The Wealth Elevator Syndication eCourse

Secrets of Syndications: Part 6

Video Notes

Biggest mistake accredited investors make?

• Unsophisticated accredited focuses on pitch deck and pro forma return. They must look at reversion cap rate, assumptions, and economic vacancy on assumptions to make sure that numbers are legit.
• Not getting to know the operator, not checking underwriting, and relying on a pitch deck

Example of a mentee’s success

• Able to jump on the simple passive cashflow move: get passive losses, use passive losses to implement tax strategies to pay less tax, have a real estate professional status, invest in high-end strategies like infinite banking.
• Attain holistic wealth planning through tax, legal, and network.
• Going into multiple deals

What would you do with $500,000 liquid today? What would your expectation be for the investment in 5 years?

• Start investing in small amounts like $150K distributed into 3 deals and see what happens. Get to know more about the operator if they’re trustworthy or steal your money. Check if they’re competent. 
• Consider diversification in deals and build up the syndication ladder with deals evenly spacing out possible over the 5 years.

What’s a deal you regret not taking?

None. Deal criteria must always fit these qualifications: must cash flow from the start, there’s enough buffer to increase rent, stabilized asset, with 90% occupancy rate. 

What’s an example of a deal that you were involved in that went sideways? What did you do?

• Had an unscrupulous partner before so I removed him from the general partnership and got the LPs to descend.
• Bought an apartment property and tenants are already not paying on time. After months of the same scenario, we evict the tenants. Demolish their units and evict them.
• Usually deals go sideways when there’s a bad person involved.

From an underwriting standpoint, what’s at the top of your list, and what type of numbers do you assume?

(1) Reversion cap rate (2) Annual rate increases per year (3) Economic vacancy

Where would you not invest that other syndicators are investing in (geography and type of asset)?

I do not invest in primary markets where there’s no cash flow, rent-to-value ratios where it doesn’t make sense, retail (storefront, shopping malls), no diversification, no population increase area in general, areas that are not handled by a trustworthy property management team.

If you could roll back time, what would you do differently in your investment career?

I wouldn’t invest in a retirement account, want to pay my taxes now and I wouldn’t pay down good debt ahead of time.

What makes you different than other syndicators?

Being transparent, showing investors what assumptions we’re making (nothing forceful), educating investors, and believing that there will always be a bumpy ride, but when you diversify, you’ll get there and continue to be good stewards of your money.

Every syndicator sounds great on paper. What would your advice be for new LP’s-what type of syndicators would you be cautious about?

• Go into more stabilized assets ever since the beginning and get the cash flow. Determine our sponsor’s competence enough to set up direct deposit. 
• As a starter, you don’t need to go after luxury developments right away.