The Capital Stack
Three parts play equally important roles in the syndication business: Finding deals, raising capital, and asset management. Each component relies on the others for success. Without a good deal, there’s no capital to raise; without capital and eager investors, it’s hard to scale our business, without good management we can’t complete our business plan and maximize investor returns. This series will explore our experiences in each area, providing insights into our processes.
Finding Deals
Our goal is not to purchase an overwhelming number of properties a year but to find the properties with the greatest expected returns and buy them at excellent prices. We pride ourselves on disciplined buying practices, often passing on hundreds of deals to find that one exceptional opportunity. Following our strict buying criteria, we concentrate on properties located in areas with incomes surpassing ~$60k and home values exceeding ~$250k.
Let’s dig into how we’ve found our most recent deals. We bought Sugar Pine in February, and Milford Village Flats in March, and are currently under contract on three more.
Sugar Pine
Sugar Pine initially came to our attention through a cold call. Despite the owner’s initial reluctance to sell, he eventually listed the property with a broker six months later. Over this period, we remained persistent, consistently making offers. After many months of negotiations, the seller finally agreed to a price we considered to be a great deal. You can read the full story here. Cold calling remains effective! We’ve successfully acquired $9.8 million worth of real estate through cold calls made by us or our partners. Despite the significant effort involved and the numerous “I’m not interested” responses, this strategy continues to yield results.
Milford Village Flats
Milford Village Flats was discovered while browsing CoStar. Often, I choose markets I want to invest in and manually review every apartment property in those areas. I then reach out via phone or email to the ones that pique my interest. In this instance, I utilized both methods, and it was an email that ultimately sealed the deal, connecting us directly with the seller. You can read the full story here. This method is one of the newer approaches we have tried to gain contact with property owners who do not have their property listed. With a strong track record so far, we’re committed to continuing this strategy in the future.
Deal 1
We’re currently under contract on a property that stemmed from a connection I made a couple of years ago with an investor who had shown interest in purchasing the Pinehurst Apartments. He recently reached out via text, seeking my opinion on a property he was considering. After advising him to “buy it immediately, or I will,” we decided to purchase the property together. More details will be available soon. We often partner with other investors in most cases the individual will bring us a deal and we will take the reigns while the investor who found the deal retains a portion of the promote and receives a predetermined fee.
Deal 2&3
Both deals 2 and 3, as we will call them for now, were sourced through a broker. When these properties hit the market at 8 am, I wasted no time and called the broker by 8:17, expressing my willingness to pay full price. While this may seem unconventional at first glance, I’ll be able to provide more details about why this strategy aligns with our objectives in the coming weeks.
Final Thoughts
In conclusion, our strategy for securing deals remains consistent. We keep numerous lines in the water by staying in touch with brokers, reaching out directly to sellers, and networking with fellow investors. We understand the importance of persistence and having multiple avenues for opportunity. By casting a wide net, we enhance our chances of uncovering deals that align with our investment goals.
Major Market News
Detroit, MI Development
Attention Detroit locals: A development is on the horizon in downtown! Bedrock Detroit revealed plans for the city’s first 5-star hotel, to be housed within Hudson’s Detroit, Michigan’s second tallest building. Edition, a renowned global luxury hotel brand, will spearhead this ambitious project, marking its debut in the Midwest. Dan Gilbert, Founder of Bedrock, hailed the partnership as a testament to Detroit’s allure and potential. The Detroit Edition and the Residences at the Detroit Edition will occupy all 45 floors of the tower, promising unmatched luxury and amenities. Scheduled for commercial tenant build-out by 2025, this initiative is poised to redefine Detroit’s hospitality scene. Additionally, the Residences at the Detroit Edition will offer 97 condos for sale, boasting stunning views of the Detroit River and downtown Detroit, along with exclusive amenities for residents.
Source: MLIVE. (2024, April 17th) Downtown Detroit is getting its first 5-star hotel. https://www.mlive.com/business/2024/04/downtown-detroit-is-getting-its-first-5-star-hotel.html
Tips and Tricks
Terms-
CoStar: Costar is a leading provider of commercial real estate information, analytics, and online marketplaces. It offers a comprehensive suite of services and tools designed to empower professionals in the commercial real estate industry, including brokers, investors, appraisers, and lenders. Costar’s platform provides access to a vast database of property listings, market trends, and analytical tools, allowing users to make informed decisions and maximize their investment opportunities.
