A Behind-the-Scenes Look At 3 Multifamily Real Estate Syndications

23April, 2020

A Behind-the-Scenes Look At 3 Multifamily Real Estate Syndications

By Shirley Xu

The problem with investing is, it’s really easy to look back in time and see the best path, but it’s not so easy looking forward in time.

I can’t pretend that I have a crystal ball for you to show you the future and what’s best for you to invest in at the moment. But, what I can do, is show you the past performance of three multifamily real estate syndications (group investments) that we and our investors have invested in, how much they’ve returned to investors, and the impact that they’ve had on their respective communities.

Let’s take a look at three multifamily real estate syndication projects, all based on actual projects in our portfolio, and how their performance to date. Please note that all data and identifying information below is based on actual projects but has been changed to protect the privacy of the deals, our partners, and our investors.

Case Study #1 – 320-Unit Apartment Community

In May of 2016, our partners acquired a 320-unit apartment community for $26.6 million. This class B apartment community was built in 1983 and is in a rapidly growing submarket of Dallas-Fort Worth. The previous owner had inherited the property from their father, no longer wanted to manage it, and was looking to cash out.

The business plan for this real estate syndication was to improve on-site operations by bringing in professional property management and to renovate each unit to the standard of other apartments in the surrounding area.

Upon acquisition, the team immediately put into place a professional property management team, which was able to maximize operational efficiencies and oversee and execute on all phases of the value-add business plan.

The renovations were completed within 18 months. The market was quite favorable at the time, so the team decided to sell the property. After just 22 months, they were able to sell the property for $35.2 million and exit the real estate syndication with a profit of $8.6 million in less than 2 years.

What did this look like for investors? Let’s take a look.

If you had invested $100,000 in this real estate syndication, you would have ended up with $170,000 in 22 months. That means you would have made a profit of $70,000 in less than 2 years, while having to do zero work.

Case Study #2 – 216-Unit Apartment Community

In October of 2016, our partners acquired another apartment community in the Dallas-Fort Worth area. This complex was a bit smaller, at 216 units, and was built around the same time, in 1981. Similar to the last example, this apartment community was a class B asset in a growing submarket.

One key difference, however, was that this property was acquired off-market (i.e., it wasn’t publicly listed). Because of the relationship our partners had established with the broker based on their previous transactions and track record, they were able to acquire this property without having to compete with other potential buyers, meaning that they were able to get it at an excellent price.

This property was purchased for $12.2 million. The team worked hard to rebrand and reposition this property, investing several thousand dollars per unit to renovate the property.

Their hard work paid off.

In just 18 months, they were able to sell the property for $18.25 million and exit the real estate syndication with a profit of over $6 million in just a year and a half.

If you had invested $100,000 in this syndication, you would have ended up with $200,000 just 18 months later.

In other words, you would have doubled your money in a year and a half.

Case Study #3 – 380-Unit Apartment Community

Let’s take a look at one more example. This one is a current project. It was acquired in August 2019. This 380-unit apartment community is a class B asset in a hottes growing submarket of the Dallas-Fort Worth area.

The team immediately started the renovation of units as they become available. Within few months, we had total 38 units completed renovated and able to raise rent $20/mo.

Sidebar: Okay, I know that $20 above original projections doesn’t sound super exciting, but you have to think about the scale of this thing. $20 across the 38 renovated units means an additional income of $760 per month, or $9,120 per year. At a cap rate of 5%, this adds an additional $182400 of equity to the overall value of the property. All from a measly twenty bucks.

Other projects that have been completed within the first six months include the installation rebranding with new signage, and remodeling leasing center… and implementing tenants weekly activities.

Future

The value-add progress continues on this property, and we aim to complete all the renovations within the coming months. At that point, depending on the state of the market, we may sell the property, or we may hold onto it until market conditions are most favorable.

Either way, this real estate syndication project has been a huge success thus far. Both investors and residents are very happy with all the progress made to date.

Conclusion

In our experience, the number one thing that holds our potential investors back is lack of education. These real estate syndications sound great in theory, and you see people around you making great returns, but investing your own $50,000? Eek!

That can be a huge step, and it often requires a lot of time and energy up front to really learn what real estate syndications are all about, how they work, and what to expect throughout the process so that you can invest your hard-earned money confidently.

The case studies in this post are all real projects that our partners have been a part of. None of the returns or the performance of the projects have been fabricated.

What can you do today to set Future You up for success?

Investing time in your education is one of the best ways to jump start the process, so you can ensure that two, five, ten years from now, you will be quite satisfied with all the chances you took, the returns you’ll have made, and the impact your investments will have had on the world.