Apartments & Syndications: AMA with Andrew Cushman

TL;DR

Andrew Cushman answers questions on multifamily syndication and real estate investing.

Transcript

all right good bring everything on where you are bigger puck this community come in here back to answer in all questions on syndication and apartments and multi-family hope you are all doing well and slowly getting back to normal life at least we are kind of here in California I think that's the case most other places for those who don't know who I... Read More

Key Insights

• Andrew Cushman transitioned from chemical engineering to real estate, successfully syndicating multifamily properties since 2011.
• Despite initial fears, multifamily collections remained strong during the pandemic due to stimulus checks and unemployment benefits.
• Future concerns include potential long-term unemployment and economic recession, affecting multifamily market dynamics.
• Networking is crucial for finding partners in syndication; BiggerPockets and local meetups are valuable resources.
• Raising private money for smaller residential multifamily properties can be challenging due to legal costs.
• Due diligence on sponsors is key for passive investors; vetting their track record and handling of past challenges is crucial.
• The multifamily market faces political and legislative risks, especially in regions like Southern California.
• Securing deals with hesitant sellers requires understanding their concerns and providing flexible options.

Questions & Answers

Q: How did Andrew Cushman transition into real estate?

Andrew Cushman transitioned from being a chemical engineer to real estate by initially flipping houses in Southern California. He later moved into multifamily syndication, purchasing a 92-unit apartment complex in 2011. This shift was driven by his desire for a more scalable business model, leading to significant success in the multifamily sector.

Q: What has been the impact of COVID-19 on multifamily collections?

Despite initial concerns about COVID-19's impact on multifamily collections, they remained strong due to stimulus checks and enhanced unemployment benefits. Many tenants used these funds to catch up on rent, and collections were in line with expectations. However, there are concerns about future economic challenges as government support wanes.

Q: Where can one find partners for syndication?

Finding partners for syndication involves networking in real estate communities like BiggerPockets, attending local meetups, and participating in educational courses. These platforms allow investors to connect with like-minded individuals interested in multifamily real estate, providing opportunities to form partnerships based on shared goals and complementary skills.

Q: What are key due diligence steps for passive investors?

For passive investors, due diligence is crucial and should focus on the sponsor's track record and experience. Important steps include asking about past challenges, obtaining investor references, and understanding the sponsor's market and underwriting assumptions. This helps ensure that the investor is partnering with a reliable and experienced sponsor.

Q: What are the risks of investing in Southern California?

Investing in Southern California presents challenges such as high property prices, political and legislative risks, and low cash flow potential. Legislative risks include potential rent control measures and other regulations that can impact landlord profitability. Investors should be aware of these factors and consider diversifying into more landlord-friendly markets.

Q: How can sellers be encouraged to sell during uncertain times?

Encouraging sellers to sell during uncertain times involves understanding their concerns and offering flexible solutions. This may include addressing health and safety concerns with virtual tours or offering various financing options. Building trust and providing clear benefits of selling now versus waiting can also help in negotiations.

Q: What are the challenges of raising private money for small multifamily properties?

Raising private money for small multifamily properties can be challenging due to the high costs of legal documentation, which may not be justified by the property's value. Alternatives include finding a single investor to provide a loan or forming a joint venture with investors who actively participate in the property's management.

Q: What strategies are suggested for finding multifamily deals post-COVID-19?

Post-COVID-19, strategies for finding multifamily deals include strengthening broker relationships and exploring direct outreach to property owners, especially in the sub-100 unit space. Adjusting assumptions about rent growth and occupancy is crucial, and seller financing may become more prevalent as traditional lending options become more restrictive.

Summary & Key Takeaways

• Andrew Cushman, a former chemical engineer, transitioned to real estate, focusing on multifamily syndication. He shares insights on market dynamics amidst the pandemic, emphasizing the importance of networking and due diligence in syndication.

• Despite initial pandemic fears, multifamily collections remained strong due to government support. Cushman discusses future concerns, including potential long-term unemployment and recession impacts on the market.

• Networking is vital for finding syndication partners, with BiggerPockets and local meetups being valuable resources. Cushman also highlights the importance of thorough due diligence on sponsors for passive investors.