know if Georgia charges an additional transaction fee for the purchase or sale of a multi-family asset that is owned by an out of state LLC? We would like to register in Texas, which is where our attorney's are based; however, if Georgia charges an additional fee, it may be in our best interest to incorporate in Georgia.

I’m looking to educate myself on working with a money raiser, from a sponsor’s perspective. How are these arrangements typically structured and what are some good educational resources?

@Carl Fischer Thanks for the feedback! 40 years of investing experience is priceless. 

Thanks for the feedback Daniel! Is there anyone on the other side of the fence that has invested with a sponsor that has not been paying distributions? How has that impacted your perception of that sponsor?

@Brian Adams I'd like to preface what I'm about to say with a few points:

1. I think the correct answer depends on the goals of the limited partners in an investment; therefore, I do not believe there is a "correct" answer to my question. My question comes a standpoint of curiosity.
2. I believe that capital preservation should be the number 1 goal of every sponsor. So, if withholding distributions in order to protect your investor's capital is necessary, I would fully support that.
3. Having the support of you partners is of utmost importance, which highlights the importance of effective communication, regardless of the chosen strategy regarding distribution adjustments.

With those points established, I have continued to receive distributions and that has strengthened my confidence in my partners. 1) Buy for cash flow, 2) secure long-term, low leveraged debt, and 3) have adequate cash reserves are principles that guide the business. So, in my opinion, paying distributions during economic uncertainty demonstrates that the business plan properly accounted for these principles prior to the unforeseen economic event. 

Also, one of the most important attributes of an investment for me is passive cash flow. So, if I were put in a position that stopped that cash flow, I imagine that my confidence in that sponsor would decrease. However, I say that very carefully, knowing that economic uncertainty is extremely high right now considering the many variables that this coronavirus pandemic has created. 
  

I understand the technicalities of the distributions. My question is geared towards LP's perception and how withholding/paying distributions made them feel about the sponsor that they invested with. For example, if you invested with a sponsor that withheld distributions, did your confidence in that sponsor increase because you thought they were taking the necessary precautions to protect your investment, or did your confidence in that sponsor decrease because you thought they did not plan for enough reserves?

I'm curious to know which sponsors have been paying out distributions during this pandemic. If you’re a limited partner and your sponsor has not been paying distributions, what are your thoughts? If you are a limited partner and your sponsor has been paying distributions, what are your thoughts?

@Nate R. great response. I think the most important factor when investing with a syndication group is vetting the general partnership team.  

In all of the multi-family business plans that I've reviewed over the last few years, the 17% IRR, 8% COC, and 2X equity multiple over a 5 year hold seems to be fairly common projections. Also, to answer your question, the most recent business plans that I've reviewed have projected annual rent increases. I can imagine you must be very frustrated by not receiving your distributions. To me, passive cash flow is one of my favorite elements when investing as a limited partner.

In regards to the PROs you listed about 401(k)s, I agree 100%. That's why I still have a 401(k). It's just not my primary retirement plan. I think everyone needs to build a plan based on their circumstances and risk tolerance.