Are you curious about getting involved with apartment syndication? It can be an excellent method of investing in real estate without being pinned down as a landlord or buying and selling properties on a regular basis as an individual. But before we get into the details, we want to go into what apartment syndication is all about.
Apartment syndication, also called group apartment investing, involves a group of investors pooling their money together to purchase an apartment building. This group works together to execute the business plan for this apartment building. It’s most often used for buying large buildings or communities that one person couldn’t manage or purchase all on their own.
Time is more valuable than money. You can get more money, but you cannot get more time. – Jim Rohn
How to Find Deals to Invest In
There are several ways to find great deals to invest in. The first is cold calling. While it might seem unbelievable, cold calling is one of the best ways for commercial real estate investors to find new deals. However, this is less “cold” calling than you might expect. Most investors look at property data and ownership records to gain a good start.
Do your research and prepare a script in advance. However, don’t sound mechanical when you make your calls. You need to appeal to them and introduce yourself before you move into a potential deal. If you decide to go the active route, it will take some time to find a good deal. We usually have to look at at least 100 - 200 properties before we find one the we purchase.
Another method that works well for apartment syndicate deals is to join an investment group. By joining an investment group you are able to create a relationship with our real estate investing team, we get to know your investing goals and as we have investing opportunities come available you are invited to invest. This will save you so much time while also leveraging the experience of our real estate investing team.
Knowing a Good Deal When You See One
There are three main ways to decide if a deal is a good one. The first one involves looking at the deal deck and underwriting. Deal decks are presentations that show you the strengths of an investment and how the deal will work. The underwriting offers insights into financing, rent, expenses, and more. All of these things play into whether to invest in a property or not.
The next thing to peruse is the cash-on-cash return (COC). This gives you information about the income earned based on how much is invested into a property. At the same time, look into the GP and operations team. Make sure you have a dedicated team there to ensure the apartment is operating well at all times. Each of these things plays into whether a deal is right for you or not.
What to Do After Finding a Great Deal
Once you find a great deal, the next step is completing the paperwork. You’ll also be expected to transfer funds for your investment. The money transfer process may take anywhere from days to weeks depending on the situation. It will depend on the group you work with and the property you are investing in.
After that, you’ll start receiving monthly updates about the syndication project. In addition, cash flow distributions will be provided either monthly or quarterly depending on the setup of the project.
When you receive the monthly email, you can expect to see things like how progress is matching up to the business plan, how many units are being renovated, and current occupancy rates. Photos of progress may also be provided on some occasions.
Expectations Over the Next One to Five Years
Throughout the next one to five years, you can expect to continue to get property updates. As an investor, you’ll be provided with information about any changes as things go on. In addition, you’ll receive payouts either once a month or every three months, depending on the type of project you signed up to invest in.
Depending on the situation, the property may be refinanced over the course of your investment. If this occurs, you can expect to get a certain percentage of the initial investment returned to you. For instance, a property might be refinanced after a project to add value to it. This results in more money that can be used on a different property.
When the property is sold, which is often within five to seven years, you will get your money back. The initial capital is the first thing that is paid out. However, in most cases, the amount the property sells for is more than what was invested into it. That means you walk away with a profit and can move on to invest in other properties or use the extra funds in whatever way you like.
Next Steps
If you are ready to start passively investing in real estate watch our Master Class 'Profits To Wealth' and join our Whole Wealth Investing Group so we can help you determine what your investment goals are and how we might help you.
Sources:
https://www.graycapitalllc.com/how-to-co-gp-your-first-multifamily-project-and-accelerate-your-investment-career/
https://www.bestevercre.com/blog/what-is-an-apartment-syndication
