This week blogger and veteran investor, Vinney Chopra, talks about multifamily syndication investing and his 10 rules to success.
By Vinney Chopra
If you want to know what you need to start investing in successful multifamily syndications, I can help.
My wealth of knowledge and success in real estate investing for more than 40 years can help with your education in multifamily syndication investing.
10 rules to successful multifamily syndication investing
I have completed more than 25 syndications. Here is what I practice daily that has helped lead me to success as a multifamily syndicator today:
No. 1 – Educate yourself
Spend the time and money upfront to relieve yourself of as many mistakes as possible. Just one big mistake can wipe you out. To excel in any field – my thinking is that we need to get obsessed in learning it in depth – all the intricacies, foundations, procedures, systems and the structure of the business.
Knowledge is power.
It’s great to find the very best role models in that field, discover what methods they are employing and imitate them. Try to find a great mentor in them, get a coach or a mentor, especially in the beginning. See how you can contribute to their organization their goals.
No. 2 – Dream big
Set realistic concrete goals with deadlines and expectations for massive action daily, weekly and monthly. A goal is different from a wish; you may wish to be rich, but that doesn’t mean you’ve ever taken steps to make your wish come true.
Setting clear and specific investment goals with specific deadlines becomes your road map and action plan to becoming financially independent. You are statistically far more likely to achieve financial independence by writing down specific and detailed goals than not doing anything at all.
Your goals can include the following:
- The number of units you need to acquire each year.
- The annual cash-flow they generate.
- The type of property.
- The location of the emerging market
No. 3 – Buy in emerging growth markets and location
Always invest with a long-term perspective in mind. Never speculate on quick short-term gains in appreciation, even in a heated market experiencing double-digit gains. You never know when a market will peak and it’s usually 6 to 9 months after the fact when you find out.
As a syndicator, you want to do extensive research and decide on an emerging market that will bring lots of jobs. You see, you will need to sell that market to your “Valued Investors”, who would look at all the reasons to invest in your opportunity.
The best approach:
- First is to choose your city or town based on the health of its housing market and local economy (unemployment, job growth, population growth, etc.).
- From there you would narrow things down to the best neighborhoods (amenities, schools, crime, renter demand, etc.).
- Finally, you would look for the best deals within those neighborhoods.
Sell that market to your “valued investors” who would see that you are a professional in your field and care about giving important information articles and links to great pieces of news in the market you are looking to acquire and would be asking them to look at all the reasons to invest in your opportunity.
No. 4 – Look for momentum plays and value-add for consistent cash-flow every quarter
With few rare exceptions, always buy investment property with a positive cash-flow. Do extensive due diligence and stay true to your standards and the assumptions in your elaborate Underwriting.
Don’t fall in love with the property; fall in love with numbers.
Remember, you are building a strong foundation to provide excellent Quarterly Cash flow returns ( I prefer paying quarterly in my companies rather than monthly; investors love walking to the mailbox four times a year to get their nice checks) to investors, so that they can give you more referrals and talk nice about how good you are as a syndicator. It’s so very important to be transparent and keep great communication with valued investors.
No. 5- Build a totally transparent business model
This has been our foundation at my 4 companies. Remember, the investors need to feel secure and confident about you and your business ethics before they give you $50k or $100k or $500k. It’s their very hard earned savings. And as a top syndicator you have the Fiduciary responsibilities to protect their investment more than yours.
Treat their investment as gold and do everything in your power to preserve it and make it grow.
In all our companies, the investors can ask to see ledgers, invoices, bids, bank statements, rent rolls, all financial reports, Capital Expenditures reports, balance sheets… well any and everything. That builds trust and makes them comfortable with your organization.
No. 6 – Create new LLCs for each multifamily community and get extra insurance coverages to mitigate risks
Always put each property in its own LLC. Make sure that all insurance, property, wind stream, flood and umbrella insurances are in place for your assets. Read and educate yourself the “SEC RULES AND REGULATIONS” thoroughly.
Find the best Real Estate Attorney and Syndication Attorney who you can build relationship with. The operations go smoother by getting help from them. You underwrite their fees in calculations, so don’t try to take a cheaper route, it may come back to haunt you.
I have been extremely blessed with Kim Lisa Taylor, www.SyndicationAttorneys.com. She and her team is amazing, efficient, cutting edge with laws and very professional. I would highly recommend working with her. She has done all our 26 Syndications. I am so very proud to talk about Milton Colegrove, Real estate attorneyin Dallas, TX, he is super efficient as has been with us since the very beginning and looks at all my contracts and legal matters through all 4 companies, counsels me daily/weekly. Looks after all my closings; I am never at the closings!! Isn’t that awesome.
No. 7 – Diversify across markets
Focus on one market at a time, accumulating from 3 to 5 income properties per market. Once you’ve added those 3 to 5 properties to your portfolio, you would diversify into another prudent market that is geographically different than the previous one. Economies of scale prevail and bring better net cash flows by reducing expenses.
Typically that means focusing on another state. One of the underlying reasons for diversification within the same asset class (real estate), is to have your assets spread across different economic centers.
Every real estate market is “local” and each housing market moves independently from one another. Diversifying across multiple states helps reduce your “risk” should one market decline for any reason such as increased unemployment, increased taxes, etc.
No. 8 –Use professional property management or better yet run your own property management company
We decided to manage all our acquisitions from day one. It gives so much control on the day to day operations.
We can take immediate steps:
- To rectify problems
- To get better bids
- To reduce costs
- To implement strong marketing techniques for high occupancy.
In the beginning I promote to get a local Property Management company to see the systems and learn from them; only after good grasp of the day to day operations and systems; one should think to start their company. Never manage your own properties unless you run your own management company. Property management requires a solid understanding of tenant-landlord laws, Fair housing laws, operational software, good marketing skills, and strong people skills to deal with tenant complaints and excuses.
No 9 – Build an awesome presentation and credibility kit
Remember we have only first 7 seconds to make a great impression with Investors, RE brokers, Loan Brokers, Attorneys, Bankers, Landlords and others.
It pays big dividends to get professionally designed business plan, an educational simplified PowerPoint presentation and rehearsed on some great scripts. I would highly recommend practicing your scripts for each meeting, rehearsals are necessary.
No. 10 – Leverage your investment capital, time and skills – Syndicate
Real estate is the only investment where you can borrow other people’s money (OPM) to purchase and control income-producing property. This is a very noble cause in my thinking as you are providing above average excellent returns on the funds for so many investors, who are professionals in their field of expertise but don’t have the time or skills to invest their savings to gain high returns in Real Estate-especially in Multifamily Commercial sector. By being honest, trustworthy and following the SEC Rules and Regulations you are able to build your strong business. Also you will be helping so many residents who will be living in your Multifamily Communities that you add value to. Not to forget the job you will provide to the Staff at your assets and the hundreds of vendors you will be giving jobs also.
This allows you to leverage your investment capital into larger multifamily properties than purchasing using “all cash”. Leverage magnifies your overall rate-of-return and accelerates your and investors wealth creation.
It’s much easier to manage and bring about great rates of returns with larger multifamily communities.
Focus on accredited and sophisticated investors.
You are in a very good profession by being a syndicator, you are doing a great job of helping lots of entrepreneurs, doctors, lawyers, managers, high-net-worth individuals, retired businessmen and so many more, who just don’t have the time and skills to effectively syndicate and bring about great returns.
So get excited to embark on this great journey to become financially independent to bring the kind of things you want to bring to you loved ones.
About the author:
Vinney (Smile) Chopra is the Founder and CEO of Moneil Investment Group and President of Ideal Investments Group. His latest accomplishments include acquiring 12 multifamily assets in the last 28 months worth $132 million. His last two syndications were sold out in just a few hours, and one in 36 hours raising $4.7 million and another one $6 million in eight hours. Between the two syndication companies he founded, Vinney’s teams are controlling over $200 million worth of assets. He is a mechanical engineer. After graduating from The George Washington University and finishing his Master’s in Business Administration in Marketing, he shifted his focus to marketing and motivation. He was a professional fundraising consultant and motivational speaker for more than 35 years. Vinney and his wife started their real estate investments in 1983. He currently owns single-family homes and multifamily units in Texas, California, Atlanta, Arizona and India. Many times, people call him “Mr. Enthusiasm” or “Mr. Smiles.” He likes to bring great value to everyone he comes in touch with. You can reach him at www.vinneychopra.com