Why do we syndicate? Why don't we go out and buy our own investment properties just here at Wolfe Investments? Why do we bring other investors in? We'll tackle that question today.
My name is Kenny Wolfe and I’ve been a real estate syndicator and investor for over eleven years; in this time, I’ve built a successful real estate investment firm, Wolfe Investments. If you’re new to the show, make sure to subscribe so you’re notified when a new episode comes out.
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Today we're talking about why we syndicate--why don't we go out and buy our own investment properties just here at Wolfe Investments? Why do we bring in other investors? We'll tackle that question today.
Welcome to Real Estate Investing with Kenny Wolfe, the show with weekly topics designed to help you learn how to build your ideal life through real estate investing. My name is Kenny Wolfe, and I've been a real estate syndicator and investor for almost 12 years now. And in this time, I've built a successful real estate investment firm, Wolfe Investments. If you're new to the show, make sure to subscribe so you're notified when a new episode comes out.
Why do we syndicate? That's the question we get a lot from our investors, but first of all, we need to define it, right? What does it mean? Syndication is the combining of individuals or organizations into a group in order to undertake some specific duty or carry out a specific transaction. What does that really mean? When we syndicate, we're bringing a group of investors together, we're pooling our resources and we're able to go out and invest in a much larger project. You can do this in real estate with us at Wolfe Investments, there's other guys who do oil and gas. There's a very wide range of what can be syndicated, but in the investment world, it's pooling your resources so you can invest in a much larger project than you could on your own.
How does syndication work? You have all these investors, like I said before, you're pooling your resources, everybody's coming together, and for those who have equity are coming in, are putting their money into it. Now you have to define who's going to be the manager and what does that role look like? What do you vote on? What don't you vote on? What are the roles of the passives? Taking a live example, say we buy an apartment building and we need to change the exterior paint color. We do not vote on that. We don't get 50 or a 100 votes of our investors together to pick that out. Now, there are certain things that we do vote on: major changes, major decisions like that, but all those are in your documents.
As a passive investor, you need to make sure that you read those documents, you know the rules, it's all laid out beforehand, and you are comfortable with that manager leading the charge on that project. Let's look at an example of what a syndication looks like at Wolfe Investments. Say we find an awesome property in Dallas, Texas--we're buying it for $20 million. We're going to raise $6 million of equity from investors. Our investors go through our investor portal on our website, so they see the webinar, they see the documents, they read through all that information, and if the projected returns mash up with their long term investment goals, they hit the reserve your share button, they invest, we pool all the equity together, they wire their funds in, we buy the asset, and then post-close, we here at Wolfe and Investments manage the day-to-day operations. Our team here of asset managers are constantly talking to the regionals, the onsite personnel, making sure the rehab's going on track and under budget, and that we're leasing units at or above the projected rents.
There's a lot of stuff that goes into the day-to-day. To keep them in the know, we give our investors a monthly two-page report. Then we attach a big financial package, so we have full disclosure to our investors. That's what a syndication looks like with Wolfe Investments.
What are the advantages of investing in this syndication? Some of the pros are, say you have a $100,000 to invest, you could probably buy two houses, maybe three, but you're going to have a lot more hands-on work to do on those single family homes.
Now, if you were to take that same $100,000 and you split it over into two different multi-family passive investments--you're investing in two different apartment complexes. One is 150 units, the other may be 200 units. You're getting ownership in those much larger projects, and with those sized properties you typically you get onsite professional management. You don't have to worry about taking those phone calls with the toilet breaking or the water heater blowing out at two in the morning, as they do always at two in the morning. You have exposure to great commercial investments with a lot less of the work. And usually the returns, from what I've seen on our commercial properties, far outpace what you can get on a single-family home. Again, you're taking that same dollar amount, but putting it to work in a much more efficient, a much more stress-free way of investing, and you still get a great return on investing in commercial real estate projects.
The other thing too is you can split it over multiple assets. Again, you're investing in two different multi-family projects. They're much bigger. They'll say one does a refi and you get back 50% of your money, you can reinvest that into another one. That's a way to spread it out and multiply your passive revenue stream. Syndications a very powerful tool. It gives individuals access to commercial property investments where they may not have had that chance before. Another question we have about syndication here at Wolfe Investments is, will we ever stop syndicating? It's a very good question. I enjoy what I do every day. I love coming to the office. I love coming to the job here. To me, it's not really a job because I enjoy it so much, but really I get to be a full-time investor, which is just amazing. It's my dream job. I've always wanted to do that. I've successfully checked that off now. But we are very active up here at Wolfe Investments on the pipeline of acquisitions, whether that's our B class value add in Texas or a ground up multi-family construction property, an office to multi-family conversion or triple net assets. We're very diversified. We have a healthy pipeline of bigger, larger commercial real estate investments that we get to tackle. It's a win-win. Our investors get access to these much bigger projects, and then we also get to do the bigger projects that we know and love up here at Wolfe Investments. That's why we'll never stop syndicating. We also love to see our investors grow alongside with us. One of our former sophisticated investors on one of our investments, about a year ago, was able to check that accredited box. He said he didn't only invest with us, but he said that Wolfe Investments was a big part in helping him move up the ladder from that sophisticated to the accredited investor piece, which was really cool. It's very exciting for us up here at Wolfe Investments to be a part of people's retirement portfolios and helping them build a better life for themselves and their family.
Let's go over what we talked about today about why we syndicate. Syndication is a powerful tool, just like we talked about. You're able to pool your resources, whether that's equity, whether that's knowledge, your balance sheet, whatever it is. But that's a group of investors that get to come together and buy larger commercial properties than they could individually. It's also a great way to diversify. Say you have that $100,000 or $200,000, you can spread out your investments over two, four, however many properties you want to split it over. It's always a good idea to diversify across multiple asset classes, I think, and different types of multi-family properties as well. And by coming together on syndication, we're able to create more value as a team than we could possibly individually.
This has been real estate investing with Kenny Wolfe. Thanks so much for listening.