All Forum Posts by: Anders Jax

 You know that happens in real estate home sales right? Someone knows an agent and uses them as the buyer agent and so they split the fee 50/50 with the sellers agent instead of sellers agent getting 100% of the fee?

Anyway, they are LOOKING for investors, and investors dont know they exist. So the value I am adding is finding them potentially tens of millions in funding. Thats a lotta value if you ask me. 

They wouldnt. But they might raise a fund, or if they raise 10 projects from an investor, I would be open to reducing my fee as they hit certain amounts of funds raised per investor.

 Thanks Chris. 

All the fees would be rolled in to the deal, and Im proposing doing that as LP dollars. Do you think its fair to ask treatment as an LP? The way I see it, its cash I’d otherwise be taking, which I am investing in the deal, so that’s more analogous to LP contribution than GP. 

Im expecting the deals to net roughly 60/40 in favor of the LP. It will also be a sticking point Im sure, as they want to structure it roughly 8% pref 80/20 until 11%return, 60/40 until 14% and 40/60 thereafter, which seems unusually generous to GP.

 What about the duration of time Chris? After the first deal are you allowed to work with those investors without paying the finders fee? Or do you continue to pay them for subsequent deals w those investors?

Thanks for the replies.

I am working with someone who is a licensed broker dealer so thats not an issue.

What I am interested in is say I make an introduction including pitchdeck and analysis that nets a first investment of $200k, then over the next year $2m, the next year another $4m.

What fee structure would be fair to charge, and what duration? I.e. I think I should get paid for a certain amount of time after the introduction, so that they dont do a tiny deal, then huge ones and I get paid just off the tiny one.

I was thinking a 2 year period of full fees and then gradually reduce down to zero after another 2 years, so that I get paid off the investors I introduce for a meaningful period of time

What kind of percent would be fair to command for bringing investors to the table for deals?

4% first million, 3% next million, 2% next million, 1% thereafter?

What duration would you hold those percentages for (to avoid getting backdoored after a single small deal)? 2 years? 10? 

Nobody is going to intro a heavy investor and have them put $100k on one deal, you get paid, then do a $10m deal a month later and get nothing.

Im in talks with a GP to buy a hotel. There are some sticking points.

They want a contract for 13% to handle sales and marketing for a hotel. Which they want to be the manager of until they sell the property. So the LP cant fire them from being property manager. I think this is way too much to ask.

They also want to structure the deal to where they will get 45-50% of the total profits, which seems way too much.

As well, in most of your deals, does it require both LP and GP consent to sell the property, or does LP have total control over that?

So if I get let's say 20 properties, and I'm managing them under some online software system, doing the accounting through quickbooks, should I keep separate bank accounts for each property? Then, is there an automated way that I can pay the LP their share based on the hurdles, catch-up needed to get to their IRR, etc? Just thinking through tracking what amount needs to be paid out and to whom is daunting. How do I make this an efficient and automated process?

I may be rolling some money into an investment group for a hotel deal of about 100 room scale or less, but I'm pretty reluctant right now.  These airbnb properties my friend has up and running are returning 16-20% for LPs and +30% overall ROE.  The margins on the properties are huge.

Hotel margins look to be about 5%, levered returns of 15%, so probably 9-10% LP IRRs. With a lot of risk. Margins that small... if your vacancy rates are a bit off... management isn't performing right, a lawsuit or two, and you're in the red and getting a fat 0.

Am I wrong on that? This would be the GP's first hotel development and would be managing the project as well. I think at a minimum they not manage the first project. Operational risk is too great. Neither have worked hotel properties, just been residential STR owner and operators... which is way less complex than hotel management.

Anyone have some thoughts for me? Are there higher IRRs to be had?  Would you trust your $ with a first-time operator with only residential experience?

Thanks.

Hey John, 

Just stopped this thread now.  

So here's my situation that I'd love some of your high-level thoughts on...

I've got an acquiantance who I'm helping to raise some money for his properties, who has done really well buying short-term renting residential properties... think Airbnb model.  They charge 25% management fees on the properties, because they manage them as well.  

Now they want to get into the hotel business, because it's much more scalable than buying and renovating $500k properties over and over.  

But here's my reservations:

A. They want to charge a 20% management fee for operations and marketing/sales management of the hotels.  In my research 3.5% is the average management fee, and 8% is spent on marketing/sales... and I assume within that 8% is ad buys. (I'm not sure yet whether they would foot the ad buy bills or charge them to the hotel).  So that's 11% on average.  Would you ever pay a management company 20% for a hotel?? What would they need to be doing to earn that?

B.  Just because they have successfully purchased, renovated, refurnished and rented residential properties, what gives them the capabilities of running a hotel?  They feel that those skill sets are the same... but I think having full-time cleaning, full-time front desk, perhaps loyalty programs, renting out space to a restaurant/bar operator, seems like it could be similar but not a 1-for-1 similarity to the experience of running a short-term rental property.  What do you think? Would operations risk be a concern of yours?  I proposed to them taking on an  operating partner or consultant, but they were reluctant to do so.

C. They have made a killing being the anti-hotel.  Catering to large group travel in luxurious 3-6 bedroom homes.  Unless they want to create a hotel that's more like 3-5 bedroom luxury suites to cater to the same clientele... what advantage are they creating?  They want to be in hotels to have less regulation risk and better exit multiples... but hotels aren't a new proposition, and they haven't done them before... so if they aren't bringing a new approach to hotels... what's the sell right?

D. What kind of returns can an LP get on a well-run hotel of say 50 rooms, in a hot tourist market?  Are we talking 10-12% levered IRRs, or closer to 20%?

I'd love for them to keep doing what they've been doing or at least build an all-suites hotel that resembles their short-term rental homes... because simply pitching as a first-time hotel operator isn't going to be easy.