Multifamily Investing Takes a Team
Introduction
This morning, I was spending some early morning time with my family at the 50th anniversary of the Albuquerque International Balloon Fiesta when I noticed the massive team efforts involved in launching the balloons. It took as many as 10-15 people at each balloon to set up and launch. It made me appreciate that multifamily investing takes a team.
Today, I'd like to discuss a few of the roles associated with a multifamily real estate investment's general partnership team. It takes a lot of people to put a deal together and keep it running.
Deal Sourcing
The first person needed to put a multifamily deal together is the one who sources the deal. Usually, this involves months of building relationships with brokers or farming sellers to find off-market deals with good solid numbers we can present to investors.
Underwriting
The underwriter plays a key role in the team, as this person does hours of research and market analysis to determine the viability and profitability of an asset. This person analyzes the financials and projects future rents based on their market research of like properties. It can take several hours to run numbers and tweak them. In addition, the underwriter does not stop when the deal is under contract. Throughout the transaction, the underwriter continues to tweak the numbers based on the loan structure, capital structure, and information discovered during due diligence. The underwriter’s job is never finished.
Making Offers
Sometimes the same person who sourced the deal is the one who makes the offer. Depending on the size of the deal, there may be a different person preparing the letters of intent and negotiating with the brokers to get a deal under contract.
The Commercial Real Estate Broker
The broker is indirectly part of the team and is integral in identifying and presenting deal flow to the team. Once an asset is contracted for purchase, the broker will coordinate due diligence and on-site inspections. They will stay with us through the transaction through closing and more than likely, they will assist in the exit in a few years once determining the valuation is met.
Due Diligence Officer
This team member is responsible for walking every single unit of the property during inspections. They will talk with onsite staff to discover anything possible to help with the takeover. They review leases and coordinate the lease audit with the property management team. They will coordinate all mechanical, structural, HVAC, interior, and exterior inspectors with the broker and seller to make sure the property gets the proper look before the purchase. Ultimately, the due diligence team will help identify what is needed in our business plan to improve the asset for greater valuation and returns.
Attorney
There are two different attorneys involved in putting these deals together. They may be the same person and are often different. First is the transaction attorney who assists with negotiating the contract terms for purchase. This attorney reviews loan letters of commitment, entity structure, title commitments, and purchase contract dates. The second attorney is the SEC attorney who files the SEC Reg D documents to allow the sponsor to solicit investors for partnership. Ultimately, the SEC attorney lets the sponsors know when they can offer the subscription and prepare the subscription docs. They prepare the private placement memorandum and bad actor questionnaires to keep the deal compliant with regulators.
Lending Broker
The lender is the first leg in helping the sponsorship team gather the capital needed to purchase the asset. This is the commercial mortgage, private equity, mezzanine debt, etc. They take the sponsor's deal pack and repackage it to send out to potential capital partners. They usually get the deal to 65-80% of the capital needed to close.
Investor Relations Team
Benjamin Yeager with a great group of investors
Investor Relations are constantly building relationships with potential investors who are looking for passive income to fund their retirement, create wealth, or just for passive income streams. Their primary job is to invite investors to partner with the General Partners as Limited Partners in the deals. After closing the Investor Relations Team spends time communicating the asset performance to investors through webinars, zoom meetings, and newsletters.
Asset Management
The asset management team starts working with the property management team during the acquisition phase to ensure a timely and smooth takeover process. They work to make sure the property management team is aware of the budget and business plan for the property. This may include project management, banking, web design, etc.
As you can see, there are a lot of roles involved in creating a successful multi-family investment. The general partners work for months putting deals together and must work well together to make it all happen successfully. As you can imagine, there is rarely a day in the multi-family investment world in which there are no problems to solve. This team must work well together to protect investors’ money and returns.
To learn more about deals we're working on, visit www.groundswellassets.com/invest to subscribe and gain access to our current deal flow. You'll gain access to our investment offering memorandums with proformas, underwriting, and any videos we may have put together for each deal we're working on.
