All Forum Posts by: Lane Beene

Ben if you purchased the house in 04, you won't qualify for the tax incentives.

Great discussion on OZ.  I believe this is a very sharp strategy to leverage into real estate investing.  But it's not a stand alone strategy. The underlying investment has to be fundamentally sound.  Many OZ locations are very difficult investment locations and the information about substantial improvements is accurate.  I have dug deep into this topic and can discuss specifics if interested.  PM me

Hi Lauryn - is the property located in an Opportunity Zone.  You can check at EIG.ORG. 

You will also have to improve the existing property to qualify for tax benefits.  This requires a large capital improvement plan. 

I'm considering the purchase of an underperforming 140 unit apartment complex. 50 units are currently occupied, 90 units need some form of make-ready (consisting of minor repairs to complete rehab). I have calculated the repair expense of the down units but what is a realistic expectation for the lease up of these additional units?

Assumptions: normal rental demand, asking market rents, similar properties are operating at 75-90% occupied

@Jeff Greenberg

If I understand your structure the 1st 8% is preferred return to investors. The 2nd 8% is sponsor return. And additional money is distributed according to the profit sharing schedule. How are deficiencies handled? <8% & <16% does the balance acrue to the next distribution and receive priority.

@Jared Foster

In my example, tax on earnings will flow through to the investor via the K-1 protocol, so this projection is pre-tax.

Several other real estate mentors echoed these comments. The structure varies on the quality of the deal and track record of the principle investor. This opportunity is still in the infant phase but based on this feedback I'm going to adjust the ratio to favor the equity investors. (60% investors - 40% principle) with a 3% acquisition fee to cover the cost and effort to organize the group and bring the project together.

Jared - from your example; I calculate $1,200 preferred quarterly return to investors (8% / 4 x $60,000) or $4,800 yr.

Leaving ($72,000 - $4,800) = $67,200 cash flow / year

50% to investors = $33,600 and 50% to principle = $33,600

That kind of return on equity (approx 60%) would get you off the "human rat wheel" quickly

Yes, my plan is to hold the property in a LLC and pass taxes to the partners via K-1 form and process.

I am joining forces with several investors for the purchase of an apartment building. What is the typical arrangement for distribution of cash flow, profit sharing, and sales proceeds? My template is: 8% quarterly return on equity contribution, then share profits 45% to equity partners and 55% to managing partners, and distribute the proceeds of the sale along the same schedule (45%/55%).