Syndication Investing in Multi-Family Apartment | Goodegg Investments
Investing in Syndications may sound tough to do but if you find the right people, it can be super easy and very lucrative. Today, I interview Annie and Julie, the founders of Goodegg Investments.
Together, they invest in multi-family syndications and have done 23 deals to date! As an investor, it is great to work with other investors who have a terrific track record.
Listen as we discuss syndication investing and how to do it right.Listen to the episode:
Syndication Multi-Family Investing with Goodegg Investments
Today, we are going to be talking all about syndications, which is investing in multi-family deals with other investors.
I brought my friends from the Goodegg investing team, Annie and Julie, to tell us all about it. These are great investors who have already done 23 syndication deals. You are going to get so much great information out of this.
Julie thought she was going to go out and buy an apartment building herself. As she researched more, she realized there are different pieces that you could take on and be a co-sponsor on a deal.
For the first syndication, Julie partnered with a company called a lead sponsor. She was leveraging the relationships they had and their ability to raise millions of dollars.
As a new syndicator, it would have been very hard for her to raise $10 million. It started with showing the co-sponsor that she had an interest and a skillset that was valuable to them.
When thinking about getting into syndication, know that there are many different things you can do to add value to a deal and to become part of the general partnership to put a deal together. You don’t have to do it all.
Annie's Start in Syndication and Multi-Family Investing
Annie had invested in a coaching program and was planning to do her own syndication.
She had done four-unit buildings and thought she could do a forty-unit building. She figured that the principles are pretty much the same as well as the process. She was wrong. There are so many moving pieces that are different, between the loan, legal fees, structuring payment to investors, etc. It was a whole new world.
As a co-sponsor, your investors are still your investors, but you are giving them an opportunity that they otherwise wouldn’t have access to.
Annie looked at the deal and it was better than the deal she was trying to put together. She tried it and loved it immediately. Raising capital is all about investor relations and investor education, which she has always been passionate about.
This experience allowed her to let go of the idea of having to do it all herself and it allowed her to focus on the investor relations piece.
Now that you have a company together, what is the structure? How does that play out in day-to-day operations? What do each of you do?
Annie and Julie partnered up, because they have very complementary skill sets.
Annie loves to create content on blogs, podcasts, and videos, and Julie loves the investor relations piece.
You really need those two pieces.
They’ve grown their business through the power of those relationships. They have a few very strong partnerships with teams across the country and they are the boots on the ground.
They are scouting out multi-family deals and they find the good deals.
Julie and Annie come in and help structure the deal and bring investors to the table.
If I wanted to start syndicating a deal, and I had 15 people who wanted to give me $30,000 each, how would I get started? What is the process?
Julie recommends first getting a coach, because that is how they both did it.
You can learn a lot from free resources, but nothing beats having someone there. You pay the fee, but you don’t have to split your profits as you grow.
When you have someone along to answer the questions and teach you, you will take all the mistakes they made and leverage all of their knowledge. You will get farther faster.
New syndicators fall into a trap thinking it will be like a single family home and work with a broker. They do all of this work to get it under contract and they don’t have the money to close the deal within the timeframe.
Start talking to your friends and family to let them know what you are doing. You don’t have to have a deal under contract to do this. If you get to the point where they are interested, you can put together a sample deal.
Get to a point where you have a short list of people who are committed, so you know what deals you can realistically get into.
A deal can fall into your lap and be under contract under 24 hours. Most people can’t raise $10 million in 24 hours, and they either lose the deal or end up giving away more equity than they originally intended.
Investor relationships are more important than building broker relationships.
How Do You Find Syndication Deals that Your Investors Will Invest In?
Look for a sponsor who has some experience doing deals in a market you are interested in, and see if they would be interested in partnering with you.
This is how Annie and Julie’s relationships start.
Set up a website to show them you are serious and start from there. Talk about how much money you can bring to the table, why you are interested in the market they are investing in, and why you think a partnership might be good between the two of you.
If you have the investor relationships, find a sponsor who has a track record already and one who is looking to expand and scale their portfolio.
If they want to keep doing the deals they’ve already done, they will stick with their investors.
If they are looking at larger deals, they need to raise more capital.
If someone is starting out new and they want to raise capital, how do they find the right people?
Starting with friends and family is always the best first step. Raising capital is all about trust, and they already trust you.
As you are paying them returns, they are going to recommend you to their friends and family. It snowballs from there.
If you can add value to others outside of your friends and family, that can be a great way too. When Julie first started, she added value through Facebook groups and meetups and found ways to share information and knowledge.
People start to see you as the expert and they will reach out to you.
Understanding that it is not a quick process is important. It takes time to build these relationships and there are various ways to do that.
Julie and Annie build relationships by going on podcasts, blogging, providing video content, etc., so people can get to know them and know what value they bring.
It comes down to trust. If they don’t trust you they won’t give you money.
How would you talk with a new, passive investor? How and why should they invest with you?
The first step is to take the time to educate yourself. Passive investors just want to invest and get the returns, but it will be worth it to take time up front so you understand the risks going in and the process.
There are tons of resources on Julie and Annie’s website and they offer coaching to anyone who is interested.
After you understand the process and lingo, it is about finding the right team of people to invest with. Anyone can make a deal look great on paper and they will try with beautiful photos and charts.
That will give you an overview of the deal, but it is not so much about the deal, but the people running that deal.
Vet the potential sponsors you are looking to invest with. They will be the stewards of your money. If something doesn’t go according to plan, you need to make sure they will do right by you and your money.
Spend time on their website, read their material, watch their videos, listen to them on podcasts.
Their company, Goodegg Investments, does that for investors. They do this work and they have built the relationships with sponsors. They only have three operators they work with on an ongoing basis.
Their vetting process is very strict.
They get opportunities all the time in all markets and asset classes, but they are very particular about everything they do to make sure they are working with the best of the best.
You know you will get into a good deal when you work with them, because of all the work they do to get the best deals, and they have an amazing track record.
Next year they are moving their company to a fund structure, so instead of investing in one deal, investors will invest into a fund and spread the risk.
What is the minimum required to invest with your company? What could I expect, what is the risk, etc.?
Goodegg requires at least a $50,000 investment.
If you were to invest $100,000 today, you should expect to have that money in the deal for five years. That is the typical investment period.
During that time, they are renovating all of the units in that property, which takes two to three years, and then they are looking for a good time to sell.
Also during that time, you are getting monthly cash flow to the tune of about eight percent per year, or $8,000, which is about $667 per month.
At the end, when they sell, you can expect another 50 or 60 percent of your $100,000 on top of your original capital. You can expect to roughly double your money within five years.
A big risk is working with the wrong team.
Because they are doing the value ad deals, and they are not long term, execution is key. Budgeting, expenses for construction, and staying within a timeframe for those renovations is everything. If you underestimate the cost or your holding time for the property is longer than expected, it can change the whole deal and it will hit your returns.
Being able to take a business plan and see it through to fruition is a big part of the risk.
Investing in markets that don’t have a lot of growth, job or population, can be risky.
Goodegg Investments focus on areas that have a lot of growth, in an effort to mitigate risk in case of recession.
During the recession, operators of multi-family units saw occupancy rates increase.
Goodegg invests in workforce housing, and they focus on the value-add piece of it.
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