How does one get started in the syndication business? Author and CEO of Christian Financial, Inc. Angelo Christian shares the secret to how beginners in syndication can get started and stand out from their competition. Stressing the importance of customer-centeredness, Angelo explains why every business model should provide a significant amount of value to their clients. He tells us how he’s giving back to the community and the story behind starting up Angelo Christian Foundation.
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How To Get Started And Stand Out In Syndication with Angelo Christian
Our guest on this episode is Angelo Christian. Thanks for being on the show, Angelo.
Thank you so much for having me.
I appreciate your time, giving your expertise on the show and providing value. Angelo is the CEO of Christian Financial. It’s a holdings company. They did over $102 million in sales. He’s a published author. He’s a coach. He also has a real estate university. Angelo, provide the audience a little more about who you are and what your focus is right now.
We’re a nationwide holdings company. We specialize in commercial and residential banking. Let’s say, it’s a veteran that wants to get a VA loan to buy a home or a first-time Millennial buyer and they need to get a mortgage. Let’s say that it’s a big-time investor that wants to take down a 300-apartment unit complex or somebody that owns a business that wants to refinance to cash out, we do that all over the country for everybody. Whether they have a platinum credit, whether it’s hard money or subprime, we’re there as their go-to source for funding.
We are an outside-the-box lender. We try to make deals work and try to fund. We’ve been known and claimed even in Bloomberg, CNN, Good Morning America and things like that for helping people to get the funding that most banks don’t do. Most banks want 20% or 30% down. You have to have 800 credit and never made one mistake in your life. We’re there to help people in the middle market. The guy that can pay his mortgage, pays his rent but maybe he doesn’t have stellar credit. Maybe he doesn’t have 20% or 30% down or somebody that maybe they had some challenges in the past with a bankruptcy. We’re there to help them to get them the funding they need and deserve so they can have a better life and take their life to the next level. Buying that house, refinancing that business, paying off that debt is a huge part of someone’s life and helping them accomplish the next level. We also invest in multiunit housing. It’s a whole other sector where we personally invest our company’s holdings into apartment complexes. We also have a real estate university. Our core business is mortgage lending and multi-unit housing investments.
On the lending side, how much are you all working with syndicators or people who are buying large multifamily or commercial properties?
Right now it’s about 20% of our volume. We want it to be more. Our focus has been residential. We’ve been pushing on the commercial and the industrial as an aggregator. We’re starting to see a lot more of that too. We love that opportunity. We also are a big reverse mortgage lender. I don’t know if you know that much about the reverse mortgage. We love that program helping senior citizens too.
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I’d like to focus on the relationship between you and the syndicator a little bit or how they come to you for funding. What that looks like and what you’re looking for. I know that a lot of the readers are getting started in the syndication business. How should they be prepared? Whether it’s the underwriting that they’ve already done or how they present an opportunity to you all so that they know funding is more likely to happen or some things that would kill the deal.
Let’s say that’s it’s a 100-unit apartment complex, for example. It’s $40 million. A lot of things that we’re going to be looking at is if it is syndication, the other banks that are already involved. Typically, we want to see that there’s a term sheet or a loan commitment from another bank. Normally, we want to see equity in a deal of 25%. It can be from investment funds or assets on hand or pledged assets. Typically, we want to see at least 680 credit if there’s a personal guarantor. We can do the whole thing in the business, in an LLC or an S corp or a C corp.
If the business has strong financials, we won’t need any type of personal guarantee. We want a debt service coverage of at least one-to-one or one-to-quarter. Our main concern if we’re doing multi-unit housing is how that asset has been performing. Obviously, we want the rent rolls. We want to take a look at the leases when they renew, the actual appraisal and the location are very important. We don’t want to do anything that’s too rural. We want to be in a major metropolitan area. The asset is the most important thing for us. We can do interest only terms as well. We love multi-unit houses. It’s one of our favorite things. What I would say to a lot of investors out there is in the beginning, if you’re starting out, you’ve got to start a little bit smaller, leg your way into it and grow. They can create an S corp or a limited partnership with a group and pull your funding together if you’re trying to take down larger units. Those are typically the main things that we’re looking for to underwrite.
That’s some good points there. To dive a little bit deeper, you say term sheet. What is that?
That’s the loan commitment that we’re giving to the client. When you buy a house, you want a pre-approval letter. The term sheet is what we’re giving to the investor to show that’s our commitment to the land. That has the terms as far as the interest rate, the points, the loan-to-value ratio and the conditions for the closing.
As far as interests, points and some things like that, is there any guidelines you could talk about as far as what we should expect at the moment as far as interest rates on $40 million, 100-unit property like you are talking about?
I would say it depends on the strength of the borrower. If he’s a seasoned pro, he can get Fannie Mae pricing and get interest rates in the fives. If it’s a guy that has shaky credit but he’s got good assets, you might see something around seven. Even if it’s a hard money deal, it could be 10%, 12%. It depends on the situation with the applicant or the business or the company or the borrowers. If it’s all solid financials, you’re looking at rates in the high fours, low fives. Points are typically about two points for the A-paper of the prime stuff. If it’s a hard money deal, it could be four or five points on it.
In many years of being in this business and you’ve seen lots of people get started that’s never done syndication before or never done a large deal. Is there anybody or a way that they stood out above the rest where you’re like, “I know this person is going somewhere. This is somebody we definitely want to work with to provide a loan for.” Some way they stood out when they came to you or the way they presented the deal to you or the way they were prepared or anything like that?
Typically, what I see with larger investors, they normally start it off smaller. They start it off with five units or ten units. They build a portfolio and their track record with us. I can’t think of anyone right now that started buying 100-unit apartment complexes from the onset. Normally, they start with a house. They say, “Let me see if I can do a duplex. Let me see it from there if I can do a five unit.” From there, they learn the business. They start to get cashflow. They scale. They would get investors. They make a partnership. How they present themselves, their financials are very well in order. Their rent-rolls are very well in order. When they go to purchase a deal, they’ve done their homework. They own the location, the equity, the debt service, the net operating income and how they think the asset’s going to perform. They present a full package to us so we can underwrite the file quickly and quickly give them a term sheet. They’re very organized. People that are sloppy, they’re not together and they want to apply for a loan, the underwriters are not going to take them seriously.
Presenting a full package, they’ve done as much due diligence as they can up to that point pretty much.
You have to. For example, Orlando is a very hot market right now for multi-unit housing, so as Jacksonville, Port St. Lucie in Florida and Athens in Georgia. Houston, Texas is hot. Austin is a hot market, so as Charlotte, North Carolina. These investors are doing their homework and making sure that the property has the equity spread they’re looking for. It’s performing. Normally, I see a lot of these investors, what they’re doing is they’re trying to make their complex stand out by doing things differently, maybe adding more renovations, interesting things like state-of-the-art technology to the apartment. They’re adding fences around the units or different things with service that they’re going to offer to the consumer so they can raise the rents and increase the value of the property. Basically, set new comps for the market. That’s what I see a lot of the good investors are doing.
They’re finding ways to add value that’s out of the box a little bit.
One of them that I know of, for example, he will allow pets but he charges an extra deposit. He built fences for the dogs or the cats for each one of the units. He’s attracting a certain clientele that has pets. He’s able to raise those rents by 9% because he was able to do that. It introduces a niche because a lot of apartments don’t like pets or dogs or they charge high premiums or fees to be able to have a pet. He’s basically labeled himself at one of the complexes as the pet niche apartment.
As far as on the lending side, as far as underwriting, how do you like to see that presented to you? Are there certain ways you like to see that presented?
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As I was saying earlier, 80% of our business is residential. The 20% right now is commercial and syndications. Typically, if we’re talking about a residential deal or even a commercial, they have to have their last two years of financials. They need to have their pro forma showing their projections if it’s a business or let’s say a rental income-producing the property, pro forma for the next year. They need to have their rent-rolls in place, all the rent-rolls that they have, the copy of their credit reports, a tri-merge credit report, their loan application or 1003 that are completely filled out. They have to provide if they’re a wage earner, their pay stubs, if they’re self-employed, their bank statements. A copy of their bank statements for the last two months or where the funds for the down payment are going to be coming from. An executive summary summarizing what their goal is, what their intent is, where they are trying to do. We want that all zipped up in a folder and all in PDF is preferred, either hand delivered or emailed or Dropboxed to us. We’ll be able to underwrite that loan. We can review that loan in as fast as 72 hours for a decision, which is pretty good.
I would imagine if we have that package already put together like you laid out there, it’s going to make it a lot faster.
If somebody sends us one page at a time, it’s not going to happen in 72 hours.
As far as on your multi-family investing side, what opportunities are your all looking for or maybe your buying criteria?
One of the things that we do with the company for getting extra cashflow is investing in multi-unit housing. We look for prime locations. We think Texas, Houston is a very hot market. I mentioned Orlando. These are areas that we’re personally investing in. Kissimmee, that’s outside of a Disneyworld. We love Georgia. We stay on the southeast side like Tennessee. We also have Kentucky, Virginia, as far as north as we’ll go is going to be Virginia. I’m looking for properties that have at least a margin of safety, of equity, of about 20%, where we can get on the discount. Let’s say that they’re asking $5 million for the unit. We think it’s worth about $6 million. We have some safety in there to go and purchase it. We’re looking at the study and the demographics, what we think the long-term prospects are for the rental income to keep occurring. We’re looking for a return ideally of about 15% or higher or can we change something to this dynamic of this unit to make it more interesting to raise the rents to get the type of return. Those are our main criteria. We try to stay away from very rural areas, the populations under 100,000 people. We don’t want to get stuck in something that if something goes sour that we can’t get out of it.
You said 100,000 people or less. Is there a sweet spot as far as with 500,000 people and you want this much growth or is it pretty common?
We do the research. We love Colorado Springs right now in Colorado. We have to see what the growth is. What’s happening, people to influx with the people moving in, how the wages are doing? From the economic standpoint, the jobs, the job market and what’s happening with the property values. For example, San Diego is beautiful but you can’t buy anything over there that’s affordable and the net operating income is so low from a return standpoint. The time to get into there was years ago. We’re looking for the next years, where do we want to be? Some of these states that I mentioned is where we see long-term opportunities.
Houston, for example, has one of the best medical centers in the country. They have oil and gas. We have the port here that’s opening up. The governments in Texas are trying to create Houston to be another conference center like Orlando and Vegas. You think about all that and the job market is very strong over here. This would be a good long-term area to buy an apartment. That’s what we do. We bought apartments here in Houston. Austin, Texas is a little oversaturated right now. The time to get into Austin was years ago. We’re looking for the trend and seeing what’s happening.
What’s been the hardest part of the syndication business specifically for you?
What we see is normally putting the deal together and getting everyone to agree, the other banks that could be involved and structuring the deal. How much equity they want, what they’re going to be holding for collateral, who’s getting what piece of the pie? Getting the seller and buyer to agree and then closing on time, a lot of stuff can fall apart during the process. You’d be surprised. You see all these big deals that close, but for every one deal that closes, there are probably 100 that fell apart. It’s in the underwriting that something falls apart.
What are some maybe key things or one or two things where you see someone made a mistake in the underwriting that made a deal fall apart?
Do you mean the underwriter is making a mistake or the client?
It’s the client.
Typically with them, it could be where we see documenting the funds for closing. For this $40 million deal that they need to put $10 million down, when we gave him the term sheet, they had $6 million on hand. They were going to be relying on investors to get the other $4 million. They can’t get the cash. If you can’t get the money, then we don’t have a loan. What I always tell people is and it doesn’t matter what you’re buying, you need to make sure that you have the money in your account. It’s better to wait before you go put the offer and put up earnest money because you could risk losing your earnest money and your deal fall apart if you don’t have access to the funds. Funds at closing are critical because that’s where a lot of deals fall apart. The other thing is that sometimes the appraisal doesn’t appraise out. The property doesn’t appraise. The seller was asking too much. We had one that was the $13 million on Jacksonville. The appraisal came in at $9 million. It was $4 million short. The deal falls apart. You’ve got to be careful not to overpay.
[bctt tweet=”The saddest thing in life is getting good at the wrong thing.” username=””]
Can you share why the appraisal was so much lower than what that syndicator or that individual expected?
It was the comps in the market. He was trying to get $150,000 a door for the apartment complex and all the comps in the area were only supporting about $100,000 per unit. It was overpriced. He thought that he could get away with it because he did a huge remodel to it. The remodel didn’t justify the valuation. That was the main reason for that. We have to be careful. Those are the two main things I would say if I was going to be getting to the apartment investing.
Is there a way that you suggest for syndicators to improve their business in some way that you say that stands out to you? Maybe a way that you’ve improved your business?
You’ve got to know your numbers, keep an eye on the financials, keep an eye on your costs and keep your costs down. I have an adage that I always say, “Expenses are like fingernails, you always have to keep trimming them.” Watch the costs very carefully. From a recruiting standpoint, you hire very good people. Hire the best people and have great training. You should add a significant amount of value to your client and be customer-obsessed. The main things that have helped me with building my business are these four things. Anyone that’s out there who’s trying to build a business, it doesn’t matter if it’s syndication, real estate or whatever, you have to have great people. You have to be customer-centric. You have to add value. You have to make a profit. If you’re not making a profit, then you can’t be in business unless you have investors like Jeff Bezos that will let you run for 25 years and not have returns. I wish I had investors like that.
What would you say is the number one thing that’s contributed to your success?
I would say hunger and hard work, work your butt off. You have to be very hungry for success. I want to add a caveat to that. One of my mentors told me that the saddest thing in life is getting good at the wrong thing. You don’t want to be in a tailspin and be hard working on the wrong things. You have to make sure that you’re giving yourself at least on a daily or weekly basis for analysis to make sure that your actions are in alignment with the vision, with the purpose. If they’re not, you have to keep tuning and adjusting until you get to the vision.
The saddest thing in life is getting good at the wrong thing. It’s a waste of time.
You can be working hard all day but if it’s not getting anywhere, you’re not effective. What does it matter?
The last question is how do you like to give back?
We have a foundation that I’ve started, Angelo Christian Foundation. I grew up poor, broke and homeless on the city of Houston. Angelo Christian Foundation is leaving no child left behind. We’re one of the biggest sponsors of the Wounded Warrior Project, that’s disabled veterans. Susan G. Komen Breast Cancer Foundation, my mother passed away from breast cancer so we’re a big advocate and donator of that. Angelo Christian Foundation is helping children. We give them the financial, the spiritual, the mentorship so they can get to the next level of their life with education, providing funding for school books and whatever they need to get to the next level.
I appreciate you sharing that and giving back the way that you do. Angelo, it’s been a pleasure to have you on the show and to share your expertise. Tell the audience how they can learn more about you and get in touch with you.
If you need help with any funding, commercial, residential, you can call my office directly at (832) 431-6331. Check us out on YouTube, Angelo Christian Mortgage or Instagram or you can also check us out on my website, OfficialAngeloChristian.com. I love to help with any of your real estate goals, apartment, buying a home or whatever you need, call Angelo Christian.
I hope the audience will call Angelo Christian. I hope they’ll also go to Life Bridge Capital and connect with me. I love to talk to you. Also go to the Facebook Group, The Real Estate Syndication Show, where we can all learn and grow our businesses together and learn from experts like Angelo.
Thank you very much.
Thank you, Angelo.
- Angelo Christian
- Christian Financial
- Angelo Christian Foundation
- Wounded Warrior Project
- Susan G. Komen Breast Cancer Foundation
- Angelo Christian Mortgage – YouTube Channel
- Instagram – Official Angelo Christian
- The Real Estate Syndication Show – Facebook Group
About Angelo Christian
An investor and entrepreneur in the United States. He is the Chairman and CEO of Christian Financial a Diversified Investment Holdings Company. He resides in Houston, Texas with his loving family, happily married and proud father of three aspiring children.
He has been featured in Bloomberg, CNN, Good Morning America, Great Day Houston, Houston Chronicle, Business Insider. Angelo has helped tens of thousands of people transform with his influential coaching, Real Estate University, wealth management, and mortgage banking.