An Apartment Syndication from Start to Finish
What a lot of people don't see is all the work that the operator or the sponsor has to go through in order to get a property under contract.
Building relationships with brokers.
Connecting with other owners in the area.
Securing the lending.
Finding the best insurance to keep the property safe.
Working with our real estate attorney and our SEC attorney to make sure you are safe legally.
Interviewing property managers to ensure the property is well cared for.
This process could take weeks or months because it all depends on the deals we are underwriting. Once you get those deals and you're underwriting them, underwriting takes quite a bit of time, underwriting a property can take an entire day or multiple days. Once a deal makes sense submit an LOI. LOI stands for a letter of intent We submit it to the broker and this lets the broker know we want to buy the property. The broker then gathers all the LOI’s, and then they submit them to the owner, and then the owner chooses the strongest team, or sometimes just the highest bidder.
Once you get your accepted LOI, this sets off a chain reaction of things that can last 60, 90, or 120 days, depending on the terms in your letter of intent. You now work towards a PSA, which is a purchase and sale agreement. Once you have the purchase and sale agreement, the property is officially under contract. You can begin your due diligence process which can last up to 30 days. Because of the way the market is right now you see things you know, 21, 14, 10, or 7- day due diligence period, but during that due diligence phase, you're conducting digital due diligence, which is all of the documents are online, they're provided electronically. You're looking at rent rolls, leases, you're doing a lease audit, you are looking at financials, everything that is kept digitally.
You also have the physical due diligence, on-site physically there. right. Walking every single unit with your property management company, you have a roofer come out, look at the roofs, you have a structural engineer come out if necessary, a plumber or electrition. If the property is still looking good after due diligence, and you continue along the process with choosing insurance, finding a lender, your legal team. With your legal team, you have to set up LLC’s and prepare the private placement memorandum or the PPM.
Next up! You host a webinar to talk about the opportunity to investors. Investors join as LP’s and once the down payment is raised, the deal can close!!
After the close, all the real work begins. Depending on what the business plan is, it could be three years could be five years, it could be seven years, it could be ten years long. The business plan is being executed with our property management company. You have a weekly property management call to talk about everything that's happened the week before, you can also communicate with our property management company on a project management software called Asana. This software keeps everything in one place like vendor quotes, projects can be assigned. This helped us so much get out of our email!
Then there are monthly investor updates, that should be the minimum amount of communication that you have, you want to know what's happening with the property, you want those updates, you want to know what your money went to what is happening with it, you want to know that the business plan is being executed. Michael, and I like to do quarterly webinars. That gives just all the investors an opportunity to ask us questions. That's been really important to us, because we think that it adds another layer of intimacy, to the property into what we're going on.
We need to make sure that the market is still in a really stable place. We need to know if it's growing or if it's plummeting, plummeting, we got a few problems, we just have to know if that means that our rents are at the right spot, if they're not at the right spot, what other properties are doing, what's happening to the economy as a whole. Then once we get further into our business plan, that's really what helps us determine if it's time to sell.
Where does payment come in with all of this? Investors receive quarterly distributions and whether that property has a preferred return, or if they're just getting monthly cash flow, the majority of the time, you will see quarter quarterly distributions, and that's when you will get paid. Another time that you will get paid is through the refinance or the sale of the property. As we come to a Close the very final thing that we do is an entity close out just so that all the paperwork is done all of our vendors have been paid all of you the amazing investors have been paid and we know that we sold to another real estate syndicator operator that we know that they will do really good things with the property as well because that's what will what we want to continue is just putting placing great operators with also great operators just so that the chain of effect can ripple.
If you have any more questions, please feel free to drop those questions in the comment section below. We'll get to we'll be sure to address all the questions or comments that you have!
Until next time…
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Disclaimer: The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
