All Forum Posts by: Allan C.

You should factor in time value of money and opportunity cost.  How many new developments can you execute in one year vs flips? Until you can scale, it's likely that you can execute flips quicker than new builds, thus you can turn around profits quicker to reinvest. 

Do some research on whether a single-member LLC (or LLC with spouse) will even be sufficient to protect you. Also do research on what's required to properly manage a LLC so the veil cannot be pierced.

why do this? You likely don't have the net worth, proper LLC management or proper separation of personal interests to make this an effective approach.

there numerous BP threads you can search to get more insights. 

tldr - keep under personal name and get a good umbrella plan. 

What type of returns  are you looking for? I think you're going to have a hard time finding MF properties that give you positive CF using a PM in most of Phoenix. 

Two things to consider: factoring in risk and opportunity cost. 

You've got the correct idea on factoring in risk of an uncertain future. Sellers view it the same and are trying to find someone naive enough to not account for it. Both sides also need to factor in opportunity cost. I've seen sellers be so fixated on a price that they give up closing a deal and wait months to get their desired price. The value of cash in hand today vs cash in hand tomorrow is significant and you should account for that for both sides of the transaction for any deal that you make. 

sellers going to do their best to sell their asset for max price. Be diligent about your analysis and maintain discipline. There's always another opportunity down the road. 

Has she even received a supplemental tax bill yet? 

you got all the right advice above so it's just a matter of time. Your friend needs to review what happened during her underwriting. Did she miss the tax reassessment? Not understand AB 1482? Other...  

this will likely be a good investment long term on IRR basis, but not realizing -5k/mo CF is very alarming. Btw, tell her to brace for the commercial renewal premiums when that comes around.

There's a separate thread on partnerships and the general sentiment is that majority of partnerships will fail. I think you know that but are just looking for assurance. As Jay noted, why don't you focus you energy on delegating tasks to employees. 

you may find a pwrtner who has similar motivations today, but it's almost guaranteed that your interests will misalign down the road. Instead of putting your whole venture at risk through a single partner, I suggest you build a team of employees and develop solid succession planning. There is no easy answer so you'll have to decide which path will give you the least regret.  

You both make good points, but like everything else the points are not absolute. Well, I fully align with Marcus that the largest value of REI is equity growth via debt paydown and appreciation. Debt paydown in my markets is 1-2x FCF and appreciation is 3-5x FCF.

I also agree with Joe in minimizing dead equity. However I favor refi as the means of equity stripping instead of selling. So many transaction inefficiencies with selling & buying... and I don't sell because I already have a stable asset that I know well. 

Just hire a 3rd party company that takes care of this for you - worth every penny. In one of my markets assessments are performed every 3 years, and the cost of 3rd party appeals will cost 30% of 1 year savings. 

@Lincoln Waite are you comparing market rents correctly? Do other rentals in the area cover utilities? If not then pass utility costs back to tenants. If so, you'll need to figure out why you're not making money - is it other operating inefficiencies or your debt terms?

don't get separate meters as that cost will be difficult to recover. Look up how to implement RUBS instead.