All Forum Posts by: Al Lev

It depends if you offer an apartment as a part of the compensation and that will add probably another 6-15K based on the area. However, I suspect these $24K are on top of the regular PM fees and hence will only cover the on-site person taking care of day-to-day maintenance (cleaning, garbage, first-point of contact). They do usually work multiple jobs even when expected to be on-site during work hours.

Hope this helps.

Alex

@Chris Keil I will not suggest you can't find LP by offering equity contribution for 50% split. The question is why would they do it? Decent MF syndication will offer 70%/30% split with 7-8% pref and established MHF (Mobile Home Funds) will also offer 50%/50% split after 8% pref. Ask yourself, what is in it for your LP relative to everything else he/she can invest in?

Please don't take this as negative, just current reality of the marketplace.

I can only think of one thing that may attract an investor in your case. You are buying a park at discount.

Good luck.

Alex

The rule of thumb is 50% expense ratio on a full cycle basis (10 Years +). This will including operating expenses and reserves. Usually, when I underwrite a building I count immediate capex as a part of the purchase price (this lowers cash on cash return). Once major items are taken care of, the normal expenses should run between 20% and 40% depending on the utilities, tenant and management quality.

Look into opportunities to reduce some identified expenses. While you are unlikely to reduce taxes, you may want to look into shopping insurance, implement rubs for water & sewer and negotiate vendor contract. Your PM will make a world of difference. Good luck!

You can find couple of courses on udemy.com (Search for Real Estate). They are rather comprehensive and relatively inexpensive although it will only work if you like learning online.

Here is the example: https://www.udemy.com/course/t...

If these units are part of the community, you are buying a package of condo's. I will assume they are titled individually and hence can be sold individually. The question is whether you can find a lender willing to finance this package. You may need to find a portfolio lender here and make sure you can partially release each unit so you can sell it.

I've seen these types of deals and sometimes they offer decent discount if you have cash and willing to hold for few years it may work. But make sure you value them accordingly based on the current rents and flexibility to raise them and/or sell the units.

Good luck.

There are some but it all depends on whether you like the deal itself and your 1031 timing. I've seen as low as $100K so if you see a deal, reach out to the sponsor and ask. I have seen deals offering 1031 exchanges on RealtyMogul platform. 

Good luck. 

Hi Jay,

It all depends on your risk profile. The pure "Pref investors" have higher payoff priority when property is sold and it matters if the property is not fetching full acquisition price on the sale (happens due to recessions). You can mix them to attain your desired risk tolerance as investing in both allows you to dial up/down the downside. You should consider the deal leverage as high leverage will likely negate any difference between pref and equity shares. (Both will get wiped out if the deal goes south)

Scott, your question is rather complex even on its face. There are 2 scenarios:

1. You sell the house and use 1031 exchange to buy another one. Whether your daughter rents it or not is irrelevant at that point. If you own the house at the time of your death, she will inherit it with the step-up basis and won't need to pay taxes (subject to the max exclusion) on the then current property value.

2. If you sell your property and don't want to do 1031 exchange. You will pay the capital gain taxes but remainder can be gifted to your daughter either directly or via a trust. (I would not go with that option)

3. You could gift the property today at the current market value (you will need to file a tax form to make this tax free) and she can sell it without any tax since her basis is the current MV or she can do 1031 exchange.

What is unclear from your question is whether you want your child to have the fund now or later and that determines the structuring of the transaction.

Hope this helps.

Alex

There are three key areas:

1. Can you train your tenants to self-manage the property? If something breaks can they call the professional to come and fix it. This will depend on the qualify of your tenants. 

2. Can you build a network (usually 3 levels deep) of various professionals? Most of the landlords who self-managed have a trusted handyman available to take care of most of the stuff and manage other contractors.

3. What is your process to find, vet and select new tenants? Are you comfortable giving them self-guided tour or do you need someone to show them the unit? What is your process to resolve conflicts and possibly evict tenant?

IMHO, #3 is the key. Landlording is a people's business so all depends who are your customers.

Hope this helps.

Alex

Excellent discussion and clearly highlights various risks and issues with being an LP. I have been investing for the last 4 years and so far with minor exceptions only minor pain points. Here are my few cents:

1. Sponsor - vet them as you would do any partner. Check if they have skin in the game. Check their background if they are responsible for operations and maintenance.

2. Deals - do some basic research on the area and economy, schools, jobs growth, etc. This would be no different than if buying a property by yourself. The offering will give you basic deals economics so ask for stress scenario modelling. Most sponsors would do them anyway. Most critically understand the deal breakeven point, when the collected rent will only basic expense leaving nothing for the LP. This is usually in the 60-70% occupancy.

3. Terms - read the PPM, I know it is rather long and painful for spend 3 hours but after a while you will know what to look for. You have to understand the compensation structure and payment priority. You have to know what happens in the worst case scenario and be prepared for it.

4. Risk management : The art of successful investing is not to get home runs but rather not to get wiped out. Allocate capital you can afford to lose if the deal goes south. Spread your allocation across geography, sponsors and type of properties. (Although, I am not sure if you want to invest in too many of different types unless you fully versed in dynamics for each)

5. Start small and observe. If you qualify for a syndication, you should have resources you can risk. Just make sure your gain trumps your risk.