Synopsis
Travis is the director of investor relations at Ashcroft Capital. He started with active real estate in 2009 which included house hacking, the BRRR Strategy, fix and flips, then later, vacation rentals. After ending up with a portfolio that needs too much hands-on management, he decided to shift to apartment syndications in 2015 to go back to passive investing. He sold his single-family homes and incrementally invested in apartment syndications. Along with his wife, they have since done 27 passive, limited partner syndications. Travis considers himself a full-time, passive investor. Today, Travis talks about being a passive investor in multifamily syndications and gives tips to those interested in entering the space.
Key points
Buying Properties During the Recession
At that time, the government started giving an $8,000 tax credit to first time home buyers. Combined with the depleted values of property, he got started in house hacking. He still worked full-time in the oil industry while house hacking. He rolled over his real estate profits and kept his expenses low, which resulted in him living a life that followed the Financial Independence, Retire Early (FIRE) Movement. As his capital grew, he began to look at passive investing opportunities.
For Travis, rather than come up with a figure for his monthly passive income goal, it’s more important to find out why that is your goal and what you plan to do with that passive income.
By 2015, he began transitioning his portfolio into syndication. At the same time, his passive income had exceeded his living expenses. He no longer needed to work the oil field job which he hated.
Travis tried learning and investing in stocks before he went back to real estate. Having invested with Ashcroft Capital for years, he reached out wanting to work with them. Eventually, a position opened up for him allowing him to join them five months ago.
Transitioning from Single Family Homes to Multifamily Syndications
While working the oil field job and managing 7 single-family homes, he was maxed out. This led him to pursue syndication because it is scalable, and he could be completely hands-off while enjoying passive income.
Getting Funds For His Multifamily Syndications
The college fund from his parents he saved up after getting a scholarship combined with his savings allowed him to purchase his first house. Later on, after getting a tax credit, house hacking, and a six-figure oil field job, he kept investing in real estate and turning the profits over. With these, he managed to build enough of a lump sum capital to invest passively with.
Relinquishing Control with Passive Income
For Travis, it all comes down to your time value and how hands-on you want to be. Having been so burned out, he no longer wants to do another deal. Now, he thinks more about how much his time is worth and would rather pay someone else to do the job.
Choosing a Syndication Group
Travis made some mistakes when he started looking for a syndication group. He first looked to partner with local folks doing their first and second deals. He also vetted out proformas much more than the teams.
For those looking to enter the space, find a credible team with a track record. His vetting process now is to check out the team first, then the market, and lastly, the deal.
You need to be comfortable parking your capital in an illiquid investment for what could be 3, 5 or 7 years, so it’s important to ask a lot of questions to the team.
Investing with Ashcroft Capital
Travis sat down with his wife, and they mapped out their life goals. After deciding to be passive in investing, they made a checklist of what markets, asset class, and monthly distributions they wanted. Ashcroft Capital met everything on their list. He and his wife have since made several deals with Ashcroft, individually and together.
Describing the Ideal Deal
An ideal deal involves a team with a good track record, communication that resonates with him, and being in alignment with their core values since they do value-add to pre-existing, older multi-family units. He prefers deals in a diversified market and tracks migration trends such as companies relocating their headquarters.
Typically, they invest in 200 to 600 unit properties to avoid having little things become big issues such as having 10 people move out from a 50 unit property, which could put you under the water.
While some like quarterly reporting, he prefers having monthly distributions. Recession resistant assets are what he’s into now. For him, older properties such as those built in the 80s or 90s are good as they give him an idea of how much cash flow is affected during economic downturns. He’s focused on the cash flow rather than the potential equity or where the market is going to be in five years. He believes in the model of fixing good things to make them work again.
Distributions to Ashcroft Capital Investors
All deals with Ashcroft will have preferred returns specific to what the deal is. Preferred returns mean investors and limited partners are paid a percentage from the cash flow of a property before Ashcroft takes their management fees and splits. This puts the best interests of the limited partners first.
Investing with Ashcroft Capital
Ashcroft does 506(b) offerings. There’s no general solicitation. It requires a pre-existing relationship that can be established by going on a phone call with the company first. This way they can determine your risk tolerance and whether this type of investment is appropriate for you. They only work with accredited investors, typically high net worth individuals. These are usually those with a million dollar net worth excluding personal residence, and an annual income in the last couple of years of $200,000 for singles and $300,000 for married couples.
Deals are done on a first-come, first-serve basis. Those interested are emailed an overview and a downloadable pro forma. A Q & A call is done to answer investors’ questions. Investors are allowed to change their mind after receiving the documents and getting their questions answered.
How Groups Like Realty Shares and Cardone Capital Work
Groups like that are able to take in random people, and they require only a minimum of $5,000 per share. This is because they’re using Regulation A, so they can take on an unlimited number of non-accredited investors. They can set any minimum they want. But it needs a lot of heavy management on the side of investors. It is expensive and also takes a long time to get approved. These companies have a fund structure and a whole different business model. And there are still regulations that limit investments to a percentage of your annual income.
Luckily, there are regulations being made that could ease the requirements to qualify as accredited investors. This could open up the market for more private investors.
The Number of Investors Per Ashcroft Capital Project
There could be around 60 investors involved in a deal on average.
How They Find Their Investors
Ashcroft has already been in business a while and has built up a database. Since they’re pushing a billion dollars in assets management this year, a lot of deals are filled up by returning investors.
Common Questions Asked During Conferences He Attends
In any type of investing, a lot of people talk about recessions in general. It’s important to ask people what their plan is or how they plan to mitigate that.
His Recommendations For Investors
Invest carefully. Choose a competent team and look for the right debt structure. For projects with a 3-5 year hold, look to put a long-term (10 years), conservative debt structure. This gives you wiggle room during a recession without needing to sell at a loss or refinance when there’s no liquidity.
Make sure also to underwrite capital expenditures. An example would be raising 25% for the downpayment of a $10M property plus another 5-10% for capital expenses. A loan to value ratio (LTV) could range from 70-80% for a loan.
Surge In New Blood Entering Multifamily Syndications
Travis is not worried personally, but he worries that the new syndicators would make the same mistakes he had made by syndicating with people who don’t have a track record.
Common Mistakes New Syndicators Make
Anything could come up, but he thinks most things would be a curveball. Having a good team with a track record is very important to guide you along the way.
Tips For New Investors Wanting To Get Into Syndication
Look inward and find out what it is you’re pursuing. Figure out if you want to be active or passive. Map out your plan and end goal. Don’t do things aimlessly. Maybe passive investing isn’t the right thing right now, but it could be down the road.
Demographics Of Investors In Multifamily Syndications
Most are high-income earners like doctors, dentists, lawyers, and business owners. Typically, they are working professionals aged 35-65. Passive income resonates with them since they want a return on their money that is stable and less volatile. They are busy in their careers, so passive investing fits right in.
Final Advice
Look inward and get to know yourself. Write down your goals and figure out what it is you really want.
References
Resources
- House Hacking
- BRRR Strategy
- FIRE Movement
- Preferred Return
- 506(b) Offerings
- Regulation A
- Loan to Value (LTV)
Websites
More from our guest
- You can contact Travis at travis@ashcroftcapital.com
- Check out Ashcroft Capital's website
- Download Travis' free Passive Investing Guide
1 thought on “135 – Investing Passively with Multifamily Syndications with Travis Watts”
Great to speak with you Travis.