All Forum Posts by: Marc C.

Alright, I understand from the other posters that it's likely NOT in New Orleans. That's my fault: I just assumed from your personal location that we were talking about a NOLA property. I apologize for making that assumption. 

That said, give us the details and we'll help you evaluate it no matter where it is. 

All very well said. The only issue is if you buy now and improve now, but in 2020 we're in a recession, right when you sort of "promised" investors you were going to refi them back out their investments. The real estate lending spigot can be quick to turn off or become unworkable when the market first changes. So one must be very careful in not seeming to promise investors anything of the sort. You don't want to say, "We'll refinance in year 3 and get you back at least 50% of your initial investment back." You can say, "Our goal is to refinance the property in 3-5 years, subject to market conditions and the availability of funds." And you must disclose this as a key risk disclosure in your offering documents: "Sponsor may be unable to obtain suitable new financing at any point in the future, so a lump-sum return of investor's initial capital may not be possible until the property is sold." Elsewhere, you could say, "Return of our investors' initial capital in as little time as possible will always be a goal of our company, but it is in no way guaranteed." 

I've declined to pursue it due to the risk involved with putting $250K of improvements into a property I don't own. 

There are now a couple of crowdfunding sites that don't require you to be an accredited investor, but they limit your max. investment to 10% of your income or assets. https://smallchange.com/ and https://realtyreturns.com/ are the first two. 

If you find someone doing an offering under Reg. D., Rule 506b, up to 35 non-accredited (but sophisticated) investors are allowed, along with an unlimited number of accrediteds. 

I'm seeing an 11% cap rate if I use 5% vacancy and 45% expenses. Again, seems really cheap for NOLA. My main question: WHY is it it so cheap? What's the secret here? 

I note that the HUD fair market rents for NOLA are

for studio, 1BR and 2BR, respectively. (Those INCLUDE utilities.) So there does appear to be some upside if you raise your rents and cater to Section 8 tenants. Call the local Housing Authority and get a copy of their utility allowance so you know how much to deduct from the above for utilities to compute what kind of room you have to raise rents (without utils.) 

Seems really inexpensive for the NOLA market, which I follow. Especially for something listed on the MLS. What neighborhood/part of town are we talking? If it's something in the far east, then I understand the cheap price. How far from a streetcar line?

Who manages it? 

What type of Realtor has it listed...residential or apartment/commercial? 

I don't much care what they say the expenses are, as yours will almost always be higher. If you apply a realistic expense ratio of 45% of total asking rents (rent roll), how does that affect your Cash on Cash return? 

What is the upside: Can you raise rents? Improve the property and then raise rents? Better management? 

So many questions, I know, but we can't help you without more details. 

Depends on your area. Typical fee here for basic 506c offering is about $10,000. HOWEVER, that includes all documents, including the PPM. There are companies, like www.regdresources.com, that will prepare everything but the operating agreement for $5500, and the docs look a lot more pleasing than those prepared by attorneys. There are samples on their site. They go into much greater detail than a typical PPM, so it meets the tougher disclosure requirements of Form 1A. So it can be used for other offering types, like an intrastate public offering. 

Personally, I have found an Operating Agreement and Subscription Agreement I like from viewing dozens of them on crowdfunding sites like www.crowdstreet.com. I am taking that to my attorney and saying, "Make this fit my situation and state law." I expect to get out for way under $3000 for his part, plus the $5500 to Reg D. Resources.

No, the D&B registration just gets you tons of credit offers, I've found. Spam and junk mail, to be exact! 

Non-recourse loans for a new business are pretty much like unicorns.

Why are you so worried about increasing your basis? Refi'ing every 5 years provides the best return percentage in most cases. 

There is no "best market for value-add." EVERY market has value add. You just have to find them. In addition, not sure that, if we knew of a "secret" market that is performing well for us, we'd be posting it here on BP. 

You have to do homework. Look at population growth trends, job trends, income trends, etc. Use city-data.com to start, and census.gov. Download the reports from as many brokers as you can: Berkadia, ALN are two free ones. CBRE will send you one if you get on their list. That will help you understand local cap rates and prices.