ONLY looking for FEEDBACK from residential rental owners!

[Alanna Wojciechowski]

**ONLY looking for FEEDBACK here. Negative feedback is encouraged**

BACKGROUND INFO: I have an innovative investment strategy that gives folks a unique way to invest in commercial RE without having to move capital. This offering allows investors to contribute their property into a commercial RE fund through a tax deferred event, receiving fund units and immediate cash flow on the full equity contributed. 

MY QUESTIONS TO YALL:
What are the negatives you see through this process?
Why wouldn't you consider this option?
What 'holes' do you see? 
(Flip side) any good things you'd highlight? 

Timeline goes as follows:
1) Intake: Property owner completes intake form detailing property specifications
2) Assessment: management team completes market, sales, and property analysis
3) Net Equity: Property Value-Owner's Debt-Estimate of Closing Costs=Property Owner's Net equity
4) Contribution: Property owner contributes property into the fund. Property owner receives units equal to total dollar amount of net equity
5) Dividend: Property owner immediately begins to receive passive dividends and any tax benefits from the fund's diversified pool of assets

Obviously, we think this is a great idea and opportunity for folks to capitalize on appreciation, defer taxes from 1031 swaps or cap gains, continue to cash flow on their investment while handing over maintenance and operations, possibly absorb any unfavorable debt that's currently in the property, and make their investment more inheritable/transferable. 

The investors we've recently had success with was a guy who wanted to defer taxes from multiple 1031 swaps while forging owners operations and another who wanted to capitalize on build up equity and appreciation. 

Any feedback would be awesome. Thanks yall!

[Alanna Wojciechowski]

@Logan McKay Zylstra appreciate the feedback! All very valid points and some I'd like to be more clear about when I am explaining to those who are interested. The feedback is definitely helpful!

Most owners who are interested in this offering are looking to scale into a commercial offering without having to deal with maintenance or operations (also they don't want to be locked up 3-5 years like some syndications), have accrued taxes through multiple 1031 swaps, or those who are seeking estate/inheritance simplification.

Seasoned investors have no issues with 1031's but we've also gotten into conversations with a lot of folks who get caught in the 45 day time crunch and haven't planned enough to place their capital in a better investment than what they originally started with. Also, some just get tired of running away from a tax bill through the swap until you drop method. 

So, we wanted to make an offering that eased the pressure and allowed them to 'park' that net equity until they were ready to move it again - or they'd be satisfied enough to keep it in the fund (our goal). The fund is an evergreen fund, so its more liquid than a normal syndication type of deal. 

Lastly, and I'd love to hear your insight on this, to speak to the point you made about the "fair net equity" we've started to think how we could set up a true up into the contribution. A true up is a payment made post-closing to adjust for any difference between the two purchase prices.

The net equity wouldn't really be the question, it would be the market analysis and value that needs to be evaluated and agreed upon. The management team does our own market analysis in the property area, gets feedback from the owner, and speaks with local brokers. We 'negotiate' a bit on the market value as we don't want the owner to feel like they are being cheated out of any extra value they would be getting by taking the property to market. We aren't looking to make any money during this analysis, we just have to make sure our own expenses are covered when it comes to closing costs/titling/etc. The true up would come into play if we decided to 1031 or dispose of the property that was contributed, we'd add any extra capital to the investors units that was over the agreed upon market price after that disposition.  

Thanks again for that feedback and like I said, very helpful. A main point I get back is the comparison to taking the property to market - and I believe we have good solutions for that but just need to iron out making those solutions clear and concise. Also, knowing this isn't for everyone.