Our guest today is Mike Fritz, an REI coach, leadership speaker, and podcaster. In this episode, we’re digging into the relationship between general partners and limited partners in syndication deals for multifamily. If you want to know the process that an LP should go through to find the right deals or you are a GP and want to know how to do it better, then don’t miss out on this episode! Learn more about Mike and his journey at reiclarity.com!
“Real estate is one of the safest and best ways to build wealth and get to that financial freedom”
Mike is a general partner in multifamily and commercial deals. According to him, real estate is one of the best ways to build real wealth. It can create a continuous cash flow and multifamily deals generally have a strong recession resistance.
Mike’s way to decide where to invest in multifamily is to take these 3 factors into account:
- Job growth
- Population growth
- Landlord-friendly location. This means it allows the removal of a tenant if they’re not paying rent and unwilling to get assistance.
Mike’s advice is to always follow job growth in multifamily investing, as that is the most important factor. He loves to invest in the Mid-West and has all his investment there because the market is stable.
“I’m not willing to say you know what, let’s just risk it. I make sure we have a proven track record.”
Mike talks about how to find the best deals as a limited partner. It is very important to have a good connection with the general partner and ask the right questions. These would be:
- Why the GP choose this deal?
- What class property it is? – Class D properties are not recommended because of appreciation and rent collection perspectives.
- What are the systems of communication? – That will tell a lot about the operator.
- How do they analyze deals?
“If you’re trying to find a GP that’s never had a bad deal, you’re gonna be looking for a long time.”
Mike recommends choosing a general partner who has good experience but is still motivated. They don’t have to be someone who’s done thousands of units. A proven track record and a good personality can go a long way.
Mike talks about the 3 ways that a passive investor should expect to see funds in their journey through multifamily syndication:
- Monthly cash flow: this comes from the rent and fees.
- Equity on sale: whatever percentage you own of the syndication, you get that percentage of the profit.
- A hybrid of the 2: the GP force appreciates the building, refinances it, then returns 100% of the money to the investors. They still get cash flow but they have no money in the deal anymore.
Mike uses the third approach in his company. He says, that the only downside is that the investors do have to leave 20-30% of their equity in the deal to leverage this opportunity.
Mentioned in the show:
- His LinkedIn
- [email protected]
- Power Up Your Real Estate Podcast
- Gary W. Keller and Jay Papasan – The ONE Thing
Learn how to grow your portfolio and reach incredible success the right way! Visit us here for everything you need to know: www.shineinsurance.com/reiclarity.
Special thanks to Mike Fritz for taking the time to share so many great insights with us
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Show produced by Eni Horvath