All Forum Posts by: Anthony Casa

Not looking for anything fancy/too upscale. Just a market rate build out of a traditional single family home. 

Does anyone have experience developing prefab/modular homes in the Bay Area and have an estimate on what it would cost to build a ~1,200 sft home? 

I want to begin acquiring larger deals then I have in the past by bringing on syndication partners. One thing I foresee as a potential issue as I move into larger deals is liquidity and net worth requirements that lenders expect borrowers to have. 

How do GPs/Sponsors typically get around these requirements? Also, do GPs typically serve as guarantors all of their investments? 

Thank you @Chistian

 Just for added context - I will be the managing member and also contributing ~80% of the equity. The other party will be a passive minority investor. We will be acquiring one property and I will be managing almost all aspects of the project including property management. Profits/distributions will be distributed pro rata with our ownership share less some fees being paid to me for finding the deal, managing the property, etc. (e.g. acq fee, incentive promote, AM fee). 

So I take it you believe a simple LLC between us with an operating agreement is sufficient?

Hi All,

I am forming a partnership with an 1 other investor to acquire a property. I'm having trouble determining the best structure for the partnership and if I should be forming a LLC, a Joint Venture or both.

Is the simplest/best way to do this is to just have the an LLC acquire & hold the property and then have ownership and responsibilities defined in the LLC management agreement? Or should a JV be formed above the LLC that defines rolls, profits, fees, etc.? If a LLC has the advantage of limiting liability that is not provided by a JV, when/where would it be advantageous to use a JV?

I tied up an industrial deal and plan to bring in a minority partner for <20%. The prospective equity partner is a friend of mine that has been interested in doing RE deals with me for sometime, and my plan is to use this as dry run for future larger syndications with multiple outside partners. 

In order to avoid needing to create an SEC registered vehicle, I'm structuring this as a Joint Venture, which to my understanding does not need to be registered if the equity partners are not completely passive (and only a limited # of partners). My question is that - if in the JV agreement, I allocate voting rights by ownership share (~80/20 voting rights), would this in effect make the second partner "passive" and thereby require a SEC filing? Lastly, what are some minimal control rights offered to minority partners that would allow me to avoid a securities filing?

In reality, even if I have share of the voting rights, he isn't completely passive (regularly discuss progress, solicit feedback, etc.) 

Thank you!

From a simple nominal cash flow perspective, if you refi and acquire a new property that cash flows more than the difference between your new debt service payment and your prior debt service payment (~$200+ per month), refinancing would be accretive to your monthly cash flow, so I would recommend it if overall cashflow is your goal (albeit more risk). 

Hello,

I’m considering acquiring a ~11k SF industrial building which was formally leased by a car detailer but could serve various uses (storage/warehouse, manufacturing, etc.).

The property is in okay condition but is fairly old and has a clear height of 14ft.

For those with industrial experience, how long does it takes to find a small to mid sized industrial tenant? What other considerations should I be aware of (e.g. what do typical industrial tenants look for when leasing space, initial capex/TIs?). Most of my prior investing experience is in multifamily which is a lot different.

Best,

Anthony

I'm considering taking on an industrial property investment opportunity in the suburbs of Charlotte. The property is in need of heavy renovations (repair a brick wall that partially fell/collapsed, new roof, etc.). I have experience in single family and multifamily investments (some flips, some long term holds), but this would be my first personal investment in industrial. 

With that said, I'm looking for advice/lessons learned/etc. from others with experience with industrial investing (either specific to the factors I mentioned above or just general advice/tips would be helpful as well). 

Thank you!

Rather than only looking at the profitability/feasibility of the investment, it is important to consider the relative value of a project to best determine if an investment is worth your resources (money & time) and the specific risks associated with the deal. Said differently is it worth the time/money/risk/etc. to purse this development or are your resources/attention better spent elsewhere.

One way to determine the relative value of a development opportunity is to calculate a Yield on Cost ("YoC", also referred to as Return on Cost or "RoC") of the opportunity and use this as a comparison metric relative to other developments and/or acquisitions. 

Yield on Cost can be calculated as stabilized NOI over total costs (e.g. $100K annual NOI / $1,000K total cost = 10% YOC). If you are considering multiple development opportunities, the higher the YoC the better the deal or the higher relative value (assuming all risks are constant such as market/location, permitting/approval risks, time to build, etc.). The Yield on Cost is also an indicator of profitability as the spread to the market stabilized cap rate is what generates equity profit (i.e. build to a 10% and sell at a <10% cap rate once stabilized, the spread/difference is your profit).

It becomes a bit trickier when comparing development projects to pure acquisitions (existing properties) given the two deals have very different inherent risks, however a general rule of thumb is that a development project should generate a YoC 1.5%-2.5% higher than the market cap rate (what it would cost to buy a existing duplex). This is because developments are riskier (zero initial cash flow, development risks, unproven rents, etc.). If the difference between the two rates is too small, or if market cap rates are larger than the YoC, than you're better off buying an existing property rather than going through the trouble of building a new property. 

Hope this helps. 

Adding to my initial post below...'

Doing quick back of the envelope math the yield on cost would be ~3.8% ($24k annual rent per unit x 60% NOI margin / $375k total cost per unit), which feels tight for almost any market in my opinion.