May 17, 2019

JF1717: How To Submit A Syndicated Apartment Deal Offer Part 2 of 2


Now it’s time for the second and last part of this Syndication School series on submitting your apartment syndication deals. Theo is diving deep into the details so you can walk away from these two episodes know exactly how to submit your offers on large apartment communities. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Joe Fairless: There needed to be a resource on apartment syndication that not only talked about each aspect of the syndication process, but how to actually do each of the things, and go into it in detail… And we thought “Hey, why not make it free, too?” That’s why we launched Syndication School.

Theo Hicks will go through a particular aspect of apartment syndication on today’s episode, and get into the details of how to do that particular thing. Enjoy this episode, and for more on apartment syndication and how to do things, go to, or to learn more about the Apartment Syndication School, go to, so you can listen to all the previous episodes.


Theo Hicks: Hi, Best Ever listeners. Welcome back to another episode of the Syndication School series, a free resource focused on the how-to’s of apartment syndication. As always, I am your host, Theo Hicks.

As you know, each week we air two podcast episodes that are part of a larger podcast series that’s focused on a specific aspect of the apartment syndication investment strategy. For the majority of these series we offer some sort of document, spreadsheet, or overall resource for you to download for free. All of these free documents, as well as the past free Syndication School series episodes, can be found at

This episode is going to be part two of a two-part series entitled “How to submit an offer on  a syndicated apartment deal.” If you haven’t done so already, I recommend listening to part one, which aired yesterday, or if you listen to this sometime in the future, the podcast right before this one, where we discussed how to create a letter of intent. So we went through what a letter of intent is, what information you should include in your letter of intent, and we also provided you with a free LOI template that you can use to create your letter of intent based on the information I discussed in that episode.

In this episode, part two, we’re going to talk about what happens after you actually submit your letter of intent. So you put your LOI together and you e-mail it over to the listing broker if it’s on-market, or the seller if it’s off-market. Well, what happens next? In reality, one of four things will happen.

Number one, your letter of intent will be accepted. Number two, your letter of intent will be rejected. Number three, your letter of intent will be countered, or four, in the case of it being an on-market deal, you will be invited to the best and final offer round. In this episode we’re gonna walk through kind of how to approach each of those four scenarios.

For scenario number one, if  your offer is accepted, congratulations. Good work. You’ve got your first deal, or you’ve got another deal under contract. If you do receive a notification that your letter of intent was accepted, then the next step is going to be signing the purchase and sales agreement. Now, unlike the letter of intent, which is a non-legally-binding agreement, where you’re just essentially saying “Hey, here are my offer terms”, the purchase and sales agreement (PSA) is a binding contract to purchase the apartment and the terms and conditions defined in your letter of intent. That means that — I guess the selling side is most likely gonna be responsible for the purchase and sales agreement; they’ll have that prepared and they’ll send that to you.

Make sure you review the purchase and sales agreement, and make sure that the terms are the same as the terms defined in the letter of intent. Make sure the purchase price is the same, the earnest deposit is the same, any other items that you requested are on there… Things like that.

You might also want to have your attorney look over it as well, because if you’re just starting out, purchase and sales agreements are pretty long; a lot of technical, legal jargon in there that you might not clearly understand, so you just wanna make sure that you dot all your i’s and cross all of your t’s before you actually sign the PSA. Also, make sure that you are not delaying that process too much, because there’s likely something outlined in the PSA that says that “This is valid until this specific date”, which was something you defined in your letter of intent. The purchase and sales agreement must be signed within two weeks of the letter of intent being accepted. So that’s scenario one, pretty straightforward.

Scenario number two, if your offer is rejected outright and there is no counter, then you have a few options. Number one, you can re-submit a stronger offer. Again, ideally, your first offer isn’t your highest and best offer, so if it’s rejected outright and they just say “No. Thanks for submitting your offer, but we’re not gonna move forward with your LOI at this time”, then you can go back to your underwriting, determine what your highest and best offer is, maybe tweak some of the terms to make your offer a little more competitive, and re-submit that offer. Or you can just walk away and move on to the next deal.

Emotionally, don’t get discouraged or upset if your offer is going to be rejected, because 1) this is something that should be expected. Every single offer you submit is not gonna be accepted. But 2) for those of you that have attended Best Ever conferences in the past, or are loyal listeners to this podcast, Joe has interviewed plenty of people who have submitted an offer on a deal, has been rejected, and they either got that deal later on down the road, or they ended up finding another deal.

Maybe the seller rejects your offer because they had a better offer, and maybe you’re number two, but then for some reason that initial best offer that they received falls through, and then they come back to you and say  “Hey, are you still interested at these terms?”

Or you could be awarded a different deal from either the same seller, or a different seller. Instead of spending your time fretting about being rejected, you go ahead and find another deal, underwrite that deal, and you receive that offer… Or a few months down the road, or maybe a year later, that seller is selling another property and you end up buying that deal. So that’s scenario number two, how to approach having your LOI rejected outright.

The third scenario is if your LOI is countered. So if they come back and say “Okay, well, we want this purchase price instead”, then the first thing you’re gonna want to do is go back to your financial model, your cashflow calculator, and input that new purchase price, and then determine whether the deal still meets your return criteria.

Again, remember, this is why you did not initially give them your highest and best offer. So if they do come back and counter, you will likely have some wiggle room on the terms or the pricing of the deal. Now, if it does still meet your criteria, then you can  go ahead and accept that counter-offer, and kind of go back to scenario number one, and get that purchase and sales agreement.

If the deal does not meet your investment criteria, your return goals at that new price, you can either counter again, or you can walk away. And finally, the fourth scenario would be you are invited to a best and final sellers’ call, or best and final offer round. Again, I talked about this in the last episode – the best and final offer round, you’ll typically have that on most on-market deals that are mid-sized to larger apartment deals, like 50-60 units and above, and the seller is going to invite either one person or multiple people who submitted the most attractive offers to a best and final offer round.

If you are invited to this best and final offer round, this is when you want to, as the name implies, re-submit a letter of intent with your highest and best offer. That’s price and the terms.

Now, of course, based on your conversations with the listing broker, or if it’s off-market with the owner, you’re gonna have an idea of what you’re gonna need to do to be awarded the deal, but you won’t necessarily know exactly what the seller wants out of an offer… So based on the information you do have, based on the seller’s motivations to sell and based on the information you gather during the underwriting process, go ahead and either at this point create a best and final offer – again, price and terms; it’s not just “The best price wins.” Or you can just decide to walk away, depending on if you know that you’re gonna have to go above the price and terms that you can actually buy the property at.

Then after submitting your best and final offer, one of three things will likely happen – you’ll either be awarded the deal, you’re gonna be notified that you were not awarded the deal, or they will invite you to a best and final call with the actual seller.

It’s pretty self-explanatory – if you are awarded the deal, congratulations. PSA time. If you’re not awarded the deal, again, don’t get upset; just find another deal to underwrite. If you were invited to the best and final seller call, then in the rest of this episode we’re gonna talk about what preparations to make before you actually attended that call.

So the purpose of the best and final seller call, from the perspective of the seller, is for them to vet you. The last thing the seller wants is essentially to sign a contract with a buyer who is not gonna be able to close on the deal, because that’s gonna be a huge waste of their time and a huge waste of money, because time is money at this point. Because the longer they wait to sell the property, technically the less money they’re going to make. So that means that you, the buyer, are going to need to convince the owner that you are going to be able to close… And you will do this by discussing your experience of you and your team, as well as your business plan for what you will do once you’ve taken over operations at that property.

Of course, you’re not going to want to wing this best and final sellers call. You’re gonna want to be as prepared as possible, because the more prepared you are, the more confident the seller is going to be in your ability to close the deal.

Let’s run through some questions that will most likely be asked. Again, not all of them are gonna be asked, they’re not gonna be asked in this exact same order, but these are things that you’re gonna want to not only think about, but write out some bullet point answers to before you actually have that call with the seller. So here are those questions… And we’re gonna put them in the categories of your background, your business plan, and then some miscellaneous questions that might be asked.

In regards to your background, some questions that you’re gonna want to write out answers to is what is your prior real estate experience? At this point, if you haven’t done an apartment syndication deal before, then you’re most likely not going to be focusing on yourself, but more focusing on your team. So what is your property management company’s background? If you have a mentor/consultant, what is their background and experience in real estate? And then any relevant real estate experience that you actually have, you wanna discuss that as well… But again, if you haven’t done a deal similar to this one before, the seller doesn’t necessarily care about a single family home that you bought three years ago. What’s gonna be more important is the experience that’s relevant to them, which is going to be management experience, buying properties, if you’re raising capital, raising money for them, things like that. So have a good script for what you’re gonna say when they ask about your prior real estate experience.

Next they might ask you to explain any prior transactions you have completed – where was the deal? What were the numbers? What was the partnership type for this deal? Did you buy it yourself, did you raise money for the deal, was it a JV? And then they’re gonna want to know what the outcome is.

Next they might ask you what is your future deal outlook. Are you someone who’s just buying one deal and that’s really all you’re focusing on, or do you plan on buying this deal and then continuing to buy more deals? …with the latter giving you a little bit more credibility than the former.

Then as I mentioned before, they’re gonna ask questions about your team. If you’ve got a mentor/consultant, if you’ve got a partner, if you’ve got a property management company – don’t just say “Well, I’ve got a property management company, and I’ve got a partner, and I’ve got a consultant.” Just say that, but then mention what relevant skills they’re bringing to the table based on their track record, that will allow you to successfully close any manage this deal. Those are the questions they’re gonna ask about your background.

Next they’re gonna focus on your business plan. They’re likely gonna ask you what is your overall business plan for this property. Are you gonna be conducting rehabs, and if so, what’s your plan? What’s your interior/exterior renovation plan for the property? They’re gonna want to know what your capital budget is going to be, so how much money do you plan on spending on the interiors? How much money do you plan on spending on the exteriors? What is the budget for both of those, as well as what is the plan for both of those?

They might also ask you what’s your contingency budget. Are you just accounting for “It’s gonna be a million dollars for the interiors, a million dollars for  the exteriors, so my budget is two million dollars”? Or are you gonna say “I’m expecting two million dollars for the interior and exterior, and I have a 15% contingency of $300,000 for any overspends.”

Next they’re gonna ask you how you’ll be securing the debt… So who are you gonna be using? Are you using a mortgage broker, securing agency debt, or are you getting a bridge loan? What are the terms of your financing? Is it interest-only for a few years? How long is the loan? Do you plan to do a refinance? Are there any supplemental loans going on there?

And then they’re gonna want to know if you’ve actually used your debt source before in the past, with the answer being yes giving you more credibility than the answer being no.

On the flipside, they’re also gonna want to know where the equity will be coming from, so how do you plan on securing this debt. Since you’re an apartment syndicator, you might want to explain how many investors you have, you may wanna explain what your relationship is with these investors. They might also want to know if you’re investing your own personal funds, or if you’re using institutional funds.

Then another important question is gonna be what is your back-up plan if your primary investment source doesn’t follow through. If you remember, kind of what comes first, the chicken or the egg, the money or the deal – this is why we discussed the importance of getting those verbal commitments prior to looking for deals… Because once you have verbal commitments, not only do you know how much capital you have to deploy, but you can use that to determine what size deal you can actually buy. So if you don’t have any investors yet at this point, then you’re not gonna be credible in the eyes of the seller, because if they talk to someone else who says (let’s say for example the down payment is one million dollars) “Well, I’ve got a list of 1,000 different investors who understand that my minimum investment is $50,000. I’ve worked with them on deals in the past, and once I have the deal under contract, I’ll present that deal to them… But right now I have more than enough money from investors to buy this deal. In fact, I always make sure that I have 50% more in verbal commitments that I’ll need to actually close on the deal.”

They’re also gonna want to know who your property management company is that will be helping you implement this plan. Are they actually partners in the deal, or are they a third-party? Again, we talked about this when we talked about team members and the importance of alignment of interest. A property management company who has equity in the deal has more alignment of interests than a property management company who doesn’t have any equity in the deal, or is just managing the deal. So if the property management company plans on investing in the deal or plans on having some other role besides just managing the property – maybe the loan guarantor, or maybe they’re bringing their own investors in the deal – that’s something that you’ll want to express to the seller.

They’re also gonna want to know if you’ve actually worked with them in the past; again, similar to the debt source, you’re gonna be more credible in the eyes of a seller if you’ve actually worked with this company in the past, rather than if it’s your first time working with them. And then they might want to know if the property management company has reviewed and signed off on your underwriting.

Before I go to the miscellaneous, something else that I wanna mention is that they might not ask you all these questions; they might just say “What’s your overall business plan for the property?” and that might be it. If they do that, then you need to proactively explain to them “Okay, here is my overall business plan for the property. These are the renovations I plan on doing. Here are the costs for those, and this is my contingency. I plan on securing debt from this source. Here are the terms. And I’ve worked with them before. I plan on raising capital for this deal; I have this many investors. I plan on putting money in myself. I’ve worked with these investors before in the past, and I have verbal commitments from investors of 50%-1,000% greater than the amount of money I need to raise for this deal… So if some of my investors were to fall through, I still have back-up investors.

I’ve got my property management company who is going to be investing in the deal and they’re bringing on their own investors as well. This is the third deal we’ve done together. And before I even submitted my offer to you, I made sure that we reviewed my underwriting together and they have signed off on my underwriting.”

Don’t say it exactly like that, but I think that kind of flowed pretty well. But again, they might not ask you specifically what your exterior budget and plan is; they might just ask you what your overall business plan is. So these are things that you want to be prepared to say, and that you’re gonna want to say on the best and final seller call, even if they don’t specifically ask you for that information.

With that said, the last category is gonna be the miscellaneous questions. They’re gonna want to know if you’ve actually toured the property already, for obvious reasons. They might ask you if you are pursuing any other deals… Because at this point you haven’t signed a PSA; maybe they plan on doing some special kind of contract, like an REO contract, or a Fannie Mae contract, so they might as you if you’re familiar with a certain contract that they plan on presenting…

If it’s an off-market deal, they might ask you why they should sell directly to you and not take their chances putting it on the market. This is if you’re the one that reached out to them; so they weren’t listing it off-market, you were the one that convinced them to list the property for sale, and so the might say “Well, now that I wanna sell this property, why am I selling it to you off-market? Why don’t I just go to market and find a listing broker?”

The answer to that is — if you go back to one of our previous Syndication School series, we talked about the benefits of selling a property off-market from the seller’s perspective. Those are things like potentially faster closing, less headache, lower broker fees, they’re not gonna have to worry about a bunch of people touring their property, which might mess up relationships with their vendors and their tenants… Things like that.

And then they might ask something along the lines of “Is this really your best offer? Is there anything you can do to sweeten this offer?”, things like that.

Again, the overall idea of the best and final seller call is for the seller to vet you. And they might ask you very specific questions, they might ask you general questions… Regardless, you wanna come in with the information I’ve just explained, prepared, so that if they do ask these specific questions, you’re gonna answer; and if they don’t, then you have a script to run through your business plan, your background, your team, and proactive provide information that you know the seller wants to hear.

At the end of the call, before you hang up, a very powerful question to ask the seller, whether it’s just you in the best and final call round or if it’s more people in the best and final round, ask them “Is there any reason why we would not be awarded the deal?”

Once you’ve completed this best and final seller call, your fate (so to speak) is really in the seller’s hands. Again, at this point you’ll either be awarded the deal or not awarded the deal.  If you aren’t awarded the deal, again, don’t worry about it. Find a new deal and restart the entire underwriting process from scratch. And if you are awarded the deal, then you’ll go through that PSA process.

Once you actually have that purchase and sales agreement signed, the next step is to move into that due diligence period. Now, the next series will be focused on due diligence. I know I said yesterday that I will do a series about debt beforehand, but I’m going to go ahead and – since you’re going to be securing the debt during that due diligence period, I’m just going to make the next series all about the process from contract to close, from your perspective. That includes performing due diligence on the property, that includes securing your debt, and that includes securing your equity from investors. That’ll probably be anywhere between four and eight part episode.

Until then, I recommend listening to part one of this series, about how to submit an offer on an apartment syndicated deal; I recommend listening to the other Syndication School series we have posted about the how-to’s of apartment syndication, as well as check out all of the free documents that we’ve posted so far. All of those can be found at

Thank you for listening, and I will talk to you next week.

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