Who knows if they can swim? Some individuals can make this jump into syndications. Great for them! Keep in mind that this transition is a big step that requires more capital, a larger barrier-to-entry, skills, network, and unequivocally more risk. It might make sense to get a mentor to point you in the right direction. If you are planning on being an operator or a general partner GP with no prior experience then I think you are smoking crack and I wish you luck.
You will always make a mistake and I would rather see you make it with a small deal first. Entrepreneurship is often about survival. Stay alive until you get lucky. I am one for going after a bunch of singles first then going for home runs.
- The Listener.
- Your Passion Your Purpose.
- Licensed content and brands.
- Investing in Apartments | Apartment Syndication Book | Joe Fairless.
- Joe Mercer, OBE: Football With A Smile!
Plus, if you like real estate investing and want to become an operator, you will benefit by building valuable experience as you mold your track record and brand from starting with small rentals. I think that is why SimplePassiveCashflow. Its funny that most of my coaching clients who have phenomenal W2 salaries want to start with the small stuff as if they are gluttons for punishment I think it speaks to their character and how they achieved so much and the folks with no track record of any success and are broke always want to swing for the fences.
If you are planning on being a passive investor or limited partner LP with no prior experience then there is room for some debate. More often than not, some investors just try it on their own. Do not be a sucker. This is not a good approach and often leads to investors getting taken by the glossy PDF and profile pictures. Go directly to the source and cut out the middle man and invest with us.
The Ultimate Content Marketer's Guide to Syndication and Licensed Content
The biggest problem with being a LP on a syndication is the potential of working with a shyster who takes your money. This is a very small chance of happening and can be mitigated by due diligence and creating a network that verifies characters. The risk and severity are modeled below. Being a single family home operator has its own headaches and dangers which I have documented on past articles. Being a direct operator has higher returns coupled with more risk. In my analysis of risk, a syndication with the right people decreases the variability of the investment performance as shown below.
Duplex, Triplex, Fourplex or small apartment complexes — This was the path I was going towards before we got into contact.
Share your thoughts and debate the big issues
Syndications — After coming across your stuff, I thought being a LP may be the preferred route. Do I want to spend so much time finding deals, buying, building the portfolio, or should I just be a LP and use my time for other life goals? Not quite sure, but the idea of being LP sounds like a solid approach. I thought about this path for single-family homes, but I felt like it may be too hard to jump into BRRRing something out of state.
You could pursue a hybrid approach of investing in all of the above although 2 of 3 would be more practical to not spread yourself too thin. Again, it totally comes down to how much money and time you have. More specifically if you have a lot of liquidity then you can do more than one track. All these things are totally correct and shows that you have the big picture.
Just a matter of choosing which path you want to go on. I recommend for investors to get their feet wet with investing in single-family properties first. Yes, I previously noted issues with single-family homes, which you will experience at some point. But there is no better way to learn and build up the war chest as a prerequisite for more scalable investments and private placement syndications. I believe that once an investor understands this and can 1 build some sort of liquidity and cash flow and 2 be able to call BS when a syndicator starts to use bogus proformas and assumptions.
Keep in mind that entering larger syndications requires serious capital.
But without adequate cash flow coming in from other investments you are a sitting duck for a year or two — the education process stops. If you are a tables and graphs person check this out to see a loose rule on when to make the jump to syndications. In terms of returns, being the direct operator normally produces higher gains. The only way you can protect from this volatility is to… get more properties! This is less than being your own operator on a small rental. In terms of risk you are putting a lot of risk that the General Partners will uphold their fiduciary roles. Assuming you mitigate this as best you can by checking backgrounds and only working with those you know, like, and trust with one degree of separation, the volatility of returns is much less than the smaller rental variety.
What I like about syndications is that a deal is not done unless there is a lot of meat on the bone which helps protect your equity position in a downturn — just beware of the loan terms and if it is a recourse or nonrecourse loan. Crazy huh?!? Cap rate is the market determination of how much you should pay per NOI.
For example if your starting Cap Rate is 6. That is why you want to be conservative as assume you will sell in a softer market. Likely what the syndicator will do is just blame the missed targets on the economy where it was just screwed from the get go. See below how much it impacts the total return. I personally look at the total return over the year period and focus on what really matters 1 Cap Rate to Reversion Cap delta, 2 Assumed rent increases per year, 3 Assumed full occupancy. Whatever you do, try to stay as close to the investment as possible.
Do not invest with random people. And to do this you need to analyze the Profit and Loss statements for the last 12 months, rent rolls, and pull your own rental comps. These items are typically never disclosed to investors. The less data they give you the less questions and the less question the more likelihood of you investing. Do you really want to work with these people?
There is a lot of consolidation in this new space. Think of the many competitors there was before there was the Ebay or the Amazon.
Licensed content and brands
I stay away from Crowdfunding sites personally. Update: Realty Shares going under — [a sign of more consolidation to come]. This is typical of a tech startup. Click here to learn more about crowdfunding websites. In the end, do not forget your end-goal. Folks start drinking the Kool-Aid, and will be financially free in years pending taking action. Always keep your end in mind by taking a more passive approach and start designing your ideal lifestyle today.
See chart here for further visualization. Many deal hunters I know spend off hours taking brokers out to lunch or a Dallas Mavericks game frequently to get to the top of the list for the next deal. Not saying you cannot find a deal on your own but who are you kidding? Mom and pops — you have to love them! They go into single-family homes and scale up to duplexes, triplexes, quads, and to 8 units, 16, 20…. What I like about mom and pop investors is that they eventually screw up and sell to us sophisticated investors at a discount.
One of your first podcasts I listened to SPC was one about when you decided to move to Multi-family from Single family. However, the time commitment to my W-2 career prevent me from scaling this investment model. Here is info in Turnkey rentals or Turkey rentals. Post-purchase early rehab walk-through April —. Join here! This why we invest in B and C Class deals and stay away from Class A typically unless its a good risk-adjusted return. Click here to access the growing list of things you can investing and my personal notes on each.
Let me know if you care to add to our growing information repository. I am betting this is an understatement as a lot of private placements are not reported. There are a lot of people doing this but there is very little information out there… until now! I've purchased limited partnerships in two properties, and both have meet or beat the monthly returns that were advertised. Joe and his team are great communicators, and I've always been able to get in touch with them when needed. I look forward to a few years down the road when the full return can be realized. The proven techniques in this book has helped me eliminate limiting beliefs and has given me the confidence to pursue transactions much larger than I envisioned.
If buying large apartments feels daunting, Joe has developed a practical, proven strategy to provide a clear roadmap for success. I've successfully employed these strategies and watched numerous others do the same to raise millions to acquire apartments. After applying the principles Joe talks about in this book, we've been able build a unit and growing portfolio. The Best Ever Apartment Syndication book is the ONLY book that provides a proven step-by-step system for completing your first apartment syndication deal and building a multimillion or multibillion dollar real estate empire.
If it were not for his help with applying the techniques in this book, I would not have been able to close my last purchase of 48 units!! And all of this in well under 1 years' time.