Multifamily Syndication is the vehicle used by Apt-Guy, Bruce Petersen to purchase over 1100 units consisting of 6 properties of which all are 120 plus unit apartment communities. In 2016 he was recognized by Austin Apartment Association’s Independent Owner of the Year. Then in 2017, Bruce was awarded the National Apartment Association’s Independent Owner of the year award.
When Bruce Petersen first considered investing in real estate, he looked to small multifamily because he thought it would be easy and could do it on his own. However, his real estate mentor suggested that instead of going small, he should raise some money and look for a bigger property. Why? Because bigger properties are easier. So in 2012, he found his first 48 unit property, and has never looked back.
Multifamily Syndication is the coming together of individual investors to purchase a larger property than they could on their own. In each syndication, the sponsor finds the deal, raises the capital then operates and manages the investment.
All of the investor ownership percentages, investment returns, splits, preferred returns, waterfalls, etc. are defined by the sponsor. And each sponsor does it their own way. For Bruce, he has chosen to forgo the complicated model that has preferred returns, waterfalls, etc and keep it simple for is investors. In each of the deals, the split is spelled out for the whole deal from purchase to sale. The sponsor promote, the percentage of equity designated for the sponsor. The range of split for investor / sponsor goes from 70/30 to 85/15 depending on what is needed to attract investors.
Market & Property Selection
The market and property must have the following elements for Bruce and his investors to proceed:
- Dynamic Market
- Population, he is not interested in investing in a tertiary market.
- Population growth where there are more potential renters coming to the market.
- Multiple employers, he is not interested in a market that is overly reliant upon one employer, ie the government.
- Neighborhood crime that is not out of hand.
- Properties that were built in the 1980’s or newer. This eliminates the need for costly capital improvement that older properties require.
- Identifiable operational issues that can easily be corrected to improve value.
The term “value add” can be achieved using multiple value add strategies. Most often it applies to the investor who purchases a dated property that can be freshened up by doing unit and exterior renovations to give the property a current look and feel. Bruce and his Blue Bonnet team like to find stabilized properties that do not require any heavy lifting. The value add they achieve is through operations. They find that by listening to residents and providing the easy things the residents want and are willing to pay for, ie; car ports. This approach has proven to produce a quick return on investment with increased NOI and overall property value.
What is your Biggest Risk:
My BIGGEST RISK is liability. We manage our own properties and there are a lot of moving parts. Employees, residents, guests, vendors, etc. You have have to entrust people, you coach them and mentor them. You have to hope that when the time comes, they will do the right thing.
For investors that hire out their property management, the risk is impatience. There are a lot of investors who want a deal so badly, they get to a point that they will buy a bad deal. Also, nobody knows when the economy is going to shift, but we all know it will. So, be safe and don’t overextend yourself.
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