All Forum Posts by: Adam Martin

@Michael Ward Thank you for the detail in your example. I think that structure fits our situation really well. We plan on working with a CPA and making sure everything is properly handled.

@Oleg Shalumov @Charles Soper      So given the example attached, these are not the actually numbers just smaller rounded numbers to make it somewhat easier to follow. 

If I decided to not loan him the money but instead just utilize his sweaty equity and PM. I would pay for any tangible maintenance items (estimated at 10% of the gross rent) and then his $100 a month PM fee out of the monthly cash flow (pre-mortgage). Then split the remaining $99 free cash flow (post-mortgage) 50/50? Then if we decided to sell in 10 years we would split all profits in excesses of the 300k purchase price or all profits minus my 15% down? He wouldn't get the equity from my 15% down-payment but he would be entitled to the equity that was generated from the mortgage pay, correct?

These are just made up number for the example.

@Charles Soper - I might not be totally following your example. Are you suggesting he would get 50% of the cash flow and profits at the sale of the property only after his PM services equal what my personal loan to him would have been?

@David Smith With me having to cover 100% of the 15% down those are the financing terms in which we can afford.

@Greg Scully I included 10% of the rent as a maintenance cost in addition to the PM fees in the numbers. It is an older building but we felt that 10% of the gross should cover needed repairs.

@David de Luna Simmons Bank in Arkansas

New member here with some questions!

My brother and I are looking into buying a 6plex under a LLC with a 5 year balloon mortgage amortized over 20 years. The loan will require 15% down with 85% financed. I will be providing 100% of the down payment, so I would be loaning him 50% of the down payment in the form of a personal loan. The idea behind loaning my brother the money would be to reduce capital risk and create a foundation for a partnership to start buying more properties.

We are currently planning on doing a 50/50 partnership, with the personal loan to my brother being outside of the partnership to be paid back over 5 year with interest. My brother is a realtor and does property management. The 6plex would be purchased in AR, where my brother lives, and he would be helping with the property management and maintenance. Our current plan is to pay him a set management rate but I’m getting confused on how to divide and bill that cost as he would also be a 50% owner in the property.

Questions/Thoughts:

1: We would do a 50/50 spilt all the tangibles costs but does he pay 50% of his own management fee?

2: Does anyone have experience or advice for creating a LLC with a partnership?

3: I’m currently calculation a Year 1 ~7% cash on cash and ~20% ROE (Cash and Equity) at a 90% occupancy with all the taxes and maintenance included. The numbers get better with the rents raised to market value but as to not lose any tenants we would wait until each lease expires before attempting to raising rent. Thoughts or ideas on those numbers!?

I currently own a SFH rental property in AR which my brother help management but we are new to financing and maintaining a multi-family property as a partnership. Any insight/learnings regarding our current plan or a similar multi-investor scenario would be greatly appreciated.