I’m really looking forward to telling you about a new property we just got under contract yesterday – what I’m calling the Kirkwood 226. That’s a placeholder name. This is a 226-unit apartment complex with multiple different styles of unit from 1 to 3 bedrooms. It’s in a great town, but I can’t tell you everything I want to just yet.
Due to SEC rules, you and I have to have a prior relationship, and while that isn’t well-defined, simply reading my blog is probably not enough. So, I can’t give all the details on this post. If you want to know more, send me an email and we will see if we have that prior relationship necessary. Otherwise, let’s start building one so you are ready for the next deal! A great place to start is our investor signup and our free course on getting started in real estate.
Since we can’t talk about specifics, let’s talk about how the early part of a general syndication works. Purchase and Sale Agreement (PSA) has been signed and now it’s time to get all the important information, like leases, inspections, mortgage, attorney, accountant, property management, and investors lined up. And there’s only 90 days to do it. The first step is to pay the earnest money deposit. That comes out of the principal’s account and is put at risk, but it should get refunded, if I do my job right.
All those documents the seller sent over gave a rosy picture of how the apartment is running. That’s called a pro forma, and is Latin for lies. I had to evaluate the deal with the information the seller was willing to give. They usually give the basics and a bunch of estimations, but are more willing to show the actual details once the PSA is signed. All of their numbers need to be verified. I cross-reference them with the seller’s tax documents and a bunch of other methods to determine what the true numbers are. I also have to make predictions about my ability to manage the property and what that will cost. Expenses will vary from manager to manager, and I wouldn’t have made an offer unless there were some inefficiencies I could correct to make some money.
In the meantime, I’m finding a bank and having the attorney write up documents for the syndication. I’m reaching out to my previous investors, who will have first shot at investing, to tell them about the deal and to gauge their interest. I’m making plans to tour the place and getting inspectors ready to go. It’s a flurry of work and I’m looking for any reason that the deal won’t work. But hopefully I won’t find anything, though I’d rather find out now and cancel than later and be stuck with a bad deal.
That’s why good deals are so few and far in between. I have to evaluate 100s of deals to get to the good one. And then I spend a lot of time and money to make sure it is a good one. That’s the process right now. I’ll keep you updated in how it’s going and hopefully you can learn about how it’s done. If you want more details, you’ll need to sign up.
This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum.