All Forum Posts by: Andrew Taylor

A buddy and I are talking about building a few tiny houses and using them as vacation rentals along the Texas coast. He's in a position to bankroll the project. I'm not able to contribute much financially, but I have the time and resources to design, source, and build the units. 

Our plan is to build a single unit first and then market the hell out of it. We'll use it as a rolling model home, visiting the local Lowe's, Home Depot, Cabela's, Bass Pro Shop, Gander Mountain, boat shows, etc. We're in big metropolitan areas (Houston, San Antonio) that get lots of RVers and vacation traffic and are within easy driving distance of the coast.

Our thought is that this rolling road show will help us both guage interest in the units as rentals, and perhaps drive interest in building custom units for folks who are interested in "going tiny" or might otherwise be looking to purchase an RV.

And, worst-case, if there's no interest in either of those things, either we sell the model and move on, or we keep it as a time-share RV unit for our families to use. 

My question is, in light of the fact that my partner has the money, but not the time or the skills, and I have the time and the skills, but not the money...what would be the best way to structure our deal so it's fair for both parties? My original thought was, "you pay for materials and the few labor items I can't do, I'll do all the labor, and at sale, you recoup what you spent and then we'll split whatever is left 50/50." Frankly I have no idea if that's fair to both of us. Thoughts? 

Folks, sorry I've been absent a while, but I see I need to clear something up.

I understand how a HELOC and cash-out refinances work. That's not my question. My question is (or rather, was), once I collateralize my personal home, when is it released as collateral? Turns out, that can be written into the loan docs of whatever I'm using the equity to purchase.

We're in a weird situation. We built a cabin on our land that was supposed to be my workshop, then were forced to move into it due to a job loss - but it's not our "main" home. (Well, it's our main home right now, but it won't be our main home forever. We hope.) So, if I collateralize my residence, then when it comes time to actually build our "main" home out front, I don't want the mortgage lender to say, "Whoa, you've already got a big outstanding loan on that property, so we can't make your construction loan."

But, as I said, I sort of answered my own question by bugging a local banker. If I use my residence as collateral, he can write into the loan doc that that collateral is released after X months of regular payments.

@Connor Maloney, @Scott McMahan, I wish I'd thought to check this thread before I did something stupid. I, too, was scammed by Kevin Harrison and Lazard Kisel. I fell for the "appraisal fee" and "due diligence" fee, but my Spidey sense went to 11 when he said if I used his personal title company business then I would "guarantee 100% appraisal funding" or something similar. I immediately replied that there was no way in hell that was going to happen, and he's since gone dark, both via text and email.

I'm going to go after him in small claims court to see if I can get my fees back, but I'm not hopeful. What's weird is that I had a family friend who is an officer of the court do a background check on the guy (Kisel) and nothing funky came up. The only odd thing she noted was that she couldn't find a driver's license number for him.

So I thought it might be interesting to post the results of this Marketplace ad here as time goes by.

To date, I've gotten the following contacts/offers:

• Presentation of terms for conventional financing that don't match the info in the original post (i.e. I'm not looking for a lender to finance the whole deal - I'm looking for a passive investor to help me close it.)
• Was forwarded an email by another BP member who'd previously been contacted by someone with a client looking to invest $500k-$1M in a small, commercial project. (This has been the most promising lead so far.)
• Contacted by a hard money lender and asked to visit his website to fill out an application (have not completed the app because the terms of my deal - listed clearly above - don't meet the requirements shown on their application page).
• Contacted by a 3rd-party referring me to another hard money lender's site and requesting that I use his name as a referral "or they might not respond." Have not filled that application either, for same reason above.
• I have one other active contact, but I don't think it was the result of this Marketplace posting. I think I clicked through to his website from another Marketplace ad and filled out the questionnaire about my project.

So far, most of what I've gotten appears to be lenders and/or mortgage brokers looking for applicants. I'm going to try to post an update here daily, both for informational purposes and to keep the post near the top of the thread list. Fingers crossed that I can get it front of the right pair of eyeballs and get my deal done before the seller moves on.

48-unit student housing complex in Texas. 100% occupied for upcoming school year (12-month leases). Leases guaranteed by university.

• Asking price $2.6M
• Purchase price $2.34M
• Funds pledged to-date $300k
• Gross income $398,546
• Total expenses $158,010
• NOI $240,536
• CAP 10.3%

I am looking for an additional partner (or partners) to put $300k into the deal so we can secure conventional financing with 25% down. Structure flexible:

• Debt financing (interest only, 10% simple for 5 years, return of original capital at refi/sale in year 5)
• Debt financing (6% @ 30 years w/ 5th-year balloon)
• Equity financing (12.5% buy-in gets 15% of net profits)
• Other?

I am actively seeking other sources for this funding, but the seller won't wait forever. If interested, please contact me at [email protected] or via PM here at BiggerPockets.

Thanks for the analysis.

The only flaw I see is that none of those numbers are pro forma. Those are the actual numbers.  Actual property taxes, actual insurance as quoted by my agent, actual management fees, 10% held back for repairs and maintenance. There are no capital expenditures required as the buildings are only about six years old. 

 Oh, and the rents are guaranteed by the University. They have signed an agreement to purchase 100% of the leases for the upcoming school year. 

Does that change your analysis any?

@Bryan Hancock, thanks for your input. Would you mind telling me how you came up with the 6 cap figure? When I analyze the deal I come up with something significantly different. I'm curious about what I'm missing (or doing wrong).

So I've got a line on a peach of a multifamily deal, and I'm looking for advice on how to structure a deal so it's attractive to investors. I've had a couple of investors tell me the terms I started out with are attractive and should draw interest, and I've had one guy basically call me batsh*t crazy and tell me I might as well be looking for Santa Claus.

Here's a rundown of the deal:

• Asking price $2.6M
• Gross Rents $345k
• Expenses $76k
• NOI $269k

I've tried a couple of things so far, with no luck:

• Local commercial lender, 80% LTV 3.5% @ 20 years, seller finance 20% @ 6% for 30 years with a 5th-year balloon. Seller couldn't carry that much of the debt.
• Seller's preferred lender, 90% LTV 5% @ 30 years, 10% cash down from local investor. Lender couldn't make loan because I don't have a track record in REI.
• Local commercial lender, 80% LTV 3.5% @ 20 years, 20% cash down via home equity loan on my personal residence + investor cash contribution. Lender wanted additional stated income and more guarantors. Investor went directly to seller behind my back. Seller shut him down.
• Advertised on BP for passive investment partner to put up 20% cash and serve as guarantor, in exchange for 25% of equity over 5 years plus return of 100% of investment at refinance/resale. Had one investor respond that I needed to bump the equity share to 50% over five years and also include 50% of equity at resale/refi, after initial investment was returned.
• At suggestion of another investor, advertised on BP for JV partner to put up 100% of purchase price in exchange for 50% of net profits, 100% return of investment at refi/resale, and 50% equity split at refi/resale.

That last one is how my current offering reads. Return projections look like this:

• Year 1 distribution $135k each (to investor & manager)
• Year 2 distribution $140k each
• Year 3 distribution $146k each
• Year 4 distribution $153k each
• Year 5 distribution $159k each
• Total cumulative distribution $733k each
• Estimated equity at refi/resale $690k each
• Total distributions $1.423M each

Again, I've had a couple of investors tell me those terms are attractive and should garner some interest...but I've also been told there's no way in hell, I don't bring anything to the table, I don't have the experience, etc.

So, my questions to the gallery are, A) do I have any chance of getting this deal done at all, and 2) if so, under what terms would it be attractive to potential investors? Should I let the current offer cook a little longer and see if I get any bites? Should I sweeten the deal a little? Or should I give up on it and move on to something a little easier to get done?

Somebody submits budget to lender (could be you, could be contractor - lender doesn't care). Some lenders will divvy up the budget and tell you when you can request a draw, and some lenders will provide a draw schedule that says when they'll pay for what (i.e. foundation draw is paid up-front, then draw #2 is paid after dry-in, draw #3 after mechanical roughs, etc.).

Good lenders will negotiate the draw schedule with you - they realize not everybody has enough funds in their account to buy the property and do a bunch of rehab work without getting a draw first.

Dave, these numbers are entirely made up, but I appreciate your working through the math with me. 

If / when we get a favorable response on our recent offer, I'll update with more realistic numbers for review, but they're more like $345k gross income, $94k expenses, and $184k debt service. I'm left with something like $47k.