Multifamily Syndication with Joe Fairless - CREPN #52

Multifamily Syndication with Joe Fairless – CREPN #52

J. Darrin Gross Podcast

Leverage is the catapult that gives real estate investors exponential buying power.  To increase the power of leverage creative investors are turning to Multifamily Syndication.   Syndication gives like minded investors the opportunity to scale up and share in bigger risk and potential gains not available to new and smaller individual investors.   

 

 

 

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Joe Fairless is an experienced investor and an active multifamily syndicator, and podcast host.  In just three years, Joe and his investors have grown the assets under management to an impressive $54 million.

He started investing in single family properties while still working as an advertising executive in New York City.  He learned how to invest and then taught others what he learned.     

Some of his single family investing students indicated that they were interested in investing with him, but in something larger than single family.

When he realized that he wanted to get into multifamily and he had willing investors, he recognized he could do much more through syndication than he could on his own.  

How to create a Multifamily Syndicate

Syndication is matching investors with opportunity.  The steps to syndication are:

  • Build anticipation with investors

Learn about what your potential investor goals are.  Are they passive or active?  

What do they expect.  Once you determine their goals, ask them,

“If I find something that meets your goals would you like me to share it with you?”

  • Get Commitment:

It is best to make certain you have 30% more commitment than what you need.  Why do you need greater commitment than the deal calls for?

Life happens.  Things change.  There will always be someone who raised their hand when asked, but when it is time to commit, some investors will back out.

How much do you raise?

You need enough to cover all of the upfront expenses, including:

    • Down payment
    • Legal fees
    • Inspections
    • Closing costs
    • General Partner Fees
    • Fund the operating budget
  • Identify the community and property parameters for your investment including:

Market Characteristics, learn the market including these Two key Indicators:

  • Rental market
    • What is the supply compared to demand?
    • Occupancy & Vacancy rates
    • What are the sub-markets like?
  • Employment
    • Is there a diverse number of employers?
    • Is there job growth
  • Is there a recognized path of progress?
  • Is the state friendly to Landlords?
  • What are the natural resources?
  • CAP rate
    • Lower than a 5 is speculating

 

  • Find the property

Use all the resources available to you:

  • Brokers
    • Tell them what you are looking for.
  • Off market properties
  • Approach owners directly.
The Truth

Obviously, this is a simplified explanation of what truly happens.  In addition to what is listed there are several legal documents required in order to set up a syndicate, including:

  • Private placement memorandum
  • Operating agreement
  • Investor qualifier
    • Accredited investors
    • $250 Networth
    • $250 Annual income

If you are successful in syndicating a deal, momentum can build.  The more you put yourself out there, the more consistency you can achieve.  Joe’s podcast has created a nationwide network of opportunities.

His goal is to grow to $1 billion by the time he reaches 40 years old.    

There are Investors who are looking for those who have a proven track record.  If you can you do it, they will come.

Joe’s advice to anyone considering getting into syndication:

  • Get the knowledge
    • The learning curve is steep.
    • Do the research.
    • Immerse yourself in the content.
  • Get a mentor
    • Surround yourself with successful people doing syndication.
    • Work with someone who has done it.
    • Deals are dynamic.  You need to have people who have experience on your team.
  • Follow the Blueprint
    • Do what others before you have done and you should have similar results.

 

The truth: “It’s a shark tank!”

When you compete in large multifamily real estate deals, you are competing at the highest level of real estate investing.  This is not single family!  You are bringing in other people’s money.  

You have to know how to do this.

If you screw it up you will be screwed for a long time.

For more information go to joefairless.com.