Author Topic: Good idea to buy into a multi-unit multifamily?  (Read 3022 times)

jeromedawg

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Good idea to buy into a multi-unit multifamily?
« on: February 07, 2017, 09:00:23 AM »
Hey all,

One of my FB friends (who is a financial advisor/CPA) posted an "investing" ad (pointed at beginners) for an opportunity to invest in a 40-50 unit multifamily complex (no specifics other than that really) somewhere in the Southwest. There are plans to renovate, rebrand and then bring in new tenants in hopes of nearly doubling the valuation $7mm where the current acquisition is $4.5mm. It's a $50k minimum investment and he's working with a syndicator with whom he has previously worked with and has been happy with. From following him, he seems to have become pretty active with real estating as of late, and seems to know what he's doing. Are these 'joint' ventures generally an OK idea? Or would it be something to avoid?

dandarc

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Re: Good idea to buy into a multi-unit multifamily?
« Reply #1 on: February 07, 2017, 09:06:13 AM »
No personal experience, but there are some articles about this sort of thing on whitecoatinvestor.com.

Cwadda

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Re: Good idea to buy into a multi-unit multifamily?
« Reply #2 on: February 07, 2017, 09:10:27 AM »
Given the info you've provided, no.

1. I would want to know the investor and syndicator well enough to not be handing my money over to some random guys.
2. I would want to know where the property is located specifically. Location is extremely important.
3. I would want to visit the property (or have a video walkthrough) and see its condition, as well as the tenant information.
4. There is no mention of the time it would take to increase valuation. Are we talking 1 year, 10 years? This affects returns drastically.
5. No mention of the amount money they're putting in to reach $7 million.

I'll pass, and sock my money away in a Vanguard account making 7%.

jeromedawg

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Re: Good idea to buy into a multi-unit multifamily?
« Reply #3 on: February 07, 2017, 09:20:15 AM »
Given the info you've provided, no.

1. I would want to know the investor and syndicator well enough to not be handing my money over to some random guys.
2. I would want to know where the property is located specifically. Location is extremely important.
3. I would want to visit the property (or have a video walkthrough) and see its condition, as well as the tenant information.
4. There is no mention of the time it would take to increase valuation. Are we talking 1 year, 10 years? This affects returns drastically.
5. No mention of the amount money they're putting in to reach $7 million.

I'll pass, and sock my money away in a Vanguard account making 7%.

Good questions to line-up to ask. As far as the time it would take, he is stating a 2-yr plan to reach the $7mm valuation

Cwadda

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Re: Good idea to buy into a multi-unit multifamily?
« Reply #4 on: February 07, 2017, 09:23:02 AM »
Given the info you've provided, no.

1. I would want to know the investor and syndicator well enough to not be handing my money over to some random guys.
2. I would want to know where the property is located specifically. Location is extremely important.
3. I would want to visit the property (or have a video walkthrough) and see its condition, as well as the tenant information.
4. There is no mention of the time it would take to increase valuation. Are we talking 1 year, 10 years? This affects returns drastically.
5. No mention of the amount money they're putting in to reach $7 million.

I'll pass, and sock my money away in a Vanguard account making 7%.

Good questions to line-up to ask. As far as the time it would take, he is stating a 2-yr plan to reach the $7mm valuation

Does he have any evidence to support the 2 year plan? In other words, what exactly is the breakdown during those 2 years? Some renovations are quick, but others can be much longer. Does he already have the contractors picked out for renovations? Does he already have property management in place? Will he have to evict any tenants?

These questions could continue ad nauseam. Point is, I wouldn't feel comfortable without knowing the full picture here.

jeromedawg

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Re: Good idea to buy into a multi-unit multifamily?
« Reply #5 on: February 10, 2017, 12:18:34 AM »
So I'm wondering if this is just another form of crowdfunding that I'm getting into. The investor/syndicate is looking for multiple investors to go in on this opportunity but the vehicle isn't primarily a website - it's more through a network of friends and acquaintances. My friend basically pointed me to these sites:

https://www.crowdstreet.com/education/article/what-sponsor-promote/
http://www.propertymetrics.com/blog/2016/05/04/what-you-should-know-about-equity-waterfall-models-in-commercial-real-estate/

As someone just starting to get interested in real estating, does jumping in on something like this carry higher-than-desired (and necessary) risk? I'm planning on joining the concall tomorrow and have a list of questions but there are lot of things I probably don't know enough about.... thanks cwadda for all the advice btw. My friend was able to get permission from the investors to send us the full informational packets on the plan, FAQs, etc which include the financials (current and projected) as well as more specifics and also a market analysis w/ case studies. Seems interesting but there's quite a bit of jargon and terminology in there I'm trying to hash out with the help of my wife, who has some limited real-estate accounting experience but mostly low-level. Even she doesn't fully understand everything...

Also, the name of the group is Twelvestone run by Matt Skinner. This is their website: http://realpeoplerealreturns.com

Not sure what to make of all of it... thoughts?


UGH, just did some sleuthing and stumbled across these:
https://www.yelp.com/biz/twelvestone-capital-valencia
http://www.ripoffreport.com/reports/twelvestone/valencia-california-91355/twelvestone-matt-skinner-investor-reboot-twelvestone-not-honoring-refund-valencia-cal-1095353
http://archive.signalscv.com/archives/125558/
http://archive.signalscv.com/archives/148095/

This is definitely installing heavy bias and tainting my overall outlook.... my friend, who is a tax manager and CPA said he did a prior deal (on development) with this guy/group though and had a good experience. I wonder if it might be because he knows what he's doing, as a tax manager/CPA, and wouldn't let someone take advantage of him (and perhaps the CEO realized that and didn't want to play with fire). Benefit of the doubt says my friend just doesn't know this guy's background. And 'extra credit' benefit of the doubt says the guy is actually legit but the people above are just slandering him and he was falsely accused/arrested per the two reports above :T
« Last Edit: February 10, 2017, 12:43:24 AM by jplee3 »

Telecaster

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Re: Good idea to buy into a multi-unit multifamily?
« Reply #6 on: February 10, 2017, 12:49:26 AM »
Two thoughts:

1) Rehabbing old apartment buildings and then jacking the rent is a time honored tactic, so that part makes sense as far as it goes. It is like finding a diamond in the rough.

2) People who have found a diamond in the rough don't have to advertise for investors

jeromedawg

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Re: Good idea to buy into a multi-unit multifamily?
« Reply #7 on: February 10, 2017, 01:39:23 AM »
Two thoughts:

1) Rehabbing old apartment buildings and then jacking the rent is a time honored tactic, so that part makes sense as far as it goes. It is like finding a diamond in the rough.

2) People who have found a diamond in the rough don't have to advertise for investors

Are you suggesting that this likely isn't a "diamond in the rough" then?

GoBigRed

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Re: Good idea to buy into a multi-unit multifamily?
« Reply #8 on: February 10, 2017, 09:29:55 AM »
Personally, I shy away from these types of deals for many of the reasons mentioned above.  But that is a personal decision for me.  It is more about control and liquidity of my investment. Some people have great success with these.  With a $50K investment, you are not likely to have access to that money in the near term, and you may or may not receive an annual return.  Nothing is guaranteed.  For me I would rather dump my money in a vanguard account if I want to be a passive investor.  At least I can have access to the money.  Yes, returns might not be as high, but I also see the risk as being much lower.     

If you want to get into real estate, I would suggest trying to find a cash flowing rental that you own and control (depending on your area).  If you want to be entirely passive, you may want to look into realtyshares or a similar service (assuming you are an accredited investor). These services allow you to invest smaller sums to see if it is for you. 

jeromedawg

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Re: Good idea to buy into a multi-unit multifamily?
« Reply #9 on: February 10, 2017, 10:12:15 AM »
Personally, I shy away from these types of deals for many of the reasons mentioned above.  But that is a personal decision for me.  It is more about control and liquidity of my investment. Some people have great success with these.  With a $50K investment, you are not likely to have access to that money in the near term, and you may or may not receive an annual return.  Nothing is guaranteed.  For me I would rather dump my money in a vanguard account if I want to be a passive investor.  At least I can have access to the money.  Yes, returns might not be as high, but I also see the risk as being much lower.     

If you want to get into real estate, I would suggest trying to find a cash flowing rental that you own and control (depending on your area).  If you want to be entirely passive, you may want to look into realtyshares or a similar service (assuming you are an accredited investor). These services allow you to invest smaller sums to see if it is for you.

Thanks for the input. The more I look into this, the more I share the same sentiments as you. I already have close to $50k invested in ETFs and the performance has been pretty good this past year.

If we wanted to actively do real estate, we both agree it would probably be better to get a rental property in our neighborhood or neighboring city... "start small" I suppose. By realtyshares I'm assuming you're referring to crowdfunding sites like Fundrise etc? I guess the other passive option is REITs as well, no?

I committed myself to the concall so at least I'll hopefully get a better idea of what they're trying to do here. My wife suggested I 'sit on the sidelines' for this one and see how my friend does with his investment. If he has another great experience with this project, maybe I can consider a future opportunity. So I'm sort of leaning that way.

GoBigRed

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Re: Good idea to buy into a multi-unit multifamily?
« Reply #10 on: February 10, 2017, 11:07:12 AM »
Yes, Realtyshares is essentially a crowdsourced platform for real estate investing, but you have to be an accredited investor to make an investment.  The vast majority of people are not accredited investors.

I believe you mentioned you were in California in another post.  It is going to be very expensive to break into this market.  Nothing is impossible, but as a first investment, it may be a hard market to break into at the current prices.

I would recommend listening to the Bigger Pockets podcast, reading the blog, going to local real estate investor meetings, etc.  There is also a list of books that you may want to read and see if your library has any copies (see the sticky at the top of the real estate forum).  BiggerPockets has a nice beginner's guide on amazon and their website that is free.  Learn as much as you can (within reason) before jumping in.  Try to make connections, find a mentor and deals may come from that.  There are lots of ways to make money in real estate, and what works in one market may not work in another. 

jeromedawg

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Re: Good idea to buy into a multi-unit multifamily?
« Reply #11 on: February 10, 2017, 11:13:47 AM »
Yes, Realtyshares is essentially a crowdsourced platform for real estate investing, but you have to be an accredited investor to make an investment.  The vast majority of people are not accredited investors.

I believe you mentioned you were in California in another post.  It is going to be very expensive to break into this market.  Nothing is impossible, but as a first investment, it may be a hard market to break into at the current prices.

I would recommend listening to the Bigger Pockets podcast, reading the blog, going to local real estate investor meetings, etc.  There is also a list of books that you may want to read and see if your library has any copies (see the sticky at the top of the real estate forum).  BiggerPockets has a nice beginner's guide on amazon and their website that is free.  Learn as much as you can (within reason) before jumping in.  Try to make connections, find a mentor and deals may come from that.  There are lots of ways to make money in real estate, and what works in one market may not work in another.

I see... yep, I'm out in CA (Orange County) and it's pretty insane. More insane in the Bay Area of course but still crazy down here. I was just reading an older MMM post about the 50%/2% rule. And notably the 2% rule and how that applies - I saw a ton of comments about that % realistically applying to if you're a slumlord. That particular number seems unachievable in many parts of the country and definitely here in SoCal...

Thanks for the pointers on that podcast - I'll check it out along with books.

jeromedawg

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Re: Good idea to buy into a multi-unit multifamily?
« Reply #12 on: February 10, 2017, 09:21:58 PM »
BTW: this is essentially one of those private equity real estate deals, which doesn't seem all too uncommon. I'm just curious as to what the real-world yields might be here. Has anyone done these joint ventures with great success?

chesebert

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Re: Good idea to buy into a multi-unit multifamily?
« Reply #13 on: February 11, 2017, 07:23:20 AM »
Correct me if I'm wrong, I think RE core funds on average return 6-8% with leverage and after fees and carries. I'm talking a mix of multifamily, office, industrial, warehouse, retail, senior/student housing and hotel. In other words, greater risk-adjusted return than the broader market with the downside of lack of liquidity and long holding period. Family offices really like RE core funds because they are relatively safe and generate good cash flow. Of course I refer to funds with good track record like Whitehall. I would not trust no name "syndicator". 
« Last Edit: February 11, 2017, 07:39:09 AM by chesebert »

jeromedawg

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Re: Good idea to buy into a multi-unit multifamily?
« Reply #14 on: February 11, 2017, 10:22:40 AM »
Correct me if I'm wrong, I think RE core funds on average return 6-8% with leverage and after fees and carries. I'm talking a mix of multifamily, office, industrial, warehouse, retail, senior/student housing and hotel. In other words, greater risk-adjusted return than the broader market with the downside of lack of liquidity and long holding period. Family offices really like RE core funds because they are relatively safe and generate good cash flow. Of course I refer to funds with good track record like Whitehall. I would not trust no name "syndicator".

Are those the same as REITS? Or is a "RE core fund" a completely different thing?

jeromedawg

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Re: Good idea to buy into a multi-unit multifamily?
« Reply #15 on: February 11, 2017, 11:35:08 AM »
I would recommend listening to the Bigger Pockets podcast, reading the blog, going to local real estate investor meetings, etc.  There is also a list of books that you may want to read and see if your library has any copies (see the sticky at the top of the real estate forum).  BiggerPockets has a nice beginner's guide on amazon and their website that is free.  Learn as much as you can (within reason) before jumping in.  Try to make connections, find a mentor and deals may come from that.  There are lots of ways to make money in real estate, and what works in one market may not work in another.

BTW and FWIW: I did some sleuthing and found out that this investment group (Twelvestone) and the CEO are apparently on BiggerPockets but I haven't seen a ton of activity from them in the past year or so at least. I'm sure that doesn't mean much as it *seems* most real estate investors know about BiggerPockets.

chesebert

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Re: Good idea to buy into a multi-unit multifamily?
« Reply #16 on: February 11, 2017, 02:54:20 PM »
Correct me if I'm wrong, I think RE core funds on average return 6-8% with leverage and after fees and carries. I'm talking a mix of multifamily, office, industrial, warehouse, retail, senior/student housing and hotel. In other words, greater risk-adjusted return than the broader market with the downside of lack of liquidity and long holding period. Family offices really like RE core funds because they are relatively safe and generate good cash flow. Of course I refer to funds with good track record like Whitehall. I would not trust no name "syndicator".

Are those the same as REITS? Or is a "RE core fund" a completely different thing?
A class of real estate focused private equity fund. Not the same as REITS, which are public securities.

chasesfish

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Re: Good idea to buy into a multi-unit multifamily?
« Reply #17 on: February 14, 2017, 05:54:30 AM »
I'm familiar with this style of investment.

The typical investor is someone who's high income or meets the accredited requirement and wants to tell their friends that they are into an exciting investment.  Returns may vary, it really depends on how good of an operator you're invested with.   

I personally would find it difficult to make a chunk of my portfolio illiquid for the prospect of a marginally better return.  I' already dealing with that courtesy of being a six year investor in lending club.

jeromedawg

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Re: Good idea to buy into a multi-unit multifamily?
« Reply #18 on: February 14, 2017, 09:29:42 AM »
I'm familiar with this style of investment.

The typical investor is someone who's high income or meets the accredited requirement and wants to tell their friends that they are into an exciting investment.  Returns may vary, it really depends on how good of an operator you're invested with.   

I personally would find it difficult to make a chunk of my portfolio illiquid for the prospect of a marginally better return.  I' already dealing with that courtesy of being a six year investor in lending club.


I agree, it's a lot of money to put down for that long... I think I'll probably sit on the sidelines for this one but keep in touch with my friend(s) who are invested and just check-in to see how they did.