All Forum Posts by: Bruce Petersen

@Account Closed

Make sure you have adequate reserves then with anything is excess of that I would look to adding additional income streams. 

Keep the equity nimble and don't have it locked in an investment, you can leverage the equity built up in a property by doing a refi or sale (sale if you can take the proceeds and turn it into more than the income you currently have, example, sell the one to then buy two or more). It's all about velocity of money for scale. Do it smartly but I wouldn't pay off any real estate unless you are done building and simply want to live off of what you have built.

Our first event went really well. Met a lot of really cool people and got to know a little bit about each other.

This time we will answering questions that we got from group from last month:

- Asset Management, how does it work
- how differentiate yourself as a deal sponsor with mortgage brokers and potential limited/passive partners
- little more depth on dealing with different accredited and non-accredited investors and what the SEC has to say about it currently
- how to structure and scale a mulitfamily property management company

This event like all of them will be recorded and have pictures taken.

Hope to see you there!

For public anonymity purposes I would never use my own name. 

I have a name for my management company, one for the asset management company and a unique name for each different offering that is different enough from all others so as to not confuse investors who may be in multiple deals with me as @Charles LeMaire mentioned.

@Charlotte Dunford

I am distributing profit from operating cash flow and am funding the rehab capex projects out of the dollars you raised from LPs prior to close so it doesn't effect the distribution. I would distribute the 25k if that itself is an accurate number (only you know that). If it is, you next need to ensure you have ample operating reserves before sending money back to the partners.

One thing to keep in mind, if your lender is making you escrow replacement reserves you have to account for that as well so if your monthly RR escrow payment to the lender is 5k then you should deduct that from your distribution as well. It's money you still have but is restricted until you complete a capex project that the lender approves of before they will return you escrowed funds.

@Andrew Caldieraro

It's a simple formula but you have to first decide what your required return is. Many people will go forward if the money spent gets them a larger ROI than their current or projected COC return, others may decide they want 20% minimum return to justify the spend and time.

Once you have decided what your return threshold is you just run the numbers:

ROI = added revenue (annual) / cost of job

Let's say that after doing a detailed market survey you determine that you can get another $100/month but that it'll cost you 5k per unit upgraded. ROI = 1200 / 5000

ROI = 24%

Now that you know this is does it meet your threshold? If not keep working the numbers with new inputs until you get to where you need. You also back into it by taking the known ROI you require and multiply that by the spend, this will tell you how much you need in a rent bump to justify it.

Me personally, I use between 20-25% ROI as my threshold.

Another thought to this is if you can do this for 20 units and do secure the $100 rent bump then you just made the property worth 400k more assuming a 6 CAP or 300k if using an 8 CAP. this will help when time to sell or do a cash-out refi or supplemental loan.

Hope this helped.

                     

@Charlotte Dunford

You should be able to write off educational things or events on your 1040. 

Many of the items you are asking about should be fine to write off but it sounds like you need to find a good bookkeeper and/or CPA to give you some guidance here. Everyone's situation is different.

Main thing is you can't use the real estate businesses expenses to off-set your personal income. These are two separate returns.

The accountants on the boards can better answer this but, the acquisition fee is ordinary income and is taxed right away. This is income to you and the expenses you are referencing are for the property (LLC) and not your personal expenses so you won't be able to deduct them from your income.

Start up costs are an LLC expense as well and have no effect on your ordinary income. This is part of the reason I don't personally do acquisition fees myself.

You should consult with your own CPA as everyone's situation and structure is different though.

@Rick Stein

I'm starting my second MF centric meet-up in Austin if you're interested:

September 17th from 6:00-8:00 and every 3rd Tuesday going forward at Rudy's Country Store and BBQ, 3914 N Lamar, Austin TX 78756

Format will be education, networking and masterminding from both the active and passive investor perspective.  My background and passion is teaching and have mentored people in MF for years, both formally (for a fee) and informally.

There is no charge for the meet-up and it's content, just wanting to give back and help others along the way.

My Wife and business partner is a CPA with a background in MF tax and audit so she will be adding tons of value as well.

The first one or two will be a welcome and get-to-know-you thing unless it looks like it's going to be well attended, if it is well attended then we will try to provide some high level insights and knowledge. We hope to start having solid content shortly after the first meeting.

Will likely bring in a guest speaker from time to time as well.

This will be an agnostic meet-up meaning there will be no pitching, selling or recommending of anyone's educational platform or group, if that's why you want to show up please do not  ;-).

My kids are in their 20's ;-) so no to Disney but 20 year old daughter will be at the event with us.

@Melissa N.

I will be there and be part of the syndication panel they are having on Sunday.