All Forum Posts by: Tony Lin

Definitely budget for it. You never want to fund these repairs with cashflow or get caught with no money to pay the repairs. Tenants will leave, complain to the city, write poor reviews. Not having money to repair will spiral to something much much worse. 

We're very focused in the Dallas submarket and will start looking at Austin. There are plans to look into Arizona and Florida, but I'm cautious and want to set up a good team there before investing. 

I do my reserves on a per unit basis, and long term reserves on a per month basis. 

$200-300 repair reserves per unit, as required by lender

2 Months of expenses in operational slush funds

3 Months of expenses (loan, tax, utility, payroll) in rainy day reserve fund

and more in reserves for long term repairs (roof, HVAC, sewers)

With the long bull run we've had, you want to make sure you have more than enough reserves to survive a downturn. 

Meetup is a great resource to learn and network. There are also a number of syndicators that hold web sessions and you can join online. There's no shortage of great information. 

I've had great experience with @Brian Eastman

I have invested in 4 multi-families syndications with SDIRA money. No issues except that some banks are hard to deposit into. There was a lot of trouble doing ACH deposits into Fidelity and Schwab IRA accounts. It turned into checks I have to go the bank each month and it's kind of annoying. Schwab didn't allow mobile phone deposits either because it's a special type of account type.

All else aside, they've been doing fine. I really love the flexibility to invest in more asset classes than just stocks. 

Be careful, because you're at risk of violating SEC rules on solicitation of securities. 

With a 506(b) you can only offer to ppl who you have pre-existing relationship with prior to your deal, not during. 506b Explicitly prohibit you from soliciting/advertising. While 506c allows advertising only to accredited investors. 

Syndicators shoot for 2-3 years at earliest because it takes ~2 years to renovate units, then another year to lease up the higher rents. Syndicators also get tax advantages if sold no earlier than 3 years. 

Exiting at 5-7 years is to typically aim for doubling of investor's money. The horizon isn't too long otherwise investor lose interest because the money is locked up for so long. 

Hence the usually 3-5 years range. 

I have a very serious LP/Passive investor ask me today how they will be protected in a new deal. How have you responded to this type of question in the past? He's looking for mid-teen returns open to either value-add or ground-up development deals.

Always be transparent to them. The investment is based on projections and not a guarantee of returns. They will not lose more than what they have invested into the deal. Their investments are protected by a LLC holding entity and they are not liable for lawsuits/claims against the property. Additionally, they're not on the hook for the loan balance in case the loan is recourse or turns recourse in case of bad actor.

One issue is I was offered to invest without any prior relationship to the sponsors in a 506b deal. The deal was already under contract and marketing materials presented during the initial call. 

Regarding whether the actions of the sponsorship group constitute a bad boy clause behavior will be something to dig in more detail.