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Updated over 7 years ago on . Most recent reply

User Stats

184
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223
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James Kojo
  • Rental Property Investor
  • Scottsdale, AZ
223
Votes |
184
Posts

Delayed Syndication for MFR takedown?

James Kojo
  • Rental Property Investor
  • Scottsdale, AZ
Posted

Is it possible to structure a personal purchase of a commercial MFR property with the intention of selling of pieces of the deal after the deal has closed?

Why I ask: I buy properties for my personal portfolio (I'm not a syndicator, yet.) Sometimes I get shown deals that are just a little outside of my strike-zone. If I check the seat-cushions and the change jar, I'd have just enough to close the deal, do the capex, and have 3-6 months of operating reserves. But then I'd have a big chunk of my net-worth tied up in a single deal, which I don't want for the long-term.

So, my thinking is, I would spend my initial time and resources finding, funding and closing good deals with my own money and financing, then I'd eventually sell half of the ownership to friends, family and colleagues after I closed the deal. Maybe I could even structure the sale to account for risk tolerance. So my early-adopter, start-upy friends could get in early right after I close, and maybe my retired mother comes in after stabilization.

Does it work, and if i have that exit strategy in mind, should I do anything before-hand? Obviously, I'd have to have an LLC take on the initial financing. Anything else?

Thanks for your thoughts!

James

Most Popular Reply

User Stats

93
Posts
91
Votes
Yousif Abudra
  • Real Estate Investor / Syndicator
  • San Ramon, CA
91
Votes |
93
Posts
Yousif Abudra
  • Real Estate Investor / Syndicator
  • San Ramon, CA
Replied

@James Kojo The short answer is yes.  The longer answer is that you will have to address  issues of valuation and due-on-sale clauses in your loan.  

Let's say you acquire using cash. After Capex and stabilization, you now have a property worth more than what you put into it. So you can sell ownership units "at cost" which is what unsophisticated investors will likely expect, or you can sell them at an estimated (or appraised) fair market value, which both sides will likely want to haggle over. But it can be done.

Let'a say you utilize debt to acquire the property.  You'll face the same issue above, but with the additional pleasure of having to navigate potential due-on-sale clauses in the loan.  Which means if there is a transfer of ownership, the lender can call the loan due at that time.  So you will have to be aware of any clauses in your loan documents.

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