Finding a good deal on a single family house has gotten more difficult. The latest house was more of a hobby project to show my daughter where it all started. This year is the first time I've bought an investment house since 2008. Over the last decade I've been investing in self storage, NNN and multi-family. Single family is a common starting point, but multi-family, RV parks, mobile home parks, self storage and industrial are all options. I've never done hotel/motel or office real estate. They are the most common assets I see on the auction lists lately, so I'll probably stay away from them.

I'm not sure how the market works on this, but do you think 'small footprint' commercial would be a good investment/project right now? My thought is that, with COVID hitting the small businesses so hard, there may be opportunities to pick up small 'strip mall' type properties that are partially/mostly vacant. Once the economy turns, entrepreneurs will be looking for storefronts again.

The risk is how long that return takes. Thoughts?

I got out of residential about 10years ago, strictly commercial now . I have 6 properties on long term leases and I am building 10,000 sq.ft. more. The world will turn . Be bold.

IMO Self Storage is a great investment right now because it provides the most return for the least amount of risk. Easiest way to get in is thru partnerships available on multiple platforms like Real Crowd, Crowdstreet, Equity Multiple etc etc. A Delta Pilot is also helps runs Spartan Investment Group which has been successful in Self Storage and RV Parks.

In terms of how long that return takes generally 5 years. These are illiquid investments so it's highly recommended to only invest money you won't need for a while. Moreover, generally with these partnerships you have to be an acredited investor which majority of Delta pilots qualify for.

2nd Full disclosure I'm invested in a Self Storage Partnership thru Equity Multiple

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Also currently evaluating the switch from residential investments (which are hot right now) to commercial investments (which are less hit right now).

2nd this...I’m with spartan

Do you have to be an accredited investor as defined by SEC with Equity Multiple?

Whats typical ROI? Are you able to give example? Like invested 50k and monthly you receive 10% of that?

Yes, you have to be an accredited investor. Typical ROI are in the 15% IRR range

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That would be one hell of a ROI.

Each syndication will have a different payout structure. You will hear terms like, preferred returns (pref), split, hurdle and waterfall. Here is a good explaination.

I've invested with several syndicators who all use a very similar payout structure. There is a quarterly payout of around 2% once the project is stabilized. If we invested in a stabilized cash flowing property that may occur after the first full quarter. For a value add property it may be a year or more for a payout. In the case of a value add property, once the property is stabilized it is usually refinance with significant cash out. In some cases you may get 50-100% of the investment back in 3 years, but still receive quarterly payouts from 1-3% of the initial investment. After the sale of the property in 5-10 years, you get your remaining distribution. The syndicator who puts the deal together typically gets 20% of the profits. For example if a 50k investment was returning 10% ($5,000) annual distributions, the deal sponsor gets 1K and you get 4K. At the sale if that 50k investment is worth 100k, you get back your initial 50k and split the other 50k profit 80/20 (you get 40k and the sponsor gets 10k). IRR on these deals is typically in the mid teens or better. It can also be 0, just like the stock market.

There are far more complicated payout structures and many include asset acquisition fees, management fees, construction fees, disposition fees. The waterfalls may offer an 8% preferred return, then 70/30 until the investor receives 10%, then 50/50 on returns above 10%. There are many different ways to structure a syndication.

I've only been an investor in syndications and have never acted as a deal sponsor. Any property where I've acted as the principle has been mine all mine, no sharing.

Excellent explanation. To add on, for those that want to learn more I found this book to book to be excellent:

https://www.amazon.com/dp/B01M0UDZ4D..._qfSYFbMK4W0M4

Several airline pilots have gone on to be Deal Sponsors/Syndicators. It's tremendously more work than being a passive limited partner but one can build quite a bit of wealth after a series of successful deals

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hope it's not another Delta pilot pyramid scheme, like the "concert promotion" guy.

Before my time, but I’ve heard that was very successful. I’ll definitely jump in on the next round.

That was going to be my exit plan under the VEOP. It is WAY more work to be a deal sponsor than being a direct owner without partners. The amount of work and added responsibiloty for OPM kept me out of offering syndications. Passive is an awesome way to go for high earning professionals. Sourcing your own deals is more work, but comes with potential for higher returns. It also offers control over timing any refinance activity or exit. You also have 1031 options as an independent owner, syndications almost never have that option.

There's multiple resources out there, including the book I posted, that take your thru the steps recommended to do your own due diligence on Sponsors/Syndicators. With majority of partnerships/syndications requiring minimum investment of tens of thousands of dollars which you won't have access to for years, it is imperative to do some homework.

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Very true on the amount of work. Although it seems the majority of the work is at the beginning, setting up your team, systems and processes. After that gets rolling a lot of the workload is on autopilot. One sponsor told me managing a 400 unit apartment building is easier than managing a duplex he had when he first started because the apartment building is has so much scale it pays for the on site maintenance and leasing team. A duplex that responsibility is all you because the scale is so small property management would zap most if not all your cashflow.

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What do you mean by your last two sentences? As in, the world will turn?

Be greedy when others are fearful and fearful when others are greedy.

Commercial property is cheap right now and this situation will pass.

I have not found that to be the case at all. I have been doing small scale residential rentals for about 10 years now. I pay my manager approximately $150 per month per property plus expenses. That covers simple repairs, advertising and filling vacancies, screening tenants, maintenance during periods of vacancy and a few other minor things. After it's all said and done I net, on average, $900/mo per property so I'd hardly say that all my cashflow has been zapped. Occasionally big expenses do come up and that can put a damper on cash flow but you just have to plan and budget for those.

If the majority of your properties were purchased at 2009/10 prices 3rd party property management would work. Nearly every type of property generated significant cashflow at those prices. Lots of folks became millionaires purchasing properties at those significantly depressed levels.

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I'd be very concerned about investing with a syndicator who says managing a 400 unit apartment is less work than a duplex. Don't get me wrong, there is definitely advantages to scale in larger properties, but a team of employees is more work than two tenants in a duplex. He may be in the business of raising money more than managing an investment. Ignoring the property is not responsible stewardship of his investors resources. Even with contracted third party management, there is more work involved managing the manager than running a duplex. Hopefully he was just bragging about growing his business out of the self management phase.

In the airline industry, we have a continuum of time vs money. We can trade more of our time for more money via WS, GS, etc.

In the world of real estate investing there is a similar balance. An investor with loads of time can invest that time to generate a higher return on the invested capital through self management and sweat equity in value add property. They think they are getting the best possible return. The mistake is that time is finite, but money is not. You can create more money with good investments, but you cannot create more time. Be careful with your most valuable and limited resource.

If you don't have the time to invest, you may be getting a lower percentage return by paying for property management and property improvements, but you have more of your time available to find more property. Some investors have a hard time letting go of the reins and get stuck at the limit of their own time and ability vs expanding their team and focusing time on the most productive areas.

Hey...I mostly paid for my first 7 hours of dual that way :)

Word! A friend was going to sell his 6-9 properties because they were taking so much of his time. I talked him into trying property management for a year, and he couldn't be happier. 8-10% hit in returns, but MASSIVE gain in QOL and time with the family. If I move up into more proprieties, it will only be with property management or through programs mentioned above.

I agree . I am commercial property only all on triple net long term leases. The 10% I pay my manger is money well spent and it's deductible. I now pretty much just check my statements once a month. Your time is gold use it wisely. Having just retired after 38 yrs. of airline flying its time to enjoy.

Another term for that is not having a life!

I have diverse, multiple streams of spending!

Toys are important, very important!

Same. You married too?

With kids! Why blow all that money on just one person?

Touché.




......

Your wife and your 3 ex wives?

Yep, for a while. Make a few sacrifices and in time, you will have options that were not previously available. A little bit of delayed gratification goes a long ways.

To each their own. Having a life is doing things you enjoy and trying to be the best version of yourself possible.

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I've been led to believe it was doing things my wife enjoys. Happy wife, happy life???

Sailing in with the zinger! Good one. :D

I explicative hate that phrase. https://goodmenproject.com/featured-content/exposing-myth-happy-wife-happy-life-wcz/

Good perspective in that article. I have a friend who used to say that all the time, then catches the early flight home from San Diego (actually his golf league got cancelled because of rain) and he got home and his happy wife was getting 10 inches of pain from the guy down the road.

I said “well at least she was happy....” because that’s the kind of friend that I am. He’s still with that miserable wench today. Following her around trying to make everything right. She loves it. She cheated. Then said “well you come home from work and then go golfing. I missed our romance” and he bought that lie too. What is this thread about? I thought I clicked an AE thread. Anyways I have spent too much time typing this not to post it.

Tegridy FTW. Great article.

Back to building additional income streams and having a life.

Along with the reason(s) above, not sure that maxim necessarily follows true...but...the converse (obverse?) is certainly true. "If mamma ain't happy, no one is happy!" 🤔🙄😁

That’s the opening scene in the movie ‘Old School’. Is your friend Luke Wilson?