Real Estate Syndications

[TexanTraveling 42]

Is there anyone on this site that is involved in real estate syndications?

Curious what your thoughts are with debt being so cheap? Do you see this time as an opportunity or are you holding pat waiting for things to calm down? What kind of class do you invest in?

[G650 14256]

You need to be a little more specific. Are you talking development, physical assets? Are you putting in cash or sounds like you are leveraging?

[TexanTraveling 42]

41 minutes ago, G650 said:

You need to be a little more specific. Are you talking development, physical assets? Are you putting in cash or sounds like you are leveraging?

Yea, so basically any situation where a GP is pulling capital from investors to invest in real estate, whether it be for development, Class A/B/C, etc....no debt or very little debt

[G650 14256]

Gotcha. I generally think it's always a good time, and pretty much continually keep money in syndications for single family development. Obviously things like 2008 are a risk, but that is a once in a lifetime event. Housing fundamentals are so strong right now I can't see anything slowing for the near future, corona notwithstanding. One caveat would be to know your market, I'd shy away from boom/bust areas like Vegas or South Florida and stay in steady growth regions.

I am also a site contractor so I generally invest in projects which I'm doing, which eliminates a risk source obviously.

 

Edit: I'd stay away from commercial for awhile though.

Edited June 10, 2020 by G650

[Sbbruin 21853]

1 hour ago, TexanTraveling said:

Is there anyone on this site that is involved in real estate syndications?

Curious what your thoughts are with debt being so cheap? Do you see this time as an opportunity or are you holding pat waiting for things to calm down? What kind of class do you invest in?

I am in 5 of them.  But I got preferred investment positions as a company exec, so  in the case of new developments we got a developer earn up and in other cases the company covered a portion of the investment and all that needs to be paid back is the principal.  A few have been great, and now I get decent monthly distributions.  

But believe me, while there are going to be a lot of distressed deals out there, there is also BILLIONS sitting on the sidelines waiting to pounce.  I would only get involved with someone who has a proven track record.  These can be more complicated than they look.  

[52-80 19158]

I invested with private placement in LLC in a 5-10M Class B project running over last few years.  Exited recently when they did 1031 to larger project . 

 

Was very profitable, matching or exceeding QQQ/Tech Equity which was on a historic bullrun. 

 

Difference obviously was liquidity... got paid out 8% quarterly dividend and got the big capital appreciation when I got out.  Prefer to have more control of my capital now... or get into an RE project myself and reap more of the tax advantages

Edited June 10, 2020 by 52-80

[TexanTraveling 42]

7 minutes ago, Sbbruin said:

I am in 5 of them.  But I got preferred investment positions as a company exec, so  in the case of new developments we got a developer earn up and in other cases the company covered a portion of the investment and all that needs to be paid back is the principal.  A few have been great, and now I get decent monthly distributions.  

But believe me, while there are going to be a lot of distressed deals out there, there is also BILLIONS sitting on the sidelines waiting to pounce.  I would only get involved with someone who has a proven track record.  These can be more complicated than they look.  

I agree with you. A lot of people are timid right now but I would have to imagine that late summer there should be some great opportunity.

[Sbbruin 21853]

If you can let your money sit for a long time, a good value-add play is where you can really make money.  Reposition the asset, lease it up, and either wait a few years to pay back some of the initial capital outlays before starting to distribute, or flip it.  But letting it sit and getting monthly distributions is going to make my retirement more comfortable. 

[Chewbacca 7779]

I would stay the fuck away from office and retail developments right now.  And multifamily was trading at historic low cap rates recently.  I'm waiting for a dip to jump back in.  We'll see.  I think the fall is when things start to go south.  Too much government money propping things up right now for the true pain to be felt.  

[Sbbruin 21853]

6 minutes ago, Chewbacca said:

I would stay the fuck away from office and retail developments right now.  And multifamily was trading at historic low cap rates recently.  I'm waiting for a dip to jump back in.  We'll see.  I think the fall is when things start to go south.  Too much government money propping things up right now for the true pain to be felt.  

Retail yes, stay away.  The demise of office is premature.  There may certainly be some transition to a work-from-home model, but that doesn't work long term for a lot of businesses (we have a ton of entertainment tenants, and they just can't work that way).  Plus, we are already seeing to impacts to occupancy- a planned decrease in density (moving from 4-6 per 1,000 sf leased to 2-3), and a flight away from the open office/ collaboration model that has become so popular back to more private offices, which naturally decreases density.  So companies may be taking more space for the same number of employees.  Stay tuned.

Retail is going to be a nightmare.  We have some, but not much.  What we have is getting pounded.  Fortunately it is not heavily leveraged. 

[troph 24798]

We raise capital for our projects - all central Austin (78704) projects. Mix of debt and investor capital. Usually run 60/40 bank debt to investor capital with 5-10% of that being our money to shore up budget overruns or carrying costs that come up (taxes or additional interest on a hold period). Preferred returns of 8% off the top and a share of profits with the GP. Average annual returns around 30% though we will probably see that drop some due to COVID - we’ve got two projects now that are long and longer than they need to be. Losing capital I guess can happen but it seems pretty damn impossible in our micro neighborhoods - some of the most sought after hoods in the country.

Because have our own deals we are light on investing in others. I’ve got one that’s multi family Class C in good school districts and the rehab them to Class B stabilize and sell. Returns have been great.

I’ve got clients too I represent as securities counsel.

A lot of good deals out there.

I’d stay away from strip centers and office space too.

[Chewbacca 7779]

26 minutes ago, Sbbruin said:

Retail yes, stay away.  The demise of office is premature.  There may certainly be some transition to a work-from-home model, but that doesn't work long term for a lot of businesses (we have a ton of entertainment tenants, and they just can't work that way).  Plus, we are already seeing to impacts to occupancy- a planned decrease in density (moving from 4-6 per 1,000 sf leased to 2-3), and a flight away from the open office/ collaboration model that has become so popular back to more private offices, which naturally decreases density.  So companies may be taking more space for the same number of employees.  Stay tuned.

Retail is going to be a nightmare.  We have some, but not much.  What we have is getting pounded.  Fortunately it is not heavily leveraged. 

Yeah, maybe it's premature to suggest the demise of office, but I have to believe that a lot of businesses are going to realize that they can function perfectly fine without all that office space and come renewal time will downsize.  It will be a gradual process, but I have to believe it's coming.

I would add mixed use multifamily to the list of projects to avoid, though.  In the best of times, the retail and office are a drag on cash flow.  These days, they could potentially blow otherwise good projects up.

[Chewbacca 7779]

26 minutes ago, troph said:

We raise capital for our projects - all central Austin (78704) projects. Mix of debt and investor capital. Usually run 60/40 bank debt to investor capital with 5-10% of that being our money to shore up budget overruns or carrying costs that come up (taxes or additional interest on a hold period). Preferred returns of 8% off the top and a share of profits with the GP. Average annual returns around 30% though we will probably see that drop some due to COVID - we’ve got two projects now that are long and longer than they need to be. Losing capital I guess can happen but it seems pretty damn impossible in our micro neighborhoods - some of the most sought after hoods in the country.

Because have our own deals we are light on investing in others. I’ve got one that’s multi family Class C in good school districts and the rehab them to Class B stabilize and sell. Returns have been great.

I’ve got clients too I represent as securities counsel.

A lot of good deals out there.

I’d stay away from strip centers and office space too.

What kind of projects are you doing?  Are we talking single family?  Multi?  For sale?  For rent?

[Newdoc 3440]

Keep the Help talk the Help section. I’m telling a mod. It’s bad enough with all y’all helping each other in that part of the website then you gotta come round here with all your bs help talk.

[Sbbruin 21853]

25 minutes ago, Chewbacca said:

Yeah, maybe it's premature to suggest the demise of office, but I have to believe that a lot of businesses are going to realize that they can function perfectly fine without all that office space and come renewal time will downsize.  It will be a gradual process, but I have to believe it's coming.

I would add mixed use multifamily to the list of projects to avoid, though.  In the best of times, the retail and office are a drag on cash flow.  These days, they could potentially blow otherwise good projects up.

So what sector other than industrial are you bullish on?  Industrial prices are off the charts, and there's very little value to add to a concrete tilt-up structure.  If you want to be super conservative, CRE is not the place to play.

[Chewbacca 7779]

Just now, Sbbruin said:

So what sector other than industrial are you bullish on?  Industrial prices are off the charts, and there's very little value to add to a concrete tilt-up structure.  If you want to be super conservative, CRE is not the place to play.

If I'm developing right now, I'm doing 3 story walk up multi projects all day long.  Maybe industrial but I don't know enough about that market to tell you for sure.  My experience has been all single and multi family projects.  Primarily for rent, but some for sale.  And a few shitty mixed use deals that never worked out as well as the pro forma suggested they should.

If I'm investing in stabilized or value add deals right now, I'm not investing in CRE right now.  Cap rates (at least in Denver) are at historic lows.  I'm sitting on cash waiting for an opportunity to get back in.  But let's put it this way, I saw a B- or C+ 10 unit multi deal come out a couple months ago and they were asking sub 5% on the cap rate.  And it went under contract in a week.

I'm hoping to see some COVID bloodletting in the fall after all the .gov stimulus dies out.

[troph 24798]

What kind of projects are you doing?  Are we talking single family?  Multi?  For sale?  For rent?

Luxury single family, each separately designed. All tour of homes type designs. Selling to out of state buyers mostly or some downsizing from 78746(Westlake) to central Austin. PM me I’ll shoot you a link to one of our properties.

[John Lawrence 244]

1 hour ago, Sbbruin said:

Retail yes, stay away.  The demise of office is premature.  There may certainly be some transition to a work-from-home model, but that doesn't work long term for a lot of businesses (we have a ton of entertainment tenants, and they just can't work that way).  Plus, we are already seeing to impacts to occupancy- a planned decrease in density (moving from 4-6 per 1,000 sf leased to 2-3), and a flight away from the open office/ collaboration model that has become so popular back to more private offices, which naturally decreases density.  So companies may be taking more space for the same number of employees.  Stay tuned.

Retail is going to be a nightmare.  We have some, but not much.  What we have is getting pounded.  Fortunately it is not heavily leveraged. 

[John Lawrence 244]

55 minutes ago, Chewbacca said:

Yeah, maybe it's premature to suggest the demise of office, but I have to believe that a lot of businesses are going to realize that they can function perfectly fine without all that office space and come renewal time will downsize.  It will be a gradual process, but I have to believe it's coming.

I would add mixed use multifamily to the list of projects to avoid, though.  In the best of times, the retail and office are a drag on cash flow.  These days, they could potentially blow otherwise good projects up.

Lawyers and accounting firms could/should probably operate with smaller offices that are not dedicated to a person.  Or cubicle.  And have more conference/war room space.  More people work from home, at client offices and on the road.  So just have docking stations where you plug in laptop whatever officer or cube that is open when you are in the office.

[Chewbacca 7779]

7 minutes ago, John Lawrence said:

Lawyers and accounting firms could/should probably operate with smaller offices that are not dedicated to a person.  Or cubicle.  And have more conference/war room space.  More people work from home, at client offices and on the road.  So just have docking stations where you plug in laptop whatever officer or cube that is open when you are in the office.

A lot of them already do that.  When I was with Arthur Andersen back in the late 90s, we had a setup like that.  Only managers and partners had their own designated space.

[UT_OB1 2223]

39 minutes ago, Chewbacca said:

If I'm developing right now, I'm doing 3 story walk up multi projects all day long.  Maybe industrial but I don't know enough about that market to tell you for sure.  My experience has been all single and multi family projects.  Primarily for rent, but some for sale.  And a few shitty mixed use deals that never worked out as well as the pro forma suggested they should.

If I'm investing in stabilized or value add deals right now, I'm not investing in CRE right now.  Cap rates (at least in Denver) are at historic lows.  I'm sitting on cash waiting for an opportunity to get back in.  But let's put it this way, I saw a B- or C+ 10 unit multi deal come out a couple months ago and they were asking sub 5% on the cap rate.  And it went under contract in a week.

I'm hoping to see some COVID bloodletting in the fall after all the .gov stimulus dies out.

When you say 10 unit - do you mean 10 apartments (this is how i take it to mean) or 10 buildings each with 4 or 6 or some number of apartments in each building?  

I'm trying to find a smaller multifamily that I can purchase and fix up, but it is tough to find.  The prices seem ridiculous.  We bought a duplex that needed a little work, but rented from day 1 about 24 months ago, and now I don't see anything pop up in that area for that isn't at least 50% more expensive than what we paid.  I found a 6 unit in La Marque, but it is essentially a frame, wall, and a roof (that part needs repairing).  They are asking almost 200k for something that is going to need a minimum of $350k to fix, and it will probably only rent for 4800 a month.  The math trying to make it work bottles my mind.  It only seems to work if I can do 100% of the work myself, and 1) i don't have the time and 2) I don't have the skills.  I don't see how people make these things work.  Maybe prices come down in a couple months?  

[Chewbacca 7779]

8 minutes ago, UT_OB1 said:

When you say 10 unit - do you mean 10 apartments (this is how i take it to mean) or 10 buildings each with 4 or 6 or some number of apartments in each building?  

I'm trying to find a smaller multifamily that I can purchase and fix up, but it is tough to find.  The prices seem ridiculous.  We bought a duplex that needed a little work, but rented from day 1 about 24 months ago, and now I don't see anything pop up in that area for that isn't at least 50% more expensive than what we paid.  I found a 6 unit in La Marque, but it is essentially a frame, wall, and a roof (that part needs repairing).  They are asking almost 200k for something that is going to need a minimum of $350k to fix, and it will probably only rent for 4800 a month.  The math trying to make it work bottles my mind.  It only seems to work if I can do 100% of the work myself, and 1) i don't have the time and 2) I don't have the skills.  I don't see how people make these things work.  Maybe prices come down in a couple months?  

10 apartments in one building.  I'm looking for the same thing you're looking for, among other things.  I'm also waiting for prices to come down.  No way I would pay what they are asking today.

[Dbeasy 15051]

I’ve looked at and passed on many multi family deals over the last ten years and obviously could have made a lot of money. I need someone who really knows what they are doing to help me evaluate the deals - carry, cap rate, etc. everything I looked at seemed like it wasn’t great but several of them sold for sky high prices recently. Are we at the peak?

[Johnny Sack 8397]

Trailer parks can give you great returns.  

[Chewbacca 7779]

Trailer parks can give you great returns.  

I have heard that. Have never seen a proforma, though.

[Chewbacca 7779]

I’ve looked at and passed on many multi family deals over the last ten years and obviously could have made a lot of money. I need someone who really knows what they are doing to help me evaluate the deals - carry, cap rate, etc. everything I looked at seemed like it wasn’t great but several of them sold for sky high prices recently. Are we at the peak?

I believe we are at or near the peak. Cycles typically last 7 years or so. We are now approaching year 10.