10 Tips for Your First Apartment Syndication Deal
Getting into multifamily syndication can be one of the most lucrative areas of commercial real estate, but it can also be quite intimidating. You’re not only responsible for your own money and success, but you also have other investors entrusting you with their finances.
We recently spoke with Mo Bloorian, a 25-year-old investor who has acquired over 100 units in just two years. Mo’s best-ever advice is to just get started. Don’t worry about your age or experience level — if you want to get into syndication, you’ll make it happen. Read on for more of Mo’s best tips for doing your first apartment syndication deal.
1. Don’t Wait — Just Get Started
Mo can be an inspiration to everyone. Many of us feel that we’re too young and too unfamiliar with the real estate business to get started. We may make excuses that we’ll invest when we’re a little more secure in our careers and when we’ve taken the time to learn more.
Mo did the opposite. He jumped in and he’s been learning as he goes. He started as a real estate agent and then used some of his equity to buy a duplex. From there, he was hooked, and he’s been taking risks ever since. Mo’s bold attitude has helped him get successful quickly.
2. Sometimes You Have to Look Outside Your City…
If you live in an area where multifamily syndication is difficult to turn a profit, you may need to look outside your city. Some cities and regions are just naturally better for multifamily properties. If you, like Mo, live in an area like New York City, it may be too expensive for you to invest.
Instead, Mo started looking in upstate New York. He found the properties to be much more affordable and he did really well on turning a profit. Just start widening your search circle until you find an area that will be profitable.
3. …But Stay Within Driving Distance
While some apartment syndicators will work with commercial real estate from all over the country, Mo prefers to stay within driving distance from where he lives. His properties are all only a few hours’ drive for him.
He suggests keeping your properties relatively close, especially if you’re working closely with management or if you’re involved with value-add properties. For active investing, you need to be able to visit the property in person. When there’s an issue, sometimes the best way to handle it is to take care of it yourself. You can have a more hands-on approach if it’s somewhere you can reach in a few hours.
4. Look for Hidden Gems
While some properties are an obvious win, there are some that are hidden gems. These properties often seem like they’re in such disrepair that they’d be too much trouble to renovate. However, don’t just overlook a property without giving it a chance.
You may be surprised that some properties that look awful may just need some simple repairs and some changes in management to give you a significant value-add.
5. Network and Cultivate Strong Friendships
One of Mo’s biggest accomplishments comes from networking with other young professionals who are passionate about investing. He made it a point to connect with others and learn as much as he could from them. As a result, he was tipped off about some of his best deals.
Investing is difficult to do completely alone. If you are willing to work with others, you’ll often be considered when they have new deals come up. You may even find out about prospects before others if you’re friends with the right people.
6. Work With People Whose Skills Complement Your Own
While it’s great to have friends who share your interests, you also want people who can complement you when it comes to active investing. Mo and his partner each handle different parts of their business and each play to their own skills.
You’re not going to be great at every aspect of being an active investor. Instead of trying to do it all, surround yourself with people who excel at the areas where you don’t. You’ll have a much greater chance of success. Focus on what you do best and find talented people to handle the rest.
7. Management Skills Are Important
There will be times when the people you’ve hired to manage, maintain, or renovate properties aren’t quite meeting your expectations. If you want your investment to be worth it, you’ll have to step in and manage the situation.
8. You Don’t Have to Break the Bank to See a Return on Value-Add Properties
Many investors think that value-add properties involve spending tens of thousands of dollars in order to increase their profit on a property. However, Mo feels that in many situations, you’ll only need to sink a few thousand into each unit to get a really good return.
Focus on the areas that’ll make a big difference, like the kitchen and baths. If you can improve these areas, you can definitely increase the rent.
9. Consider Using Local Banks
When you’re just getting started, you may not have a lot of equity. It can be difficult to get larger banks to lend you money. Instead, you can work with local banks. Local banks are much more willing to take risks on a new investor.
10. Build Trust With Your Investors
When you’re working in apartment syndication, it’s imperative that your investors trust you. You can gain trust with a proven track record. You can also be upfront about everything. Your investors will appreciate your honesty and will be more likely to work with you in the future.
As an active investor, getting your first syndication deal can be challenging, but you can be successful. Remember to find the right people and play to your skills. Above all else, follow Mo’s top advice: jump in as soon as possible and start making money.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.